I owe how much! Let’s say after figuring your taxes you find that you end up owing the IRS money. The money you owe comes out to a large amount, say $10,000. You’re afraid to file your return because you know you can’t afford the potential tax debt. Unfortunately before you know it, the IRS sends you a bill: not for $10,000, not for $15,000, but a bill for $25,000! The IRS has gone ahead and filed your tax return for you with what is called a Substitute for Return.
Don’t let them do it…With a Substitute for Return the IRS does your taxes for you, and here’s the rub. The IRS files you with no dependents, deductions, or credits at the highest possible tax rate. Most taxpayers fall into the 15% tax rate. You'll be taxed at 35%. The IRS then calculates your tax debt, adds penalties and interest, and sends you the bill.
Now you are up the creek…and not only do you not have a paddle, but your boat has a leak. Right now that $10,000 debt sounds pretty good doesn’t it. So how do you get the IRS to go back and accept your original return? You have to file an amended tax Rreturn. I hope you saved all of your tax records.
Here are the steps to filing an amended tax return:
1. Make sure you’re in compliance with the IRS.Since you are already replacing a Substitute for Return, now is a good time to file any other missing tax returns. Call the IRS and find out what other years you need to file for and get to work!
2. Get together all of your receipts. You have to have proof of all your deductions and credits. When filing an amended return you have to prove to the IRS that they need to accept your adjusted return. As far as the IRS is concerned you are guilty until proven innocent.
3. Submit your amended return. If you want the return to succeed and get the IRS to accept the return you should get the services of a tax attorney, CPA, or licensed enrolled agent. These are the only professions the IRS will negotiate with.
There is a catch…You will still have to pay interest and penalties, but at least it will calculated based on the new balance. The best thing that you can do to avoid a Substitute Filing Return is to go ahead and file even if the debt seems high. It will still be a lower amount than if the IRS files for you.
Now you have the smoking gun…Use it!