Twenty Years back tax return

[Naveen Mohan from New York]

I have been approached by a man to do his back taxes. He has not filed a tax return since 1995. In 1995 he said that he went to IRS office and they helped him file for the period 1985-1995. He said IRS will no longer help him and he wants to get legit.

Problem is that he does not think he has W-2 for all those years. He said that he always had been a used car salesman and he did get W-2 each year. Problem is that evenhis employer may not have copies of that old W-2.

The only source I can think of is have him get earning record from Social Security administration and try to produce substitute W-2 but that willonly give me gross pay, it will not tell me how much was his federal and state withholding was.

Is there a way to help him or is he a lost cause.

Thanks for your help.

Naveen Mohan 

 

[SaraEA]

Not sure about 20 years ago, but in more recent years the IRS computers would have created a SFR, using Single, one exemption.  If that showed a balance due they would have filed for him, and he would have heard from them by now.  My hunch is that there were overpayments, which he certainly can't claim now.  I'd just file the open years and assure him everything must be ok with the IRS before then.

[BulldogTom]

I respectfully disagree with SaraEA.  You should call the IRS and let them know what the situation is.  They will probably take a look at his record and see if they have any open years on their books.  They will tell you how many years they want you to file.  I had two of these types of clients, one they wanted 10 years because they had open items that far back, in the other, they wanted 7 years because they had no earnings records at all for the client.  After you get the IRS to tell you what you want, you can buy some time to get the returns prepared and filed.  Then you can pull the transcripts and see what the IRS has for W2s and 1099s for the client.  

Just filing the open years will get the refunds if there are any, but those other years are still open for audit because the statute does not start running until the return is filed.  You need to protect your client from that audit exposure.

Still love you SaraEA, and I think you are very smart.  I would just take a different approach to the situation.

Tom
Newark, CA

 

[Catherine]

I agree with Tom in this one.  Get a POA that covers all the years - and make sure it includes provisions to discuss civil penalties - and call.  May take more than one call, if you get a clueless newbie or a real hard-nose on your first try.  Find out the situation, get a list of exactly what they want, transcripts, and go from there.

And get paid up-front for this one; I never take a back-taxes case without payment up front.  I use up the payment and there's more to do - more money, and work ceases until paid (and the check clears).  

[Max W]

The IRS look back period is six years, so that would mean only 2011 to 2016 would have to be filed. This is true even if prior years show that there was substantial taxable income.  Every year at the end May, another year falls off, so next May, 2011 falls off. 

 

[Abby Normal]

12 hours ago, Max W said:

The IRS look back period is six years, so that would mean only 2011 to 2016 would have to be filed. This is true even if prior years show that there was substantial taxable income.  Every year at the end May, another year falls off, so next May, 2011 falls off. 

 

The enforcement period is 6 years but there are facts and circumstances exceptions. https://www.irs.gov/irm/part4/irm_04-012-001.html#d0e61

Also, until the taxpayer signs a return, whether actual return or SFR, the statute of limitations on assessments does not begin to run (scroll down to SFR). In other words, that year is still open.

Substitute for Return (SFR)

1. The Service has authority to prepare and process a tax return when a person fails to file a required return or files a false or fraudulent return under authority of IRC Section 6020(b). If the Service processes a tax return prepared under the authority of IRC Section 6020(b), the assessment date will start the period for the statute of limitations for collection per IRC Section 6502(a)(1), but does not start the period of limitations for assessment.

2. If the taxpayer signs a SFR return prepared from income information received from the taxpayer, it becomes the taxpayer’s return per IRC Section 6020(a) and starts the assessment period of limitations.

[SaraEA]

I understand you posters who want to do the "right thing," but the IRS is not going to have transcripts going back 20 years.  It is a good idea to pull this client's record of account to see if perhaps a SFR was filed.  If not, there is nothing you (or the IRS) can do but file the open years.

I did have a client who hadn't filed in about 5 years, but in this case the IRS had 1099s to prove income and was hounding him.  Believe it or not, he actually had records (receipts, check registers, mileage logs) for all those years.  I have observed that serial nonfilers often have some personal catastrophe that gets in the way of their filing one year, and after that they are afraid to file.  In Naveen's case, though, I believe the IRS would have come knocking if a SFR showed a balance due.  Did he move a lot so notices didn't reach him? 

[Catherine]

18 hours ago, SaraEA said:

I have observed that serial nonfilers often have some personal catastrophe that gets in the way of their filing one year, and after that they are afraid to file.

I have found the same thing time and time again.  But I'm not sure it's fear that keeps them from filing.  I've seen it take a couple of years to recover from the catastrophe, at which point they are so far behind they don't know where to start, and it's too overwhelming - so they never start, and the problem escalates.  

Case in point, an older man who had a heart attack or stroke (I don't remember, if I ever even knew; serious health issue).  In the hospital for a long time, in rehab even longer, and a couple of years before he got his strength and energy back.  Took one look at the stack somewhere before he was really well, and ignored it as too much to handle after that.  His kids found out years later and they brought everything to me (with dad's permission).  But it wasn't fear; it was just Sisyphus, facing another morning with that rock, and turning away.

[Randall]

I only go back one year (if there's good reason).  I just don't want to bother with it anymore.