when clients haven’t filed taxes for years

help them put a stop to this.

by ed mendlowitz
the 卡塔尔世界杯常规比赛时间 practice doctor

it is not unusual to meet with potential clients that have not filed tax returns for many years.

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with these clients it is important to get them to understand the seriousness of their situation and that the sooner they comply, the greater the likelihood that the worst they would be subject to would be penalties for late filing and payment if they owe money.

who needs this service

a surprisingly large number of people do not file because of the fear of filing. they don’t start out with the fear, but through a probably unintentional problem, not usually caused by them, they miss a deadline and don’t file a return for a given year. when the due date for the next year’s return comes around, they push it aside, not wanting to file until they correct their neglect for the prior year. this process continues each year until the irs or their state tax authority catch up with them – and then they have a serious problem.

introducing the client to the service

here are a few suggestions for those with a fear of filing:

file as soon as possible. since a push is usually needed to get the client started, tell the client to take whatever information they have, shove it into an envelope or bag and bring it to you, a professional tax preparer, who will sort through it, organize it and actually be able to get a handle on how the returns will look.

why the accountant is suited to offer this service

usually, but not guaranteed, once the client goes to a tax professional before they are contacted by the irs it will serve to mitigate any possible criminal penalties since they demonstrated a desire to correct the problem.

it is suggested that the client should not attempt to self-prepare the returns. i believe this will cause further delays and the returns will not get completed. i would also not recommend going to the irs for assistance with the preparation. the client can, however, go to the irs to request copies of income statements that have been filed with them if they do not believe they have everything needed to complete the returns.

how to handle the situation

it is possible that the client will not have all their information. in that case, you can assist the client in making good faith reasonable estimates that should be disclosed on the returns that are filed.

it is important to advise the client that late-filed returns where tax is owed will be subject to late filing penalties of up to 25 percent and late-payment penalties also up to 25 percent as well as interest at statutory rates. it is possible for late-filing penalties to be abated but very unlikely for multiple late filed returns.

those entitled to refunds will receive them unless the return is greater than three years delinquent, in which case they will forfeit the amounts they would have been entitled to. no interest will be paid on the refunds.

like any other fear, it can be conquered by dealing with the matter at hand.

checklist to use

following is a checklist that could be used as a guide in your meetings with clients.

checklist of questions to ask a non-filer who wants to file their delinquent returns

 

client__________________________ date___________ preparer________________

 

• what caused or prompted you to decide to file at this time?

• was there any sort of contact (either by mail, telephone or in person) by a tax agency?

• can we see what was given to you or what you received?

• if there was an in-person contact, what were their names, agency and title or position?

• if there was an in-person contact, how many people were there from the agency?

• are you married?

• if you are married, the questions also apply to your spouse for the periods you were married.

• are you a u.s. citizen or resident?

• what state are you a resident of?

• when was the last u.s. tax return you filed?

• how many years have you not filed?

• in what country or state have you lived during this period?

• if you lived in another country, did you file all required tax returns in that country?

• do you have non-u.s. bank or brokerage accounts?

• are you a grantor, beneficiary or trustee of any type of trust?

• why were returns not filed?

• what was the source of your revenue, e.g. job, business, interest and dividends?

• have any estimated taxes been paid?

• were you ever subject to backup withholding?

• where was the revenue earned?

• do you have funds to pay any past due taxes, interest and penalties?

posted on september 27, 2023