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jgordosea
jgordosea, Enrolled Agent
Category: Tax
Satisfied Customers: 3005
Experience:  I've prepared all types of taxes since 1987.
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I have not filed a tax return in years. I am self employed.

Resolved Question:

I have not filed a tax return in years. I am self employed. I went down to the irs and got my 1099's and in the last 6 years the 1099 income they have for me ranges from 0 year to 8000. in any given year.Unfortunately i got a letter from them requesting my current address. I made a lot more than this but i have not heard from them in years . i understand if you do not file they will file a return for me. What do you think they will do with the reported income so low? summons me down there or file a return using those figures? if i do not file that is. i am dreading this whole deal.
Submitted: 1 year ago.
Category: Tax
Expert:  jgordosea replied 1 year ago.
Greetings,

Although the IRS in some cases does use just the 1099 information reported to them, that is not the only method that can be used to reconstruct income and create a return for you.
Another method that is often used is to take all deposits to your bank accounts and consider those all to be income unless it is obvious that it is a transfer or not income (it is a bit more involved, but this is the general idea).

The disadvantage of letting the IRS prepare a substitute for return rather than filing the returns yourself is that the IRS will have little or no information on the expenses paid that will reduce your profit subject to income tax and self employment tax.
Even the filing status, deductions, dependents and credits that might have been available will not be included to your best advantage on the substitute for return.

If you do not file the IRS will prepare a substitute for return that will likely have much more net income and much more tax due that if you reconstruct your income and expenses and file the returns.

Indeed, it will not be easy to file these past returns; but it is much better for you to do it than to let the IRS file substitute returns.

Please ask if you need clarification or have a follow up question.
Thank you.
jgordosea, Enrolled Agent
Category: Tax
Satisfied Customers: 3005
Experience: I've prepared all types of taxes since 1987.
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