| In the latest Star Wars episode, the evil empire | | | | owe tax on it due to the SFR.For business owners |
| executes a brutal revenge on the Jedi. While the IRS | | | | who do not file 941 payroll tax or 940 unemployment |
| is not an evil empire (and due to the Revenue | | | | tax, IRS uses code section 6020(b) to file payroll |
| Reform Act of 1998 not very brutal anymore); it too | | | | returns for non-filers. These returns can also be for |
| is executing revenge on those who do not comply | | | | more than one would have owed if they filed the |
| with filing their tax returns.The IRS is agressively | | | | originals.Once IRS files an SFR 1040 or a 6020(b) 941, |
| using the "Substitute for Return" (SFR) program to | | | | they can collect on them just as if they were filed |
| file tax returns on behalf of those who fail to file. | | | | by the taxpayer. I had one client who had a Federal |
| The SFR program has been around a long time. | | | | Tax Lien filed on him for over $100K due to an SFR |
| However, due to better computers at IRS, it is being | | | | on 1996. We went ahead and filed a correct tax |
| used now more than ever to get people into filing | | | | return in 2004 and his true debt was only about |
| compliance. Basically, if you do not file on time, the | | | | $10K. The reason was because IRS taxed all his |
| IRS sends you letters and may call you on the phone | | | | stock sales as 100% profits when he had many |
| requesting that you file. If one ignores the letters, | | | | losses.There is good news for someone caught in |
| IRS takes the information reported to them by third | | | | SFR trap. You can always file an original return! The |
| parties and files a Form 1040 for you. In most cases, | | | | tax laws are valid and IRS is a legitimate government |
| the tax owed on this IRS prepared return is far | | | | agency. Don't be fooled by bogus websites or folks |
| more than one would owe if they filed an original | | | | who tell you that there is no law requiring one to file |
| return.Why is the tax so high on an SFR? Well, IRS | | | | a tax return. If you get SFR'd, hire a tax professional |
| does not know who lived with you so they usually | | | | to prepare a correct return and work with IRS to |
| file the return single or Married Filing Separate (the | | | | overturn the SFR. You may be audited, but if you |
| worst tax table). A person might have had 3 or 4 | | | | are right then you will owe much less than the |
| dependents, but they won't be on the SFR. Also, if | | | | amount on an SFR.A good CPA, Enrolled Agent, or |
| you worked contract labor and got a 1099, it is very | | | | Tax Attorney can help you with IRS collection issues. |
| likely you had deductable business expenses. Again, | | | | DON'T IGNORE IRS LETTERS. GET HELP. |
| IRS does not know what your expenses were and | | | | Here are some websites that can help you get info: |
| will tax you on the total of 1099s. In addition, if you | | | | |
| sold stock, IRS will tax you on 100% of the sales | | | | |
| price because they do not know your basis in the | | | | |
| stock. In this circumstance, you could have lost | | | | |
| money on the stock and had a deduction, but will | | | | Robert Coleman, E.A., A.T.A. |