The IRS makes use of Notice CP59 to request tax returns from you. They normally only request returns if they believe you owe. You also might receive a CP59 if you filed an extension or if you had home mortgage interest but no income. The IRS wonders where you got the money.
You may think that you did file but the IRS says you did not. If you have the licensed mailing receipt, then you can argue about the filing date and there is a process for this. But, except you have the mailing receipt, it is generally better to just re-file than dispute.
Steps to take in Response to Notice CP59
Since you are filing an original return you have the opportunity to search through your records and find more deductions. If you want to prepare the return, sign it in blue ink & send it to a tax attorney for guidance & advice before you file it with the IRS.
If you are sure the return has not been filed or prepared, then we can put together the required documents, prepare & file the return with attorney guidance so you have no further problems.
This is NOT an audit & it will likely not become an audit. The IRS wants your return, that’s all. But, they have proof that suggests you owe so you have to be careful. Seek the advice of a tax attorney.
The IRS can’t implement collection against you until you either file a return or they do a “return” for you and review the tax. Since the CP59 requests a return from you no assessments have been made. So, the situation is not urgent but needs to be solved soon.
Does IRS Know I Haven’t Filed Back Tax Returns?
The truth is, they already know you have not filed your tax returns and because of heavy inventories they have not had time to work your case. Besides that, so many taxpayers don’t file their yearly tax returns.
How many Back or Past due Tax Returns Should I File?
You’ll get advice from all types of tax professionals on the subject of “how far back should I file my on file for back tax years.” The good news is, as a common rule you do not have to go back that far.
- Delinquent returns; enforcement of filing requirements
- Taxpayers failing to file tax returns will be asked to prepare and file all such returns except in cases where there is an indication that the taxpayer’s failure to file the required return or returns was willful or if there is any other sign of fraud. All delinquent returns submitted by a taxpayer, whether upon his/her own idea or at the request of a Service representative, will be approved. However, if signs of willfulness or fraud be present, the special procedures for handling such returns must be followed.
- Where it is determined that needed returns have not been filed, the extent to which compliance for prior years will be enforced will be determined by reference to factors ensuring compliance and evenhanded administration of staffing and other Service resources.
- Factors to be taken into consideration include, but are not limited to:
- Prior history of noncompliance,
- Existence of income from illegal sources, effect upon voluntary compliance, anticipated revenue, and collectibility, in relation to the time and effort required to determine tax due.
Concern will also be given to any special circumstances existing in the instance of a particular taxpayer, class of taxpayer, or industry, or which may be peculiar to the class of tax involved.
- Generally, application of the above criteria will result in enforcement of delinquency procedures for not more than six (6) years.
Enforcement further than such period will not be undertaken without prior managerial approval. Also, if delinquency processes are not to be enforced for the full six-year period of delinquency, previous managerial approval must be secured. Managers are reluctant to require more back tax returns unless there is a clear ability to pay the back tax.
The unfortunate news is many taxpayers who had withholding taken out have lost a refund checks. You can file and claim refunds however for the last three years. Also if you have not filed your W-2s and tax returns you can lose valuable Social Security credit.
What happens if you have lost your tax records?
If you have back tax returns to prepare, IRS has an income transcript available to prepare your tax returns.
The IRS keeps all back W-2s and 1099’s on record for the past seven years.
Usually income tax reconstruction records are put together by looking at various factors:
- Cost of living,
- Expense analysis,
- Bank statements,
- Credit card statements,
- IRS records,
- An overview of Due Diligence of the asset base, and various other factors to back into income.
As former IRS agents we have learned to prepare tax returns under reconstructive methods.
Why does IRS only require back 6 years?
The answer is simple, manpower. By next year, the entire IRS workforce will be cut down by one-third as a result of attrition and budget cuts. That does not mean IRS is not going to find you. At some point in time you will get the mail.
As a general rule, the only time IRS will go beyond six years is if a person has important assets or can pay all the back years. In those kinds of cases, the IRS may ask you to file all your tax returns. But as a general rule, there are so many exceptional cases, so much money to be collected and so many back tax returns that have to be filed, the IRS has put limits on past-due tax years is six.
What Happens if you Owe Back Taxes?
The Internal Revenue Service will merely take a financial statement on form 433F or 433A and make a determination how they will want the back taxes paid.
In general, after IRS reviews your financial statement, they will either place your case into a currently not collectible status if your expenses go beyond your income, ask you to make a monthly installment payment after they apply the national standards or they may propose that you consider an offer in compromise to resolve your case.
Am I going to Jail
The general idea is to contact IRS before IRS knocks on the door. Once you have come forth on intentional basis, it is extremely doubtful that IRS will ever go after any taxpayer illegally unless there is fraud involved.
Bear in mind the IRS wants voluntary compliance and our tax system is based on that principle.
Unless unique situations exist do not be wedged in criminal fear. In the entire United States, and abroad, the IRS as a general rule convicts a total of 3300 taxpayers for a variety of criminal charges yearly.