In addition to what’s already been said about all the penalties, she needs to file. The worst place you can be in is the one where you haven’t filed and owe money. In that scenario, if her bank account gets cleaned out by the IRS or her paycheck taken (because they will eventually prepare Substitute For Returns for her), the only way to fix it is to scramble and do the tax returns as quickly as possible. . . then attempt to try to get the IRS to accept them and release the levies.
Just owing money can be handled, so long as you’re in current filing compliance.
Once she files those old returns, she’ll have something like 6 months before the IRS processes them and starts hounding her for money. If it’s under $25k, it’s easy peasy for her to deal with-- she can set up her own payment plan and make monthly installment payments on her balance. If it’s over $25k, she needs to consider acquiring professional representation.
While she’s far from in a good place, she’s also not in some horrific place either. The worst thing she can do is bury her head in the sand, because while tax stuff is always fixable. . . the longer you wait, the harder it will be----and the more you’ll have to pay a professional to intervene.
Diosa
Tax Rep Type Person with oodles of clients who, before coming in, hadn’t filed in 20+ years. Hooray!
As others have said, this really is a problem that only gets worse the longer she puts it off. The IRS is never going to forget that she hasn’t filed and owes them money; she’ll just get penalties on top of penalties. Can you send her our way so we can try to convince her to rip that old bandaid off?
singular, can you go to a tax preparer and get them to do your two years worth of taxes? If it’s sitting down and slogging your way through the paperwork that’s making you procrastinate, just get someone else to do it for you. Even if you don’t have all your receipts, they should be able to get started and tell you exactly what you still need to finish.
Yep, this is what I understand as well. If you let it go too long, of course, you might lose your chance at the refund (there’s a limit).
And the other issue is, if the IRS has gotten income reports from employers etc., they may take a stab at figuring out your taxes for you - which might result in them saying you owe them money.
So - you goofed, but as goofs go this one isn’t too bad or too hard to fix.
Especially true for people with small businesses/ contractors. If you get a 1099 that shows $80,000 in income, the IRS has no idea what if any business expenses you had— so that’s $80,000 of pure profit on their books. The reality is that the electrician with that 1099 probably had a whole mess of miles he drove, supplies he had to buy, hotels he had to pay for to work out of town, on and on. So, very quickly, that $80,000 in income becomes $40,000, which has a much different tax liability than the previous assessment.
In addition to all of that, the tax agencies (state and fed) are notorious for creating horribly wrong returns for people. I once got an assessment for a client that didn’t give them any exemptions or standard deductions. Why did the tax agency do it that way? “Oh, we have no way of knowing if he can claim himself on his taxes, so we just assumed he can’t.” So, even if this guy did a straight, no frills tax return with the standard deduction. . . that filing would put him in a much better place than the IRS created return.
The trick to it is that the IRS will tell someone that they don’t need to file if the IRS has created an assessment (called a Substitute for Return). Let’s say you haven’t filed for 5 years, but the IRS has done assessments for 07,08, and 09. They’ll tell a taxpayer, “Oh, we’ve done them for you! Just do 10 and 11, you’ll be fine.” When in reality, there are all kinds of negative impacts to not going back and refiling the original 3 years appropriately-- the financial stuff mentioned and then a whole mess of legal stuff pertaining to the statute of limitation and collections, etc and so forth.
My point is: always do your unfiled taxes. Even if you can’t pay 'em, that’s ok. Just do them.
Word. You’re giving the government an interest free loan, which is pretty silly when you realize that even in a crappy savings account, you’d at least make a little money on the refund if it was in your hands.
My youngest sister did a quick and dirty one year, determined that she was only due about $5 from the state, so in a gesture of generosity, she decided the state could keep it and she didn’t bother filing. Our brother, the CPA, found out and explained to her that she was not being generous, and he straightened her out. She’s filed ever since.
An ex-SIL ratted out her dad for not filing and she collected a reward on him and he went to jail. She didn’t understand why he didn’t want to see her when he got out…
I realize I’m posting a lot in this thread, so forgive me, but: your father in law (or whoever he was) must have been a real scumbag breaking some very serious laws. The IRS almost never sends people to jail for taxes-- I’ve certainly never seen it first hand with our clients (though I’ve seen it from afar and heard stories) and trust me, we’ve got some pretty egregious cases in our office. Like I tell our clients: can the IRS send you to jail? Absolutely. Do they send you to jail? Only if you really, really piss someone off. We have clients that owe millions of dollars, but sleep in their beds every single night. To get sent to jail, he must have done something very, very wrong---- and not just not filing for and paying for a few years (or even a decade).
Beyond that, for her to get a whistle blower reward, he had to have owed a substantial amount of money. Like, a huge amount.
It sounds like this guy was a huge fraudster-- and that’s coming from someone who has nothing but understanding for folks in bad tax situations. Your ex SIL is probably better off without someone like that in her life.
The whole family was crooked - the ex-SIL was always being evicted from apartments and having cars repossessed, and when she decided she was tired of being married to my husband’s brother, she called us to come get him (he had some mental problems and didn’t drive - another story entirely!) I never met her father and all I knew was what she told us (like she’s such a reliable source…) Interestingly, even after she dumped my BIL, she continued to file joint tax returns and he got stuck with a huge bill. He refused to fight it - I guess he kept hoping she’d come back. They’re divorced now and I think he’s cleared the tax debt, but, well, let’s just say she wasn’t a very nice person.
My sister didn’t file for years, had a business, drank the business as well as every other asset in her life (which sort of explains the non-filing), went into rehab, sobered up and before she declared bankruptcy, had to figure out all those unfiled taxes. Thank God that the guy she was dating (and is now married to) is a CPA!
I didn’t pry into how it worked out - I know they postponed the wedding until it was straightened out she she didn’t mess up his financial life.
When I married my husband, I filed two or three years of back taxes for him before the wedding - he was always due a refund, so it was “no big deal”
Singular1, I haven’t filed my 2010 yet and I got a letter today from the IRS saying “hey, you didn’t file for 2010 yet, here’s the forms to do it”. So I’m going to fire up Turbo Tax this weekend and knock it out. I’m owed a refund, so I guess it’s not that big a deal. I’m just a lazy SOB and read on here that I had three years anyway. I just needed a kick in the butt to do it. I think we’ll both be OK.
