8045 Corporate Center Dr.,
Charlotte, NC 28226
Frequently Asked Questions
(Click subject to expand for details. Click again to
1. What happens if I don't file
my Income Taxes?
Those who haven’t filed their tax returns sometimes wonder if the IRS
knows that they haven’t filed and if the IRS is following them everywhere
they go and if they will be confronted at a most inconvenient time and
asked why they haven’t filed. Well, the good news is that the IRS is not
following you. But, the bad news is they (the IRS) will probably
eventually discover that you haven’t filed.
Typically, there will be a 2 or 3 year time lag between the due date of a
tax return and the time the IRS contacts you on the matter. It’s even
common for 5, 6 or 7 years to pass before the IRS catches up to
non-filers. And, imagine this - I’ve met several people who haven’t filed
for 20 years or more and have never been contacted by the IRS. Don’t count
on it, but it does happen. But, the IRS is probably getting better at
finding those who have not filed given the capability of this high tech
world we live in today.
If you are one of the unlucky ones who do get caught, and my guess is that
most non-filers will get caught, then the IRS will file a “substitute
return” for you. This return is based on information the IRS has from
other sources, such as 1099’s, W-2’s, etc.
The problem is that that the IRS will file the return as if you are a
single taxpayer, even if you are married and eligible to file a joint
return. You will not get any credit for dependents either. No deductions
will be used in computing the amount of tax you owe (such as the amount of
mortgage interest you paid on your home) even if the IRS also has
information on these items. Sorry, you get no benefits for deductions. You
just get taxed on income items they know about.
If you are self-employed, you get no expense deductions for the cost of
running your business. No mileage, no cost of labor and no other “normal”
If you sold your home or other real estate, you will be taxed on the gross
sales price of the home or real estate that was sold. No deduction for the
cost of the property. It’s the same for securities that are sold. The IRS
taxes you on the gross sales price of the security sold, allowing nothing
for the cost of the security sold.
Basically the tax is computed on the “gross amount” paid to you without
any reductions that you may be entitled to and, of course, this overstates
your real tax liability.
To add insult to injury, penalties and interest will be charged to you.
These “add-ons” are huge. They can double the tax in just a couple or
three years. Multiple penalties add up fast. Once these are added on, the
IRS treats them just like tax and sets out to collect these “add-ons” just
as if they were the same as the original tax owed.
Do something about this if you find yourself in this predicament. Even if
the IRS has already filed a substitute return, it still makes sense for
you to file your own return to make sure you take advantage of all the
exemptions, credits, and deductions you are allowed. The IRS will
generally adjust your account to reflect the correct figures.
We can start a dialog that can create a plan to get these returns filed and
2. What will IRS do once they
say I owe them some tax, even though I didn’t file?
Let’s say you didn’t file and the IRS filed substitute returns for you.
The IRS will then start what they call the “collection process.” This is a
process of many steps by which they intend to collect the amount they say
you owe from the substitute returns they filed for you.
The process starts with a combination of three things. The sequence of
these steps vary from situation to situation. The IRS can:
File a Federal Tax Lien against any property that you own,
Garnish your wages if you are a wage earner,
Take your compensation (by Levy) from a client or company who owes you
money if you are self-employed, or
Levy your bank account.
You may hear from a Revenue Officer who is an IRS employee assigned to
contact you and collect the tax.
The IRS also shares the information they used to set up the taxes on you
with the state taxing authorities. So if you live in a state with a state
income tax, expect to hear from the state also who will have filed
substitute returns for you based on the information they received from the
Make a move. Do something to avoid these actions by the IRS. Call or
so we can begin a dialog that will allow us to create a plan to solve
your tax problem
3. Will I go to jail if I don’t
A long-standing practice of the IRS has been not to recommend criminal
prosecution of individuals for failure to file tax returns, provided they
voluntarily file, or make arrangements to file, before being notified they
are under criminal investigation. The taxpayer must make an honest effort
to file a correct return to avoid criminal prosecution which could end in
The IRS wants you to voluntarily file your tax returns. The IRS does not
want to prosecute ordinary people who made a mistake. However, flagrant
cases involving criminal violations of tax laws will continue to be
investigated and could possibly result in jail time.
4. What if I don't file voluntarily?
The IRS is taking enforcement steps for those who repeatedly choose not to
comply with the law. IRS employees will prepare returns when taxpayers do
not file. The returns prepared by the IRS might not give credit for
deductions and exemptions a taxpayer may be entitled to receive. Bills
will be sent to those taxpayers for the tax due, plus penalties and
People who repeatedly don't comply with the law are subject to additional
enforcement measures such as criminal investigations which could result in
. We can start a dialog that can create a plan to get
these returns filed and corrected.
5. How did the IRS find me?
IRS’s rulebook (The Internal Revenue Manual) has a whole section on how to
find you and your assets. IRS agents are trained from this manual on how
to research public and private records to find you. They do this research
in person or online.
I am going to just hit the highlights here otherwise you would be
overwhelmed with information. If you need to know more my contact
information is at the end of the article.
IRS has a “Locator Services Program.” It includes a national asset locator
tool, the credit bureau web browser, the tax research portal and the
Department of Motor Vehicles.
These services provide easy access to public records such as real estate
transactions, real property, corporate officers, vehicles, and aircraft,
as well as information on people and businesses. The national asset
locator tools allow IRS agents to research public records data and perform
nationwide research on you.
The IRS knows the Internet is a powerful tool for gathering information
about you and your business.
The IRS also has corporate contracts for locator services and credit
bureau services. These services provide IRS employees with Internet /
Intranet access to do the following:
locate taxpayers or their assets
understand various types of businesses
understand various types of property ownership
confirm/validate the information taxpayers have provided to
The IRS agent considers the level of cooperation from you, the type and
size of the tax, and other factors to decide whether to use the Internet
They also make “third –party contacts” to find you and your assets.
The IRS agent also performs a telephone number search, a Social Security
Number search and an Employer Identification Number search.
Real property records are a critical source the IRS uses for locating you
and your major assets.
The IRS agent performs a courthouse records check either online or
DMVs require state residents who own a motor vehicle to register their
motor vehicle and require state residents who drive a motor vehicle to
hold a valid driver license. In addition to driver licenses, motor vehicle
departments issue identification (ID) cards to persons who require an ID
card. The ID card looks like a driver license, but is used for
identification purposes only. Information maintained by the various motor
vehicle departments varies from state to state. Most states provide driver
information, lien holders, and vehicle information on cars, trucks, etc.
ID card information is also provided. The IRS loves this stuff and has
direct access to all of it. They can not only find you but anything you
are driving that requires registering.
National Uniform Commercial Code (UCC) filing records contain information
from commercial lien filings. These records can help IRS agents find
assets used by businesses to secure commercial loans or to learn about
financial relationships between businesses and individuals.
Corporate information is available from each individual state's Secretary
of State, State Corporation Commission, or equivalent. These organizations
provide information regarding the date of incorporation and the officers
of the corporation. All states and the District of Columbia require that
corporations register at the time of their incorporation, and the
registration information is usually maintained in each state's capital.
Secretary of State information is one of the most effective sources
available to the IRS agent for corporate accounts. It provides third party
information, corporate officers, and registered agents, and is also fairly
effective for verifying the existence of assets. IRS agents use the
corporate information received from the Secretary of State research to
assess the Trust Fund Recovery Penalty (TFRP), if applicable.
Limited Liability Company (LLC) Information is maintained by each
individual state's Secretary of State, or equivalent, often in the same
database as corporation records. These organizations provide information
to IRS agents regarding the date of organization and the members and/or
managers of the LLC.
The Employment Development Department (EDD) is a state agency, and in some
states the agency name is different (the name changes from state to
state). EDD provides secure information regarding the payroll information
supplied by employers who have filed with the state. EDD information is
especially useful when an employer may have filed state employment tax
returns but not federal employment tax returns. Information includes
number of employees, payroll, etc. The various state employment
commissions (EC) have proven to be some of the best available sources of
wage levy data for IRS agents. Access to these sources has been greatly
enhanced by on-line vendor access and tape-to-tape exchange programs.
These levy sources are very effective because the information is updated
The IRS exchanges information with State Employment Commissions.
Utility company information helps IRS agents to locate you. The IRS knows
that often, taxpayers attempting to hide from the IRS and other creditors
do not notify the post office of a new address. However, taxpayers
generally will transfer their utility service from an old address to their
new one, so when a taxpayer moves within an area served by the same
utility company, the taxpayer will provide an updated address to the
The United States Postal Service (USPS) provides an address update product
— the National Change of Address Linkage (NCOA). The IRS is a licensee of
NCOA, and receives a consolidated data file with change-of-address
information from the USPS on a regular basis. The IRS benefits from the
NCOA address update process by using the new addresses to attempt contact
and/or maintain contact with taxpayers.
If you haven’t filed,
. Let’s get you caught up and in good
standing with the IRS. Otherwise, as you can see from this article, they
will be using all of their resources to find you..
6. How can I get more information?
so we can begin a dialog that will allow us to create a plan to solve
your tax problem.