FAQ. IRS Debt Settlement

Frequently Asked Questions

“FAQ content is general information, not advice on anyone’s specific situation, and doesn’t create an attorney-client relationship”
— Michael Anderson

  • The most common reasons why missing tax returns are prepped and filed:

    • Willfully failing to file a required tax return is a federal misdemeanor under 26 U.S.C. § 7203, carrying penalties of up to one year in prison and a $25,000 fine per unfiled year.

    • If a return will create a “refund” and you wait more than 3 years to file it, you will lose that refund.

    • Filing a late return stops the growth of the civil penalty for failing to file that’s assessed once the return is filed.

    • The IRS may file a return for you called a “substitute return” based solely on what has been reported to it. This return is often incorrect, adds a difficult layer of “work” to correct the incorrect filing, and it’s filing, under current law, renders the underlying debt non-dischargeable in bankruptcy should that ever be needed to deal with the debt.

    • Peace of Mind…getting them done helps to ease the intense stress and worry associated with the situation.

  • It is relatively rare that the IRS moves forward with criminal charges against a non-filer, but it happens to “average” Americans everyday.

    Generally, the IRS takes the position that if you file the return before they do the substitute return, they will treat the lack of filing as a civil matter.

  • The IRS takes the position that it needs to see six years of the most recent returns in the system before it will work with you to reach a debt resolution.

    This means for example, that if you have 3 of the last 6 years in the system, and have an IRS debt related to those filed years, the IRS won’t cooperate with you to set up an installment agreement, consider an offer to settle etc.

    This doesn’t mean that the IRS won’t demand more than the six years be filed however. In certain circumstances it will demand that you file returns that are older than six years.

    There are also situations when the IRS will stop looking for the return that is six years old immediately on the date it reaches that six year mark.

  • Generally, the IRS will accept and replace a return it has created, the “substitute return” with your correct/filed return.

    However, this process can take a long time, and the incorrect debt can cause collection problems while you are waiting for the replacement to take place.

  • If the correct return won’t change the substitute return debt amount, or if the collection statute expiration date (the date the IRS will stop trying to collect the debt and zero it out) is near, it may not make sense to create and file the correct return.

  • Phone Discussion

    The first step is to use the calendaring system on this site to set up a 15 minute phone call with me. I use this call to get a better idea of which returns you may be missing, they type of those returns, whether the IRS may be in collection mode related to returns you have filed or it has filed for you, to answer your questions and explain more about steps and fees. The call is free.

    IRS History

    Once the discussion is complete, some additional “analysis” and document retrieval must be done. I provide you an IRS “8821” form, that you will fill out and sign. I use this to tell the IRS I have permission to review your history, obtain the IRS account history documents that show what has been going on for years you may already owe, and to obtain the wage and income history reports for years you haven’t filed.

    The wage and income reports are critical as they provide the information from 3rd parties reported to the IRS and are used as a starting point in the creation of the returns. This step is required and the fee is $450.00

    Worksheet Completion

    Most clients will print off and fill out a “worksheet” for each missing year to try and ensure that as much information is provided as possible.

    This is especially important for the self employed. This worksheet along with any documents you have like w-2s, 1099s etc. are provided to me.

    Draft Returns

    Once I have the IRS wage/income transcripts, your worksheets and related information, and documents, I will create a first draft of the return and ask questions to help tighten up any missing or unclear items.

    Finalize Returns and File

    Once all the questions are answered - final/proposed drafts are provided for review.

    When reviewed and approved, I will attempt to file returns that can be filed electronically… and the others are mailed to you with instructions for signing and mailing.

    Tax Return Fees

    Most 1040 returns are 295.00 per year. This includes the state of Arizona 140 return.

    There are additional fees for clients with stock sales, schedule C (self employed), out of state tax returns, and other items that make the return more complex.

  • I’ve helped thousands of clients deal with millions of dollars in IRS debt by challenging it, settling it, and bankrupting it.

    I’ve helped many clients create missing returns as well.

    I limit my practice now to helping just those who have unfiled return problems… analyze the history and create the missing returns.

    I will also, (once the returns are complete), discuss options generally with clients.

    The fee for this is usually $125.00 and the discussion is limited to 30 minutes.

    Many people can deal with the IRS debt without representation… and just need some direction to get started.