This client came to me because he was tired of the state of Iowa leving his bank accounts. That’s usually how it starts.
Before I do anything, I call the state. I want to know exactly what they think is missing and what numbers they are using.
With state returns, you cannot just prepare the state return by itself. The federal tax return has to be prepared first because the information flows from federal to state.
Now, here is the part people don’t always understand. The federal returns for those years did not actually need to be filed. They were beyond the six-year compliance rule. But I still had to complete the federal information so the Iowa returns could be done correctly.
Taxes are layered like that. One thing feeds into another.
This client was a subcontractor, which meant I had to file a Schedule C to find out his taxable income.
I gave him a list of what I needed:
Income
Expenses
Any records he had
For 2012, he had no proof of income. The IRS had no proof of income for 2012 either. I tried to get income information by submitting a Freedom of Information Request asking for copies of his W-2s for the year 2012. Those records had been destroyed. So I pulled his Social Security earnings report and used the income listed there. It is not perfect, but it gives us something solid to work with.
Usually, after I get the first round of information, I have more questions. That was true here, too. We went back and forth a bit until I was comfortable that I had everything needed.
Then I completed 2012 first.
The 2012 return had to be paper filed. Which means printing, mailing, and waiting.
And waiting.
Paper returns take awhile to process. There is no rushing it.
After that, I completed 2015.
Never send two different tax years in the same envelope. It is very likely that one year will get lost. I have seen it happen, and it creates a mess. One envelope per year. Always.
Because the state tax levies had already been applied to his account, the final numbers worked out like this:
He owed a small amount for 2012.
He received a refund for 2015.
He is now compliant. The state is satisfied. And he no longer has to worry about Iowa dipping into his bank account.
I will also say this: Iowa is not the easiest state to work with. They have very high expectations of taxpayers, especially when they are not compliant. Sometimes some of their expectations are unrealistic. If you follow the process and stay persistent, it can be resolved.
If you have unfiled state tax returns, ignoring them does not make them go away. It usually just gives the state more time to get aggressive. But they can be fixed.
If you are dealing with state tax levies or years of unfiled returns, do not wait until you are completely worn down.
Let’s figure out what the state is showing, get the correct returns prepared, and get you back into compliance. 702-533-8984 or candy@numbercruncherllc.tax
It is fixable. And you do not have to do it alone.
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