IRS Collection For Individuals

Individuals are supposed to file Form 1040 tax returns every year. Form 1040 tax returns are due on April 15th of the following year. An automatic six-month extension of time to file is available if you file a Form 4868, Application of Time to File U.S. Income Tax Return, by the due date of your tax return. Remember, an extension is only an extension of time to file the tax return, not an extension of time to pay the tax liability. Most people with several years of unfiled tax returns do not know where to start, let their problem snowball and simply try to ignore the problem. However, the problem rarely, if ever, goes away, only becoming larger and more severe. Let Patrick T. Sheehan & Associates help you with your IRS problems.

Case study: Marital Status, Dependents and Charity Donations Make Substitute for Return InaccurateOur taxpayer simply forgot to file a tax return for one year because of his divorce. Although he intended to file the tax return, he never got around to it. All of a sudden, one year turned into two years and two years turned into three years and his case began to “snowball.” Because our taxpayer did not file his tax returns, the IRS filed tax returns for him, called Substitutes for Return. Unfortunately, the tax returns filed by the IRS were wrong because the IRS did not know that he was married, had children, had a house and that he gave money to his church. The IRS then started garnishing his wages and seizing bank accounts, making our taxpayer afraid of losing his job and home. We were able to stop the IRS and undo the Substitute for Return liability. Our taxpayer is now on track, has no IRS problems and files all of his returns every year without fear of the IRS.

If you are a W-2 employee, your employer withholds taxes from your pay. If you are withholding at the correct level, you typically have a refund at the end of the year. Income from other sources may alter this result.

If you are self-employed, you may have to make estimated tax payments on a quarterly basis. Estimated tax payments are due on April 15th, June 15th, September 15th and January 15th of the following year. People that are recently self-employed often fall into a trap by not realizing that they need to make estimated tax payments. Because you may be new to being self-employed, it is often difficult to discipline yourself to save money for estimated tax payments. Failure to make estimated tax payments often leads to a cycle of not filing tax returns and hiding in fear of the IRS.

If you are self-employed, we recommend that you open A second bank account. Title this account “Tax Savings Account” and deposit regular, small deposits in anticipation of your quarterly estimated tax payments to the IRS. We recommend that a small percentage of each self-employment check you receive be placed into the tax account. It is easier to take small bites of the apple rather than one big bite at the end of the year.