Discussion:Delinquent tax client (2006 and 2007)

I have a local carpenter who didn't file for 2006 or 2007 and needs to file those plus 2008. He is single and will be taking the standard deduction with a very easy schedule C. His gross income was very low for 2006 and 2007 (~$10K per year) and he probably has enough in mileage deductions and tool expense to bring that down. With the possibility of the EITC and his business expenses, he will probably end up owing very little or no tax for 2006 and 2007. He claims that he has NOT been contacted by the IRS in any way (a fact that he will sign an attestation to before we do business).

So here is what I have researched and concluded:

1) I will prepare his returns in year order.

2) I will have him go to the local IRS office and have the first page of his 1040 stamped as received for comfort before filing (I am not able to do this since I am not an EA or CPA).

3) If it turns out that he owes taxes for 2006 and/or 2007, he will receive a notice of tax due/demand for payment from the IRS once the returns are filed.

4) If it turns out he doesn't owe taxes for 2006 or 2007, no penalties or interest will apply.

5) Assuming he owes taxes and cannot pay those taxes, I will have him pay what he can and then visit the local IRS office and have him seek an installment agreement.

6) Since there has been no contact from the IRS, I will file them using the standard address for the return year.

Now for my questions....

1) Should I prepare all of the returns and file them at once or file 2006, wait for the IRS notice, and then file 2007?

2) My plan is to charge $800 for the 2006, 2007, and 2008. These are very easy returns to prepare with a simple schedule C and possibly an EITC. Sound fair to you?

I think I have this under control, I just want to make sure that I didn't miss anything. I tried very hard to get this right before posting as I am not trying to learn on your dime...really. The IRS process is somewhat complicated and further complication by the pitfalls of selective client memory, etc. I very much appreciate your help and hope to return the favor.

Thanks,

Michael

Thank you for the clarification, I knew about the separate envelopes but failed to include that in my OP.

I will have him mail them certified with return receipt requested.

He is supposed to be getting copies of all his documentation together, including his 1099's.

Thanks again,

Michael

I believe his gross income will be more than the filing requirements for him...2006 was $8,450 and 2007 was $8,750 (single, under 65).

However, I get where you are going regarding the cost verses benefit and I wouldn't file if he didn't have to...fee or not. I still have to sleep at night.

Thanks, Michael

Good point and reminder. I think in this case he will have both a net income from SE and will exceed the gross income for filing. He will have to file these returns.

I was mainly unsure as to whether I should file 2006 and wait or file them at the same time. It's that literal, "I want to see it in writing" gene of mine! :D

Thanks, you guys are the best.

Michael