Filing Back Tax Returns - From 1988

[TheTaxMan]

I have been approached by a prospective client who has not filed any Federal or State (California) tax returns since 1988 (yes - 1988, not 1998).

The client, based on a general discussion, had modest Schedule C gross income (approx. $25 per year) in all of these many open years.

He has good tax records for all years so we could verify each year whether or not he had a net refund due (if so, most years would be closed and we would/could not file) or net tax payable (would have to file).

I would very much appreicate any insights you may have on:

1) Getting prior year tax forms:

I use Lacerte and I have the last three years currently available on Lacerte. I know the IRS has tax returns on their website going back to 1990. Any suggestions for 1988 and 1989?

Any suggestions going back beyond the past three years (i.e., other software providers)?

2) General approach with client and IRS:

Besides advising the client as to the various penalties and interest due in past years where there was a net tax payable any other suggestions for the client and how to approach this very long period without having filed tax returns?

Also, have any of you worked with the IRS beforehand to let them know that a number of back tax returns are coming from one taxpayer or do you simply file the returns?

Thank you very much in advance for all of your insights.

[Brad Imsdahl]

I had a new guy come in once that needed about 10 years worth of returns prepared. I told him I needed a $300 retainer to start.

Naturally, the $300 got used up before being able to finish, as there was all kinds of missing info that he never got back to me on.

About 5 years latter, he contacts me again saying he got some more letters, and did I file all those returns? I informed him that I was still waiting on him to provide the missing info he said he would get for me, but never did. I also said he long ago used up that $300 and that more would be needed for me to continue.

I haven't heard from him since.

Lesson learned: People who file once every 10 years or so pay their bills even less often.

Don't bend over backwards for this guy.

[jainen]

non-filer program

>>has not filed any Federal or State (California) tax returns since 1988 <<

The IRS has a non-filer program that promises to not pursue criminal charges if the taxpayer approaches them first and makes a bona fide effort to comply. California doesn't have a formal policy but will probably work with you to keep it as a civil case. I strongly recommend you engage a tax attorney to make the initial contacts and monitor the progress. Very often clients like this have other unresolved issues that can complicate the tax matters. Don't forget to collect $5000 retainer up front.

The IRS and FTB will be able to provide the forms you need. Plan to do at least the first five years or so by hand--the software was lousy back then and it isn't worth learning (or re-learning) DOS. Even if you can get it to run on your current computer, which I doubt, it won't work with your printer anyway.

[JoshinNC]

Wow.

I've done back to the mid 90's, but never back to the 80's.

I would notify the IRS that the returns are coming. But, before I did that I would go on e-services and get the transcripts. Any return older than 1995 is past the statute unless the IRS has determined that the taxpayer grossly underreported (greater than 20% of income), on which there is no statute. I wouldn't be filing returns for years out of statute that the IRS has long written off.

I use Drake software, and they will only allow you to go back 3 years from the current year.

[Holland]

Get the cash up front

I do a lot of back years. I have never ever had a back-year client willingly pay my bill for back year tax prep. My advice would be to demand 100% of your projected fee in advance. If it goes over that, stop work and tell the client to bring more. These clients are generally charming individuals, but you have to be ruthless with them.

Christopher Mewhort, EA, CGA

[JoshinNC]

What's CGA?

Just wondering.

[KJ Judd]

Lacerte program

A few years ago I had to do back taxes for 7 years. I called my rep at Lacerte & they sent my the prior year's tax program on CD for me to load. I'd suggest doing that. The laws have changed over the years & I always appreciate it when the software can remind me on those.

[Holland]

Cga

Just wondering.

Certified General Accountant
Canadian equivalent to US CPA

Christopher Mewhort, EA, CGA

[JoshinNC]

Ohh!

May I ask why you have a Canadian certification as I see that you are in HI. My family was stationed at Pearl Harbor for a couple of years when I was younger. Needless to say we loved it.

[veritas]

A few years ago

the IRS was contacting delinquent taxpayers in our area. What they wanted was the last 6 years of tax returns even if more had not been filed. I guess the thinking was get the taxpayers back into the system.

So my thought is would the IRS accept less than the 18 years when you approach the IRS? I would ceratinly explore that possibility.

[Holland]

You can have HI

May I ask why you have a Canadian certification as I see that you are in HI.

Because I am Canadian, lived in Canada for the first ~40 years. Wifey got a job here, so I foolishly came with her. And no, I don't like it here. Haven't been to the beach or in the water in at least ten years.

Christopher Mewhort, EA, CGA

[Gretel]

Because I am Canadian, lived in Canada for the first ~40 years. Wifey got a job here, so I foolishly came with her. And no, I don't like it here. Haven't been to the beach or in the water in at least ten years.

Sorry, to hear that you are at a place that you don't like. Maybe this message board can aid a little bit? Maybe you want to entertain the idea of moving back to Canada, even if you have to go by yourself?

In any event, I am glad you found this message board and wish you all the best.

Gabriele

[veritas]

I have been approached by a prospective client who has not filed any Federal or State (California) tax returns since 1988 (yes - 1988, not 1998).

The client, based on a general discussion, had modest Schedule C gross income (approx. $25 per year) in all of these many open years.

He has good tax records for all years so we could verify each year whether or not he had a net refund due (if so, most years would be closed and we would/could not file) or net tax payable (would have to file).

I would very much appreicate any insights you may have on:

1) Getting prior year tax forms:

I use Lacerte and I have the last three years currently available on Lacerte. I know the IRS has tax returns on their website going back to 1990. Any suggestions for 1988 and 1989?

Any suggestions going back beyond the past three years (i.e., other software providers)?

2) General approach with client and IRS:

Besides advising the client as to the various penalties and interest due in past years where there was a net tax payable any other suggestions for the client and how to approach this very long period without having filed tax returns?

Also, have any of you worked with the IRS beforehand to let them know that a number of back tax returns are coming from one taxpayer or do you simply file the returns?

Thank you very much in advance for all of your insights.

No statute of limitations has started on any of the delinquent returns whether he owes or not. The statute of limitations start once the retun is filed and the tax is paid.

[ChEAr$]

back returns

the IRS was contacting delinquent taxpayers in our area. What they wanted was the last 6 years of tax returns even if more had not been filed. I guess the thinking was get the taxpayers back into the system.

So my thought is would the IRS accept less than the 18 years when you approach the IRS? I would ceratinly explore that possibility.

Finally someone has hit the nail on the head. For federal purposes ( I don't know about
California of course) six years will satisfy IRS.

[New York Enrolled Agent]

ChEAr$ is correct - the IRM only calls for six years when dealing with a non-filer. Do the last six years and get the taxpayer moving forward.

HOWEVER, if tax has already been assessed based on SFRs for any earlier years, then you can file those outstanding years asking for audit reconsideration to possibly lower the previous assessments.