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Mark Taylor
Mark Taylor, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2050
Experience:  Certified Public Accountant
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My son is a tattoo artist and he has not filed taxes for

Customer Question

My son is a tattoo artist and he has not filed taxes for about 3 years. He use to own a business and he walked away from it, leaving it to the artist that worked in it. He now works from his home and the majority of his business is cash. He makes enough to pay rent and miscellaneous bills. The problem is that he applied for Obama care, which he got, but they wanted a copy of his taxes, so he sent them what he prepared for last year, but he did not file it. Now they want a true filed form. The question is, since he has not filed for 3 years, will he be okay just to file for last year (late of course) to appease Obama Care or should he try to make it right for the other years? Is he looking a penalties... he just needs to know what direction to go in - does he have a tax preparer do it for him or does he have to get a tax attorney? Please advise. Thank you.
Submitted: 8 months ago.
Category: Tax
Expert:  Mark Taylor replied 8 months ago.

Hi, my name is Mark. I will be happy to help you with your questions. Please give me a moment to prepare your response.

Expert:  Mark Taylor replied 8 months ago.

He should have a tax professional prepare the 3 years. He would need to gather the income he made during the year with the applicable expenses. If he does not file than the statutes for these years would remain open and if he owed money any penalties and interest would continue to accrue. He would be looking a late file and late payment penalties (if he owes money).

Customer: replied 8 months ago.
He has not kept any receipts... he pretty much wings it and tattoos as they come up. We estimated by his bills that he only made about $1,500 a month. So how will the accountant handle that?
Expert:  Mark Taylor replied 8 months ago.

I am assuming that the money did not go through a bank so there would be no paper trail. Did you son keep track of the number of tattoos that he prepared? The $1500 a month would be an estimate of the net income.

Customer: replied 8 months ago.
Everything would be a guesstimate
Customer: replied 8 months ago.
He does use a bank and he does on line billing, but all it would show is deposits, does that help? Would he have to take the bank statements to the tax preparer and could they work off that? Also, do you have any idea what type of penalties he could be facing?
Expert:  Mark Taylor replied 8 months ago.

The bank statements would be a good start. He would be able to deduct his expenses. It is possible that the vendors that he purchased from would have a history of his purchases. If you under report your income by 25% there is the potential for additional penalties. The bank statement would at least show the amount of income from the business.

Customer: replied 8 months ago.
He probably only has bank statements... his vendors would just be equipment and probably most of it was purchased with cash and I doubt if he has receipts. So basically what you are telling me is that he has to file past taxes and present with an accountant... and we don't need a tax attorney... is that correct? And... you have not given me any idea what type if any penalties may occur... is it possible that there may not be any penalties at all since the amount claimed on the tax forms would be so low?
Expert:  Mark Taylor replied 8 months ago.

You would not need a tax attorney. It is a case of a non-filer. The amount of penalties would be determined by any taxes that he owes. If he does not owe any taxes then there would not be any penalties. The taxes your son would need to be considered about are self-employment taxes. Self employment taxes are 15.3% of the net income. In your prior post you mentioned the net income was $18,000. This would come to Self Employment taxes of $2,700. The penalties would be a late file penalty and a late payment penalty. The late file penalty is 5% per month up to a maximum of 25%. The late payment penalty is 1/2% per month up to a maximum of 25%. The maximum penalty per month for the combined penalty is 5%.

Customer: replied 8 months ago.
Now that helps... thank you.
Expert:  Mark Taylor replied 8 months ago.

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