We’re excited to be partnering with the Shepherd Express on a monthly “Ask The Expert” Column in 2017! The month’s question was: “How in the world did the IRS or State come up with these numbers?! I can’t possibly owe this much, I never even made this much! And now they want to levy me?”

Arthur Lee, owner of Alliance Tax and Accounting Service has a response for those concerns:

The tax code has defined a pay-as-you-go system. This means that as you earn income you should be paying taxes on that income at least quarterly. The interest and penalties accumulate quickly on tax bills! There are penalties for not filing a return, for filing a return after the deadline, penalties for underpayment of taxes and penalties if you don’t pay estimates at least quarterly throughout the year. And of course, there are interest charges on any outstanding tax balances.

If you have unfiled tax returns, the IRS or State Department of Revenue may file a tax return on your behalf using the best information they believe they have. This is known as a Substitute for Return or SFR. With an SFR, the IRS or State will not give you credit for many tax credits and deductions you are legally entitled to and they may not recognize any tax payments paid or withheld from wages. Letting the IRS or State file a tax return may be in their best interest, but it’s not in yours.

Having unfiled tax returns is by far the biggest problem for those who owe back taxes. Taxpayers who haven’t filed each year for personal and/or business taxes can’t be sure exactly how much is owed without first completing those past returns! In addition, in order to settle tax debts, each taxpayer must be in compliance—meaning, all tax returns due must be filed before the taxing authority will negotiate the tax debt and attempt to reach any settlement plan.

Remember, you may not owe what the IRS and State says you owe, but you’ll never know until your back taxes are filed. Our advice? Let an experienced tax professional complete and file your back taxes, so that you can truly negotiate with the State or IRS. Our goal at Alliance Tax is to find a permanent solution to your tax problem, and to help you pay the smallest amount allowed by law. If you have unfiled returns and the State or IRS is sending you outrageous bills, call us today at 262-786-4442. We offer a FREE 1-hour consultation which allows us to understand your situation, and advise you on the best possible approach to a permanent resolution.