1. A person hasn't filed tax returns since 1999. He took care of his mother from 1999 onward and earned no income in the last seven years from any sources. He has to:
a. file all 14 returns 1999 to 2013.
b. not file any returns because he is "below the filing requirement."
c. file only the last 7 years of returns 2007 thru 2013 as that is what the IRS is looking for.
d. go the Department of Justice to prevent jail-time for not filing.
ANSWER: b. If you weren't self-employed and earned below the standard deduction plus exemption - in this guy's case he had - "$0" income - you aren't required to file a return. The IRS won't be looking for returns 2006 or older - very likely - even if he did work.
2. A person hasn't file tax returns since 1999. He was self-employed in all of the years. The IRS filed 2004 and 2005 returns for him and he owes $50,000 for those two years based on their filing for him.
a. file all 14 returns 1999 to 2013 including replacing the 2004 and 2005 ones.
b. file only 2006 thru 2013 and negotiate on everything owed.
c. file 2004 thru 2013, reduce balances for 2004 and 2005 and negotiate on everything owed.
d. Just file 2013 - pay it and wait for 2004 and 2005 to expire. File and pay for the rest of your life!
ANSWER: b, c, - depending. This is a tricky question obviously and as licensed tax professionals we can get into hot water by not answering it correctly. But the real questions here are: what is the IRS looking for and how "hot" is the collection process against you? The IRS generally won't be looking for returns in this case older than 2004 and might not be looking for 2006 or maybe even 2007. If you are easily going to qualify for an Offer in Compromise, you can save hassle by not doing 2004 and 2005, but you should probably do 2006 thru 2013. The choice - d- can't be recommended but some people might decide to file and pay 2013 - if there is no paper trail for income - 2006 to 2012 -- and wait for the older debt to expire.
3. A person hasn't filed since 1999. He worked a cash business and received no 1099's, but he earned about $25,000 in gross revenues for his cash business the last 14 years.
a. file all 14 returns - 1999 to 2013 and negotiate.
b. file 2007 to 2013 and negotiate.
c. file 2013 and pay it - be a good taxpayer for ever.
d. go back underground.
ANSWER: probably b. This is the trickiest question to answer as the IRS generally doesn't scrutinize people who are self employed and have no 1099's. But the IRS in 2014 - generally is looking for returns back to 2007. This person could meet that requirement then negotiate a payment plan or a settlement on what might be owed. However, he also could - gamble - against our recommendation - file and pay 2013 - and file and pay for the rest of his life.
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