Tax Filing Question

[JimmyV]

My cousin failed to file his fed taxes for what he said was the last 5 years. He stated that he paid into the feds via W2's but didnt file at the end of the year. He said he knew he owed taxes in amounts of around 500 for each year. Now I beleive he wants to file and start paying them off but hes scared of prosecution. Any advice?

[Chief]

Late Filing

I believe if you prepare the returns and have them signed and filed he will not be prosecuted. The IRS willl appreciate that he is trying to take care of the matter. The ones that are over three years old maybe a problem. I would let IRS handle it. Is he able to pay what he owes? The IRS will bill penalties and interest. I would le that part of it up to them. Good luck.

[Corduroy Frog]

Penitent Taxpayers

There are more non-filers out there than you would suspect. Partially because IRS personnel place too much emphasis on sitting on their butts letting computerized compliance programs do all the work instead of mingling with people in the field. A taxpayer fearing the IRS has a better chance not filing and staying off the radar, than to file and let all his misinformation hit the fan.

There are probably those of you who would challenge this, and you might be correct. However, whether this is true or not is irrelevant to non-filers who believe they're better off not filing. There are LOTS of non-filers who believe this.

Early in my career I encountered a "penitent" taxpayer -- one who hadn't filed in at least three years. I backfiled for him and, believe it or not, he turned in as much revenue and income as he should have. Paid IRS a few thousand $.

Found out later this converted soul really had applied for a business loan at the bank for some $100K. Bank wanted to see his last 3 years tax returns. Not only explains his penitent duty to country, but also explains why he didn't mind turning in all his income.

[New York Enrolled Agent]

My cousin failed to file his fed taxes for what he said was the last 5 years. He stated that he paid into the feds via W2's but didnt file at the end of the year. He said he knew he owed taxes in amounts of around 500 for each year. Now I beleive he wants to file and start paying them off but hes scared of prosecution. Any advice?

Jimmy V

Unless your cousin is Wesley Snipes or Richard Hatch or some other type "celeb", the chance of IRS prosecution is about equal to snow in Phoenix in July. File the past returns, pay the balance due (plus interest and penalty) and tell your cousin to file each year in the future. The IRS wants his money - not him!!!

[thomtax]

Jimmy V

Unless your cousin is Wesley Snipes or Richard Hatch or some other type "celeb", the chance of IRS prosecution is about equal to snow in Phoenix in July. File the past returns, pay the balance due (plus interest and penalty) and tell your cousin to file each year in the future. The IRS wants his money - not him!!!

Very true. I tell people that come in, and are behind, that are worried about going to jail, that's the last thing that they want to do.send you to jail. It costs a lot of time and money to prosecute and if you are in jail, you don't make any money to pay them. What they want is the money and if you are willing to pay it, unless you are high profile that they want to make an example of you, paying them makes them happy.

[ED SMITH]

No prosecution.

Before you do his tax returns, you will want to get a transcript of his tax records.
First, to be sure you have all the income reported to the IRS and second to see what penalties and action they have taken or are about to take.

If you are an EA or CPA you can do this for him by getting him to sign off on a POA , form 2848. You can then call the TPH (tax prof hotline) 866-860-4259 and request his:

Wage and income Transcript and
MFTRA - master file transcript.

Some of the returns may have gone to SFR, in which case you will have to find out which office to send them to. You will have to call ACS (collections) for this 800-829-3903. Expect to be on hold for quite a while. In fact, if he only owes small amounts, he may not even be in collections.

If you are not able to represent him, then he will have to do this himself. However, if he does it himself he will be at a disadvantage. He will have to reveal his employer and bank account info which you would be able to deny any knowledge of.

Good Luck!

[DaveO]

No worries about prosecution…

But persecution is a whole other problem. Judging by the range of replies so far, others have had as much problem answering the questions of non-filers as I do. Some people can just file the current year return and go forward with no issues. Other people have to reconstruct records and file returns from 15 years ago. Defiantly pull transcripts from e-services so you know what needs to be reported. If the IRS has filed SFR’s you may have to file returns to correct filing status, dependents and such. I had a client that hadn’t filed for10 years. The service filed SFR’s for 5 years as MFS with no dependents. He was HOH with 3 dependents. We had to file returns back to 1995 to flip those returns and stop the IRS from taking his refunds to pay the old tax accessed. At the other extreme I met with an individual today that hasn’t filed in 20 years and has never had a notice. I figure he will owe $60,000 just over the last three years. I wish the service could develop a more even way of handling the issue of long time non-filers. It seems to be a crapshoot under the present system.

[Bees Knees]

Unless your cousin is Wesley Snipes or Richard Hatch or some other type "celeb", the chance of IRS prosecution is about equal to snow in Phoenix in July.

It isn't that unusual to see snow in the mountains surrounding Phoenix.