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Analyzing Back Taxes Owed to the IRS
Analyzing Back Taxes Owed to the IRS
August 21, 2019sdcdev
My Client Owes How Much in Back Taxes?!
One of the most difficult tasks for a tax professional is to take on a client’s battle with the IRS. Advocating for a client who has failed to file a tax return for one or several tax periods, or who faces a closed IRS audit that desperately needs reconsideration, can feel like an uphill battle, especially as the amount the IRS determines the client owes is so often inaccurate.
Substitute for Return (SFR)
If a client doesn’t file a tax return, Internal Revenue Code §6020(b) gives the IRS the authority to prepare those returns on the client’s behalf using a Substitute for Return. If a client fails to respond to SFR notices within 30 days, the IRS return is filed and collections start immediately. This can lead to an IRS levy, a federal tax lien, or even to an IRS garnishment of wages.
But those returns are rarely accurate. For example, the IRS won’t include any itemized deductions, doesn’t account for any business deductions to offset income reported on a 1099, and always prepares a single return, whether or not the client is married and normally files jointly.
Back Tax Returns
Maybe you have a client who failed to file one year and then continued not to file, while their back taxes snowballed as each year passed them by. Perhaps your client never filed taxes in their career, but has come to you to negotiate their return to tax-paying before they get caught. Some clients manage to fly under the IRS radar for a time, but that can’t last forever. And while no one goes to jail for failing to pay taxes, if the IRS can prove that the client’s refusal to file was done with criminal intent, they could face charges of tax fraud.
PRO TIP: When you file back tax returns it’s always best to request the IRS wage and income transcripts so that you know exactly what information the IRS has on your client. IRS Solutions Software has the ability to request, download, and analyze the unredacted wage and income transcript through the IRS e-services Transcript Delivery System (TDS) directly and your Secure Mailbox, making your job that much easier.
Every client dreads an IRS audit, and for good reason. IRS auditors can make mistakes, notices can get sent to the wrong address, vital documentation can go missing, or, as one tax professional recounted, the adversarial nature of these interactions can lead to a prematurely closed audit.
In one case, an auditor got upset with the taxpayer, threw him out of the office, and closed the audit right away. The client had additional documents to include in the case file, but the auditor refused to look at them, claiming the audit was closed. Audit Reconsideration was the only option left for this client. The tax professional stepped in, but it took over a year and a half to get someone to review the request—a review that later revealed the client owed half of what the IRS claimed through the audit.
How IRS Solutions Software Can Help
As a tax professional, your role in providing back tax help or filing for audit reconsideration can be both rewarding and daunting. IRS Solutions offers CPA software to automate these tax resolution services. We arm you with clear answers to help you negotiate with the IRS by determining your client’s best options, whether that’s creating a reasonable installment agreement, providing an IRS offer in compromise, or appealing to the IRS to show that the debt is currently not collectible.
IRS Solutions Software not only gives you the tools you need to analyze your client’s unique circumstances, but also provides a blueprint to help you negotiate with the IRS as you assist in minimizing your client’s tax liabilities so that they can start to rebuild their financial future. Serve your clients year-round by providing tax resolution services with confidence using IRS Solutions Software.
Don’t Miss Out! Sign up with IRS Solutions Software and gain access to incredible features AND informative monthly case study webinars conducted by a tax resolution specialist on the 4th Thursday of every month from 10am-11am PDT.
Ready to learn more? For starters, please pick up our FREE PRICING GUIDE below so you can learn how to charge for your tax resolution services. IRS Solutions is available in affordable monthly and annual subscriptions and you can try it FREE for 14 days before you commit. Act now so you’re ready when your clients need help with IRS tax bills this year.
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