Tax Talk

Question: I haven’t filed my tax returns for 2018, 2019, or 2020 and the IRS keeps sending me notices that I owe them $38,273. How can that be? I never even filed. What should I do?

Answer: When a legally required income tax return isn’t filed on time, the IRS can file an income tax return on your behalf. It’s called a “substitute for return” or “SFR.” Most of the time, the ensuing tax liability is much greater than if you filed your own return. This is because the IRS doesn’t give you credit for proper exemptions, credits, or (business) deductions. In addition, it’s a misdemeanor, punishable by up to one year in prison and a $10,000 fine for each year not filed.

The good news is that your Tax Resolution Specialist can prevent this from happening, but you must act fast. Once retained, we can replace all “SFRs” with originally filed returns, reducing, in most cases, what you owe. Once these returns have been filed, the next step is negotiating a resolution with the IRS on the remaining amount owed. You will most likely be looking at one of two options – the Offer in Compromise or a properly structured payment plan.

The Offer in Compromise (OIC) was created for people who owe the IRS but who, for whatever reason, are unable to pay their tax debt off, even over time. The Offer in Compromise allows taxpayers to negotiate a settlement amount that will take care of the entire tax debt once and for all. This settlement agreement can lower the tax debt by a significant amount. However, there are strict eligibility requirements. If you do not qualify for the OIC, then you may consider a payment plan, which, if properly structured, allows you to pay off your debt over time by making manageable monthly payments, much like a commercial installment loan.

Mark Diehl is the founder and president of Diehl CPA LLC and a Certified Public Accountant licensed in Alaska. He has a Bachelor of Science and a Master of Science degree in Accounting from Western Governors University. Mark has previously worked with the Minnesota Department of Revenue as a tax auditor, so he knows the audit process very well. Diehl CPA is Alaska's expert in Tax Negotiation and Mediation.