The primary reasons why successful and seasoned business owners have unfiled income tax returns is that their accountant died, retired, or just got too old to be able to handle the job competently. It is difficult to change tax practitioners once you have an established relationship. Of all of the relationships that business owners have with professionals, this one is certainly the most sacred. My clients tell me things that they would never tell a spouse, and certainly not a child. And that’s exactly how it needs to be if this is going to work. The relationship needs an underlying basis of complete and unfailing trust, on both sides in order for the job to get done properly.
What happens when you lose that accountant that you have relied upon for so many years? Many clients go through a sort of mourning period. They know what they need to do. They need to move one and find someone else. But they just can’t get themselves to do it. Change requires risk. At best, it will be new and it will take time to rebuild that sense of trust. At worst, it could possibly turn into a nightmare. When you are talking about your taxes and looking at a situation like this, it is easy to procrastinate. But as you wait longer, you will naturally have more problems. And naturally, those problems will become more costly.
Here are the five steps you will need to get current…
1 – Depending on your situation, you may not need to file every open income tax return. I can’t make any promises in this regard. But I just had a business owner walk into my office after not filing a return for twenty-two years. What I will do is file the last few years, and wait for a letter from The IRS telling me what additional years they would like to see. The chances are very high that we won’t need to do all of them.
2 – Put your records together so that we can process the underlying financial statements necessary to complete the income tax returns. These records should include bank statements, copies of cancelled checks, check registers, payroll, monthly credit card and other liability statements, as well as any petty cash receipts. Normally we will do a first draft set of financials before asking the year end questions necessary to properly complete an auditable business tax return.
3 – We will normally request a tax transcript from the IRS so that we can see what they have on file. This helps us in being more complete on something that you may have overlooked.
4 – Once the business returns have been completed, we need to complete the personal returns as well. A completed tax organizer is very helpful along with the IRS transcripts to make sure that we have not missed anything.
5 – Once the returns are done, we need to determine how to handle any tax that may be due. If you had withholding on your W-2’s or made estimated tax payments, you may end up getting a refund. If there is a tax due you can either pay it, go into a payment plan, of file an Offer In Compromise.
The hardest part for any business owner is taking the first step. Selecting an accountant can be difficult. Find someone that you like. Someone that you trust. Someone that has the experience necessary to protect you, your family, and your business. Once that is done, the rest can be much easier.
If you have a problem with Unfiled Income Tax Returns – How to Satisfy The IRS Chicago Illinois, please don’t hesitate to contact us.
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