Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

Late Tax Returns

Posted by taxguru on January 15, 2006

Q-1:

Subject: Unfiled Taxes

Hi. I was wondering what I can do about two years of un filed federal taxes.

I’m 22 years old. Own a small business. In the year of 2003 I filed an extension for my personal federal taxes. Payed est. tax I thought I would owe. Worked hard at my business (which I started in my teens). Incorporated and started switching it over to the LLC. When it came time for the extension to be over, I found out had to have major surgery, went through a deep depression.

The business flourished without me strangely. I did the minimum to keep the business running. Deposited the checks. Paid its bills etc.I spent most of those two years holed up in my apartment, buying groceries, surviving on the minimum, and staying out of public life. Surgery time came, everything went well and I was healthy again. Decided I had no reason be depressed.

Now I owe two years of un filed personal taxes and one year of un filed taxes on the LLC. I believe I have the money to pay it as I did nothing with the profit from the business, just let it setting in the account. I’m in a bit of a mess as I have no CPA for myself or the business.I want to get it all sorted out, pay the taxes to the IRS I owe, and hope to avoid jail time.

Could you lead me in the right direction?

Thanks,

A-1:

You aren’t that far behind on your tax returns that you need to be worrying about prison.  I know plenty of people much further behind than you are.

You absolutely must engage the services of a qualified tax pro who can help you get the past year tax returns prepared as accurately as possible.  Trying to do this on your own is asking for serious trouble.

If there are taxes due, your personal problems will be important in getting the IRS and State tax agencies to reduce or waive the late penalties for reasonable cause. 

Good luck.

Kerry Kerstetter

Q-2:

Kerry. Thanks a lot for the response. I value your opinion greatly because of your site and your writings.

There are  many CPAs in my area, most who either seem to have clients who are either employed clients, or large business. I cannot seem to find any who do small business specifically.

Do you have any suggestions for finding a qualified CPA?

Thank you,

A-2:

I know that there are tons of tax pros desperately looking for clients.  You may want to widen your search area.  Choosing one based on close proximity to you is the wrong way to go about it.

Unfortunately, we don’t have anyone else to whom we could refer you. If you haven’t already done so, you should check out my tips on how to select the right tax preparer for you

Good luck.

Kerry Kerstetter

Follow-Up:

I will carefully read the advice on the page.

Thanks again!

 

 

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