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Frequently Asked Questions

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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” business expenses.

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.

Call or . We can start a dialog that can create a plan to get these returns filed and corrected.

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. What then?

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 IRS.

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 file?

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 jail time.

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 interest.

People who repeatedly don't comply with the law are subject to additional enforcement measures such as criminal investigations which could result in jail time.

Call or . 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:

  1. locate taxpayers or their assets

  2. understand various types of businesses

  3. understand various types of property ownership

  4. confirm/validate the information taxpayers have provided to them

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 search.

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 in-person.

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 quarterly.

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 utility company.

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?

Call or  so we can begin a dialog that will allow us to create a plan to solve your tax problem.



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