I represent taxpayers in Bucks and Montgomery county PA who have tax issues.
Haven’t filed a tax return in a while ? Do I have file every return that I missed? What if I have not filed in 5 years? Or 10 years? What if I do not have the records anymore? No Problem. The IRS only requires a taxpayer file the last 6 years to be compliant. (IRS Policy Statement 5-133).
Here is a roadmap to get back into compliance. The first step is to gather your records so we can prepare your tax returns. If you an employee, find your W-2 earnings reports. If you cannot find one, contact your current or former employer for another copy. If you are self-employed, your Quickbooks files or other accounting software will have the financial reports necessary to complete your return. In addition, your personal bank statements will assist in showing your income and certain expenses necessary to complete your return. If you have an auto mileage log, it will assist you in determining your travel history and will possibly help you in remembering your work history. Finally, any cash receipts or credit card statements will help with expenses associated with generating the income you earned. There are many ways to reconstruct your earning and expense history.
Another source of information is the IRS. All of your Wage and Earnings are kept with the IRS and we could pull your transcripts to see what information the IRS has for you. We can confirm W-2 earnings and 1099 reports with the IRS and find out if we are missing any.
Once we have the information, we can determine if it makes sense to file Married Filing Jointly (MFJ) or Married Filing Separately (MFS). If one spouse is expected to have a large tax liability, it may make sense to keep that tax liability separate from the other spouse. Likewise, if one spouse has a large amount of assets, we may want to keep those assets separate from the other spouse’s tax liability. If you file separately (MFS), you can always amend to file jointly (MFJ). Once you file jointly (MFJ), you cannot amend to file separately (MFS). A jointly filed return (MFJ) is jointly and severally liable, which means both spouses are responsible for the tax liability. It is important to think through the impact on collection before quickly filing joint.
Another consideration before filing is the impact on the state. Does it make sense to file the state before the IRS? What will be owed to each? Do we want to file the state first and get into a payment plan before filing with the IRS? If the state tax liability is established before the IRS liability, the full amount of the state payment plan will be an allowable IRS deduction in determining reasonable collection potential for the IRS. If the state and Federal returns are filed at the same time, only a portion of the state payment plan amount will be allowed.
Finally, it is important to consider PA’s Voluntary Disclosure program. It is possible to limit how many years of state tax returns that need to be filed and may limit the penalties and interest.
Yes, there are many factors to consider when getting back into tax compliance. But, we understand the process and realize the peace of mind that will result from filing your tax returns. If you or someone you know has a tax issue, please call Steve at 215-316-3437.
1016 Mill Creek Drive - Feasterville, PA 19053
215-316-3437 - email@example.com