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Tax Returns Help

A tax return is a document that a taxpayer needs to fill in and file with state or federal authorities that explains what their tax liability is for the year based on their income. These forms can appear a little complicated to fill in since they not only total the income made but also show additions and subtractions depending on the taxpayer’s actions. That is why many people prefer to take the help of a professional while filing their returns. Listed below are a few questions answered by the Experts on filing tax returns.

Does it become a Certified Public Accountant’s (CPA) responsibility to keep tax returns and supporting documentation for three years?

CPAs are not required to keep tax returns and supporting documentation for their clients. The responsibility for this actually lies with the actual taxpayer. . CPAs often, however, keep records for their clients for a certain period of time. This could sometimes extend to for as long as seven years. While all tax returns must be retained for as long as they matter to federal tax law, the three year rule is followed because the IRS typically does not initiate audits on taxes filed over three years back.

I have a C Corporation and have not filed tax returns for many years although my employment taxes have been paid on time. Can the IRS come after me for returns that go back more than nine years?

The IRS can collect returns that date back to more than nine years ago. Typically, the statute of limitations is three years past the due date of the tax return or the date the return was filed. The IRS will choose whichever the later date is. Since you haven’t filed the tax returns for those years, the statute of limitations would not yet have begun for those years.

According to my experience, the IRS freezes a refund in cases where Earned Income Credit (EIC) is filed by a person with a criminal record. Does this apply only to individuals with a criminal background?

Individuals with a criminal record are not the only people targeted by the IRS to have their refunds delayed because of a tax return audit. There are many other taxpayers that have had their tax returns held up or audited. They include people who owe tax money from past years, individuals who have abused the EIC before and have been prohibited from filing for it even after the time period in which they are not allowed to file has past and so on.

I am self-employed and haven’t filed tax returns for the past ten years. The IRS has not sent me a Form 1099 either during this time. What can I do now?

It is unlikely the IRS will prosecute you unless you owe an extremely large amount of money. Individuals are required to file returns for each year that their income meets the tax filing requirements. Even if you don’t have all the records that you need to file your tax returns, the IRS can provide that for you. They can go as far back as ten years to retrieve records. You would need to contact the IRS and request your Wage and Income Transcripts. You would also need to follow up on your state returns in the same way.

If you were due a refund for any of the years beyond the last three years, those refunds will have already been forfeited. The IRS only allows three years to claim a refund.

There are a few additional things to keep in mind. In many cases, the IRS files your return if you haven’t done it within a specified period. This may increase your tax liability since the deductions you qualify for are not added. Yet, very often, just filing the returns can reduce this liability. If you are not able to pay it all at one time, you can ask to be put on an installment plan.

Finally, interest and penalties will have continued to accrue on any unpaid balances that you owe. If you have a reasonable cause, you could try and ask for a penalty abatement to remove some of these penalties. If you are not comfortable filing on your own, it would be sensible to hire the services of a professional to help you with the process.

My S Corporation didn’t have any income or expenses for a year and I did not file tax returns for that tax year. I was sent a notice two years after this. Can I negotiate the penalty amount now?

The IRS is not responsible for reminding a taxpayer or corporation to file their tax returns. Claiming ignorance is not a viable option. Even though your corporation did not have any income or expenses, you are still required to file a tax return until it is officially dissolved. The IRS typically contacts taxpayers two-three years after a return is due. You may be able to negotiate penalty amounts only if you can show a reasonable cause.

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