IRS says I didn't file and owe $6,000 from 2001!?

Question

I got a letter today that the IRS didn't get a return from me in 2001 and I now owe over $6,000 in penalties and interest from over 6 years ago.

I have filed every year since and because I have a child, have gotten refunds each year too. My question is how can they do this? Wouldn't a missing refund be caught in the 6 intervening years? And why am I being charges thousands for interest and penalties even though this is the first notice I've gotten about this?

Ugh......help please.

Answer 1

From your question it appears that you did not file a return for 2001. The first thing you need to do is file a return. The IRS can come after you forever if you do not file a return.

You may not owe anywhere near the amount the IRS claims you owe, since the return the IRS has prepared for you takes nothing into account for your benefit.

Answer 2

See if you can find a copy of your 2001 return.

If you had a refund coming for 2001, even if you hadn't filed you wouldn't owe any penalties, it would just be too late to get your refund now.

Answer 3

The statute of limitations for the IRS to correct a return is 3 years from the date you filed your return. Since you didn't file a return for 2001 you're outta luck, they can get you whenever they please. Absent of filing in 2001 or amending any subsequent years tax returns to reflect your 2001 earnings they can't "catch" any errors in the subsequent years. What I would do is try to see if there are any deductions you could have taken in 2001 to reduce your tax liability. If there are you could reduce the amount you would have had to pay, plus interest, plus penalties which could add up to loads of money (hopefully $6,000!).

Answer 4

To begin, we are an accounting firm. Http://www.bcbsinc.com

We would think that they had estimated the taxes for you. If they say you did not file and you can prove that you did file I'm sure they will reverse and recalculate what is the true amounts.

You can request a printout of your account with them. I would think you could call revenue up at 1800-829-1040 and seek to do this.

If you do not have any proof of filing, well it might be that you do need to file after all. If you have proof which includes proof in the form of Mailing Receipts etc. then it would be worthwhile to get them out and submit them as evidence along with the copy of the tax return that you say that you had filed. They will review I'm sure.

The return perhaps could have gotten lost in the mail or perhaps you forgot to mail it; any number of scenarios may play out here.

The Statutory limitation for collection of past due taxes is 10 years from date of assessment. So if they assessed for example April 15, 2002, for the 2001 return, they would have 10 years from that date to collect and enforce collections by way of garnishments, etc. Liens, and otherwise. Attachment of assets and otherwise. The statutory period of assessment does not apply where fraud for example is the issue. We had a client that received an 75k plus penalty for wilful failure to abide by the I.R.C. in the 80's and in the late 90's it was still there. There is period no limit where a criminal act has occurred. Not to say this is the case of course.

The responder says it is too late to get a refund. This is a black and white way of looking at it. If you did file the return, if you were due a refund at the time you did file the return, have evidence to support the position that you did file the returjn by the staturory 3 year limitation to receive that refund then you would have a legitimate case to receive that refund, even years later. Not all cases are black and white and ones should not assume this to be so.

Just to let you know I have seen few cases if any that the IRS wrote letters to people about you having a refund coming and they do not assess taxes or penalties and interest in cases where you do have legal rights to that refund.

Simply stated, if you cannot prove that you did file, they may assess and it is perfectly within the laws for them to do so. It may be wrong, this may be so, but until those taxes are filed, etc. then there is not a whole lot you can do about it. You can complain until hades freezes over, it won't do any good with the matter.

Your best bet is to try to seek a print out and at least try to come up with some kind of return to file. In the ulterior you may be in a better more logical position to do the Offer we speak on here.

If you do owe the taxes and otherwise, you may have to file what is commonly referred to as an offer in compromise arrangement with them. By way of 433A for individuals, 433B for businesses. It is more logical to have a professional firm that deals with these matters do this for you. They stop garnishments while pending and otherwise to just let you know. Believe me when I tell you this, the IRS will try to collect those taxes and as we say in the end this is one matter you should not ignore. If tis is the case, where taxes are owed do not be surprised if soon you also perhaps get a letter from a state as well. You may also very well owe them.

I would say it may be more logical to contact an accounting firm to assist you with the matter if you can't resolve it yourself as it may be true what they state in the letter. Rarely does the IRS make such mistakes when it comes to non-filing. I have not seen one case yet where that is the case; not to say it is not possible; though it is very unlikely.

You may call us if you wish as we handle these matters quite regularly including the offers and otherwise. It may be the most logical choice should you indeed owe the taxes and otherwise.

Interest they more or less have legal rights to them under the law and can enforce them in judgments and otherwise. Penalties can normally be reduced in most to all cases.

In any case, the burden of proof is on your part under the Internal Revenue Code and would be so in the courts as well to prove beyond any doubt that you did indeed file those taxes and otherwise. No other way around it my good person.

I'm sure the matter is not as grave as one might think and overall it can probably be resolved without you losing a leg or an arm in the process.

Our number is 1877-343-5147 toll free if you are interested.

Nonetheless we do wish you luck in the matter. Again, it is highly unlikely without "proof" of filing that you will be able to convince them that you did file them. This is a primary reason why we tell people to mail their returns certified every single time we give them the letters. It costs what a couple dollars but may save soooooo much grief in the end.

I would trust you to not ignore the matter. It will not just go away. I recall many times where this has happened even years later. it is a pain surely but it is also a situation that you cannot in the end really do much about.

The best advice we can give you is to not ignore this matter. The penalties and interest accumulate very fast. I know a guy who owed a couple hundred thousand that years later, not so many years later owed around 5 million by the time we settled the tax debt. We have seen many cases where the penalties and interest are indeed much much greater than the original tax assessment themselves.

---------To the one responder that speaks about Amendments of returns such as with a 1040x you may wish to add when saying these things that it reopens the statutory period for auditing a return for another 3 years unless they can prove fraud. Aka you file 2001 and it is due 2002 April 15 etc. I think it was April 17 but no matter. You have 3 years to amend to get that refund if you may be do one.

Let us say you do so in time and receive a refund. Whamo auditing of that return is extended 3 more years from date of that amendment etc.. Some choose to just not do this for these reasons so maybe it would be more considerate to tell people these things when you speak about amending returns. Just a thought. Now if you've ever been in an audit, I don't mean just an inquiry, I mean sitting at the IRS office for hours going over every little tiny matter and the time the weeks it takes in most cases to even prepare for such things. Then you might want to add these things. You may get that small refund in amending but if you ever need to get help with that audit, you'll regret you ever listened to anyone that didn't give you forewarning on the matter to begin with. We can provide you with references if you wish. ;-) ---------------

I will not go into why interest accrues so quickly but this is so and I would not ignore this matter. That is the best advice anyone can give to you at this time. All other would be mere speculation.

-------------You know we could probably be a top responder because we get a lot of best answers at times. For the amount of answers that we give compared to the amount of times that we get them, we probably could get many more if were like many and just loved to just add up those points. But we rarely make comments on this site. We really could care less about being a top responder. We care more about assisting people and providing the best possible advice and we formulate our answers to that area. Not just simple answers as most top responders give. But ones that do actually "help" people resolve their problems. Not just give them a little bit of help but actually give them worthwhile advice they can use. Not a one response yet that I have seen many times seeks to do this unless for example they are for simple questions. Rarely do you see links and otherwise from many of the so-called top contributors ------------

We have decided to quit answering questions on this site so to your question, consider yourself fortunate (grin j/k). We spend far too much time dealing with why many answers are inherently wrong.

Have a great day and again, we wish you luck.

Wayne Barney
BC Business Services, Inc.
http://www.bcbsinc.com