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Back taxes and the IRS -CPAguys, Lawyerguys? (1 Viewer)

Evilgrin 72

Evilgrin 72

Distributor of Pain
I have a numbnuts employee that came to me (why?) this morning telling me that she hasn't filed a tax return in 10 years (!)  Somehow, the IRS isn't contacting or harassing her for payment and she hasn't had her wages garnished or anything.  However, she has this hanging on her head/conscience and wanted to know the best way to go about rectifying the situation.  Apparently, she claimed exemptions in the past to maximize her pay check because she made very little money (she said ~$20k annually on average) and then simply never filed a return - going back to the mid 2000s.

I called her an ###hole and told her I have absolutely no idea because I am a real American, like Hulk Hogan, and pay my taxes (probably unlike Hulk Hogan) but that I would try to find out what her best move is at this point.  Ignore it because they aren't coming after her?  Go to one of these tax attorneys that always run TV ads this time of year and go over options in a free consultation?  Contact the IRS directly and get her liability and try to work out a payment plan?  I have no frigging clue what the move is here, or even why she asked me and not someone who might know anything about this.  I told her I'd try to find out though, and as this board is almost always my best resource.  She's a little nervous about contacting the IRS when they haven't been pursuing the past liability - she's also married (I presume they file separately) and she doesn't want them going after her husband.  I don't know if they can do that or not.

TIA - will answer yours.

 
She should find a local CPA (contact a few...sounds like her returns will be relatively simple and it shouldn't cost her thousands of dollars to file all those years) and have him/her file all the missing years. Who knows...maybe she's entitled to refunds she is unaware of (any dependents? Only w-2 activity? Own a home? Etc)

 
eoMMan said:
She should find a local CPA (contact a few...sounds like her returns will be relatively simple and it shouldn't cost her thousands of dollars to file all those years) and have him/her file all the missing years. Who knows...maybe she's entitled to refunds she is unaware of (any dependents? Only w-2 activity? Own a home? Etc)
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I know she has no kids.  I would assume only W2 activity based on the info I have.  She and her husband have a house (not renters) but based on what she told me, I'm guessing the house is in his name, or both of theirs at best.  My guess is that her husband was probably itemizing deductions for mortgage interest and property tax, that's what I do even though my house is in both mine and my wife's name.  She makes so little that it makes more sense for us to have me itemize, even if they reduce my wife's deduction to $0 than for both of us to take the standard deduction. Maybe that will change with the new tax plan, I don't know yet.

I have no idea if this is the case for them, I'm spitballing based only on my own experience.

 
eoMMan said:
She should find a local CPA (contact a few...sounds like her returns will be relatively simple and it shouldn't cost her thousands of dollars to file all those years) and have him/her file all the missing years. Who knows...maybe she's entitled to refunds she is unaware of (any dependents? Only w-2 activity? Own a home? Etc)
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there are fines and penalties that accrue interest on top of the taxes also. I'm pretty sure they Can only go back three years.   Might be 7.  I'll ask my CPA.  he responds pretty quick. 

 
Getzlaf15 said:
there are fines and penalties that accrue interest on top of the taxes also. I'm pretty sure they Can only go back three years.   Might be 7.  I'll ask my CPA.  he responds pretty quick. 
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Thanks man.  I'm a little surprised they haven't been coming after her - collections, garnishing wages, etc.  She said she hasn't heard a single word about it.  Seems odd, this is the IRS for God's sake.  :lol:

 
Cool of you to help her. Why isn’t her husband figuring this crap out and where has he been the last 10 years?

 
Also, this is FAR from the strangest thing I've had an employee come to me with.  You'd think I was a psychiatrist half the time.  I figure that's just the perils of management.  It's always women too - the male employees never ask me for help with anything.  So, either I have a demeanor that makes women feel safe unburdening themselves to me, or they all want the ol' braciole.  50/50.

 
At that income level she was probably eligible for the earned income tax credit and the government owes her money.   

 
Depending on how much she earned - she probably does not owe any penalties or interest - presuming she was entitled to a refund each year.

Still required to file a return though - but getting her W2s could be an interesting challenge, even in this age of electronic storage.

 
Getzlaf15 said:
IRS has programs that flag stuff.  She probably was close to being ok.  The sucky thing is she will lose all of her SS benefits for the years she did not file.  
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I doubt it.  The SS taxes were still paid to her SS number and should be part of her record based on the W-2's.  

 
Getzlaf15 said:
IRS has programs that flag stuff.  She probably was close to being ok.  The sucky thing is she will lose all of her SS benefits for the years she did not file.  
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Why is that?  SS taxes were presumably withheld by her employers under her SS number.

 
The IRS is horribly under-staffed nowadays and everything is automated.  If there was nothing she filed, there is nothing to flag so she would not get a notice.  Her income is so low it is probably below their thresholds and never got escalated when her W-2 is never matched up with a tax return.  Once she files her first return it will all trigger letters, but even that will take them several months to even act on.  It would take probably 2 years AFTER she files a return before they would ever even do anything tangible to her, if ever.

Still it would become a legal issue and a detriment to her ever getting a loan on a house.

 
Megaton said:
I doubt it.  The SS taxes were still paid to her SS number and should be part of her record based on the W-2's.  
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and if she logs into her SS account, those years will be blank. They were for a person I know that didn't file from 2002 to 2007. 

 
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Getzlaf15 said:
and if she logs into her SS account
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I didn't even know this was a thing.  I just get something in the mail every now and again showing me how many thousands of dollars I've poured in and telling me it will run out before I can ever collect a penny back.

 
So, basically the consensus is to simply contact a CPA rather than a tax attorney, and to procure, if possible, W2s dating back to the first year she failed to file?  I figure if I can tell her that much, I've done my "job."

 
Evilgrin 72 said:
I didn't even know this was a thing.  I just get something in the mail every now and again showing me how many thousands of dollars I've poured in and telling me it will run out before I can ever collect a penny back.
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and on that mailing there is a link to sign up to view your account.  Shows what you made every year and how much you contributed.  Even after fixing the issue of non filing, the years that didn't get fixed because the statue of limitations passed were not updated and no credit is given. 

 
Contact a local CPA (or several).  If they feel that there is too much risk or are concerned, they will recommend she contact a tax attorney. 

As stated above, the IRS algorithm is generally pretty good at determining whether a taxpayer is going to get a refund.  If they have not contacted her, it is likely that they expect she would've been entitled to refunds.  Any refunds over 3 years old would be statute-barred and not refundable.  Too bad.

You mention she is married.  Given that she makes very little income, per your comments, I find it surprising that they didn't file jointly.  It likely would've been very beneficial for them to do so rather than him filing separately and her not filing at all.  Obviously impossible to know without having numbers, but I would be surprised if they aren't leaving refunds on the table and screwing themselves over annually by not filing correctly.

This is not official tax advice and should not be construed as such.  Call a CPA.

 
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Yeah Evil have her go see a CPA.  If she has refunds coming the IRS will only go back 3 years.  Like others have said she's going to have a hard time tracking down those W-2's over 7 years old.

 
Pipes said:
They shouldn't be.  SS takes their information off the W-2's the Employer files. 
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I don't know the answer to this, but they were blank.  If they went by just this, couldn't you get a friend that owns a business to send them a w2 and then not file and claim them.  Pretty sure you have to file to get credit for them. 

 
Getzlaf15 said:
I don't know the answer to this, but they were blank.  If they went by just this, couldn't you get a friend that owns a business to send them a w2 and then not file and claim them.  Pretty sure you have to file to get credit for them. 
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As a business owner, we file forms with the withholdings that we send to the government. That's where the SS payments are credited to the employee. The W2 is given to the employee (and a matching one is sent to the government). If the W2 doesn't reflect what was sent to the government with the withholdings, then the business owner has a problem, not the employee. 

 
Politician Spock said:
As a business owner, we file forms with the withholdings that we send to the government. That's where the SS payments are credited to the employee. The W2 is given to the employee (and a matching one is sent to the government). If the W2 doesn't reflect what was sent to the government with the withholdings, then the business owner has a problem, not the employee. 
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ok, the person that had them blank was self employed, but did pay estimated taxes by April 15.  When they filed to catch up, they could only file for the past three years.  The years prior to that are blank on their SS statement. 

 
Thanks everyone, I'm passing the collected advice along and washing my hands of this.  Appreciate everyone that took the time to add information and/or jokes (equally.)

 
Steve Tasker said:
Contact a local CPA (or several).  If they feel that there is too much risk or are concerned, they will recommend she contact a tax attorney. 

As stated above, the IRS algorithm is generally pretty good at determining whether a taxpayer is going to get a refund.  If they have not contacted her, it is likely that they expect she would've been entitled to refunds.  Any refunds over 3 years old would be statute-barred and not refundable.  Too bad.

You mention she is married.  Given that she makes very little income, per your comments, I find it surprising that they didn't file jointly.  It likely would've been very beneficial for them to do so rather than him filing separately and her not filing at all.  Obviously impossible to know without having numbers, but I would be surprised if they aren't leaving refunds on the table and screwing themselves over annually by not filing correctly.

This is not official tax advice and should not be construed as such.  Call a CPA.
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The three year clock runs to the deadline of filing.  So she needs to file prior to April 15, 2018 if she wants to receive refund from the year 2014.

 
As far as audits go I believe the IRS can only go back 7 years worth of filing but can do unlimited years where no return was filed.

 
If the USA is anything like Canada, employers send your tax info to the govt, via your Social Insurance Number/ Social Security each tax year.

They know what she's earning... So if there was a chance she's owing big time, they'd have known and done something about it.

Have to assume she'll be getting $ back, in which case, they couldnt care less if you ever file.

 
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I didn't file for 3 consecutive years between 10-15 years ago. I would have owed a little bit each time, due to exemptions claimed (was above the EIC mark and did plug the numbers into TurboTax at least 1 of the years), although had my filing status actually matched my exemptions claimed, I would have been due small refunds.

Never contacted by the IRS, and the income does show up in my SS account online.

 
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