Discussion:Taxes not filed for many years

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Discussion Forum Index --> Basic Tax Questions --> Taxes not filed for many years


Discussion Forum Index --> Tax Questions --> Taxes not filed for many years

Taxinca (talk|edits) said:

19 May 2010
A potential new client is self employed, lives overseas, hasn't filed since the 1990's and doesn't have a copy of any tax returns.

I'm wondering how to approach this both to protect myself from liability and to try to help the client.

Is is ok to request transcripts and wage and income records going back as far as possible and base the tax return on that info plus the info provided by the client?  Also is it ok to only go back 3 years for now and see what kind of response I get from the IRS?

I've always read that prior year returns are needed. But what happens when they just don't exist?

Thanks for the help

Tax Writer (talk|edits) said:

19 May 2010
Yes, I've gone back ten years for a client that had outstanding IRS debt. Get a signed 2848 and pull his records as far back as you can. Requesting PAYOR information doesn't raise any flags. In this case, you just do the best you can with what you have.

Once you get the IRS records, then talk to the client and decide what you want to do.

Marcilio (talk|edits) said:

19 May 2010
Frequently, Ex-Pat filers don't owe any US taxes unless they have US-based income. What's his motivation for filing old returns now? I don't see a problem in requesting transcripts back as far as you can. This has the potential for being a massive (read expensive) project.

Taxinca (talk|edits) said:

19 May 2010
I don't know why he wants to file now but I'll ask him that question. I think he'll only end up owing SE tax because of the Foreign Earned Income Credit.

Taxinca (talk|edits) said:

19 May 2010
sorry I meant Foreign Earned Income Exclusion

Death&Taxes (talk|edits) said:

19 May 2010
But if he was self-employed, there could be selfemployment tax.

Guya (talk|edits) said:

19 May 2010
This is quite standard. Roughly one-third of Americans overseas comply with tax returns, only less than one-tenth with FBAR filing.

I usually speak with over a dozen non-filers each week.

Of course in many cases the possible FBAR penalties frighten them off filing even though tax may be zero...

We don't know which country but don't forget to look at foreign tax credits, totalization agreement, FBARs plus things that are not taxed in the foreign country. The HIRE Act will increase penalties so I would suggest catching up now. Six years is standard.

IDrinkYour Milkshake (talk|edits) said:

21 May 2010
Is he even a citizen? If not, he wouldn't have had a filing requirement to begin with unless his income was in the US.

Mscash (talk|edits) said:

21 May 2010
My standard answer on all long term non-filers is follow IRS policy and go back six years only. You can get US income information by fax from the practitioner hot line. What you do about foreign tax credit and foreign income exclusion will be extra fun. Get a retainer up front.

Taxinca (talk|edits) said:

21 May 2010
Thanks for the help. He is a US citizen and has been living in Germany since the 1990's. He would be subject to S/E tax but has been paying social security in Germany so I advised him to get a certificate of coverage for that. So far as I know so far he does not have ties to any state but was a Calif resident before he moved.

Thanks again

Tax Writer (talk|edits) said:

21 May 2010
Germany is a allied nation; there's got to be a tax treaty out there. He might be in the clear.

Guya (talk|edits) said:

21 May 2010
Watch for non-qualified second or third pillar pensions and non-qualified insurance products all of which might be subject to OID or PFIC or foreign trust reporting...

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