If you as a taxpayer fail to file a tax return, the Internal Revenue Code authorizes the Internal Revenue Service (IRS) to prepare a return for you. Now before you begin to jump in jubilation thinking that this is a great way to have your tax returns prepared by a tax professional for free, think again.
When the IRS prepares your tax return for you, its objective is to get your attention. The best way to get your attention is to prepare a substitute for a return (SFR) showing a high tax liability, and then should the taxpayer fail to respond to subsequent IRS notices for payment, begin to levy bank accounts and wages to collect the taxes due. Once the intent to levy notice is sent by the IRS, the taxpayer usually begins to seek professional assistance.
Did you notice that we said that a way to get your attention is “to prepare a return showing a high tax liability”? That’s right. The IRS will prepare a substitute for your tax return showing gross amounts of income, disallow all dependents, disallow all tax deductions, if stocks are sold, the sales proceeds will be used and the tax cost of the stocks will be ignored, estimate business and rental income on the high side, and choose the worst filing status for you. If you are married, rather than using the married filing joint filing status, the IRS will use the married filing separate filing status because its tax rates are higher.
If you haven’t filed prior years’ tax returns, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your tax preparation and tax planning concerns and how to resolve your IRS tax problems. You can also schedule a consultation at Click Here.