Below is the typical scenario that we see:
You are self-employed and have not filed tax returns. You do not file because your income is not reported to the IRS. But you forget that you own a home and pay mortgage interest. Your bank is required, and will report, to the IRS, the amount of your mortgage interest. From this information the IRS knows you are making mortgage payments, property taxes and insurance. It is not a huge leap that there is a substantial likelihood you have unreported income. Worse yet, that unreported income is likely self-employed income, subject to self-employment taxes in addition to income taxes.
If the above scenario describes you, it is a matter of time before this headache shows up on your doorstep in the form of an IRS Audit. Once it does, you are in a very weak position and at the mercy of the IRS Auditor.
The best way to handle unreported income returns is to voluntarily file returns before the IRS comes to you. Self-employed returns can be tricky, and it is important to find every business deduction for which you are entitled.
Non-filing can be stressful enough but those with self-employed income, typically owe with their returns. The worst thing you can do is start trickling in your unfiled returns without formulating a tax resolution plan of action. Doing so will cause the IRS to go into aggressive collections before you are ready.
The following is the best course of action:
- Prepare ALL returns and determine the total debt.
- Review ALL available resolution options based on your financial circumstances and determine the best option(s).
- File All returns to get into compliance.