Non-filers

[MJG CPA]

I have been contacted by a new client who is a "new" sole proprietor that has never filed as a sole proprietor before. He has not filed a tax return in "several years" since he last held a W-2 job. In his words, he moved around a lot and just took odd jobs on the side (probably for cash).

He now wants to settle down and grow his carpentry business and get caught up on past returns.

My question is, how many years do you go back? He represents that there has been very little net income (don't they all), but is willing to provide me his records to file the prior three years.

I told him there are no guarantees that IRS might not decide to look back further.

What have any of you done in situations like this? I guess I'm thinking 3 years is better than nothing if it gets him back on the right track. Am I way off base?

[kcjenkins]

No, you are right, and it may well be that they don't ever ask about the other missing years. If they do, that will be the time to let the client worry about it, and make the decision. Three years is a good start.

[BulldogTom]

I have been contacted by a new client who is a "new" sole proprietor that has never filed as a sole proprietor before. He has not filed a tax return in "several years" since he last held a W-2 job. In his words, he moved around a lot and just took odd jobs on the side (probably for cash).

He now wants to settle down and grow his carpentry business and get caught up on past returns.

My question is, how many years do you go back? He represents that there has been very little net income (don't they all), but is willing to provide me his records to file the prior three years.

I told him there are no guarantees that IRS might not decide to look back further.

What have any of you done in situations like this? I guess I'm thinking 3 years is better than nothing if it gets him back on the right track. Am I way off base?

I would do it a little different. I would work on the books for this year. When you start asking for all the records of ALL the cash and reciepts of the business, you may find that he is not so keen to "get caught up on past returns". If he is cooperative and you feel he is really giving you all the info, then go back and do the three years. It will look better for you in the long run if the first year you have the client, the books and return are pristine. Might help when you file the back returns with less than perfect data from the client.

Just my 2 cents.

Tom

Lodi, CA

[MJG CPA]

Thank you both for your replies. You make good points.