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What if you do not file a tax return?
Not filing a tax return is absolutely the worst thing a taxpayer may do. In the absence of you filing a return the IRS will, very likely, file on your behalf what is known as a Substitute for Return (SFR) and calculate the amount you owe without taking into account deductions to which you may be entitled. While owing back taxes is not a crime, the failure to file a tax return may be construed as a criminal offense. Therefore, it is absolutely in the taxpayer's interest to file a late or a very, very late return and get back on track rather than not filing at all. The use of tax accounting professional is highly suggested, particularly when the case involves several years of unfiled tax returns. What is an SFR?SFR stands for Substitute for Return and it is the IRS' version of an un-filed tax return. SFR is filed in the best interest of the government, allowing only one personal exemption and the minimum standard deductions. Exemptions for spouse and children, real estate taxes paid, mortgage interest paid, capital loses, and business expenses would not be considered. Is it possible to negotiate an SFR?Negotiating an SFR is not a simple matter; however, the IRS may accept late filing of an original tax return leading to an alteration of an SFR.
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