Tax Questions – File Old Tax Returns

Best Time To File Old Taxes? NOW!

Believe it or not, the percentage of the taxpaying population who files late or doesn’t file at all is substantial. There have been several statistics that indicate that eleven to fourteen million taxpayers fail to file their returns on time. This could mean they do it months, if not years after the April 15th deadline. The reasons for filing late are all across the board. They range from forgetfulness and confusion on what to do to, all the way up to not sure how to pay a balance, to destruction of records. No matter what the reason, we’re going to discuss why now (through say 2021) is the best time to file those old tax returns you’ve been putting off.

Covid-19 has slowed down IRS operations and processing times. When the Internal Revenue Service (IRS) machine is humming along in a “normal” year, its computers are busy spitting out letters to taxpayers, and its personnel attempt to collect tax debt from delinquent taxpayers. This includes audits, site visits, revenue officer contact and a host of other things. The IRS is not “fast” in the best of times and now, due to Covid-19, their operations are severely impacted. For example, from March through July 2020, the IRS computers were offline and NO mail sent to the IRS was opened. All of the above can give you “more” time to address your situation. Meaning, it can give you time to:

Get the documents needed to have the old tax returns prepared.
Allow you to prepare all the returns at once for submission.
Determine if (or how much) you owe the IRS and come up with a game plan to deal with it.
Mail or electronically file the returns with the IRS and then wait for them to catch up and respond.

If you only filed a 2018/2019 tax return for a stimulus check, but have other unfiled returns, you just put yourself back on the IRS’ radar. Those who filed tax returns but have other unfiled tax returns, just “raised their hand” so-to-speak with the IRS. Essentially, that person has now told the IRS 1) that they are still around and 2) where to send the letter asking about those other unfiled years. It’s only going to be a matter of time before they reach out to you about those missing returns. Best to use this time to perform the steps outlined in the bullet points above!

If you owe the IRS, the sooner you file, the sooner the 10 year clock for them to collect starts running. Many taxpayers, and some practitioners, are unaware that the IRS by law only has 10 years’ time to collect a tax debt. This is referred to as the statute of limitations or in IRS speak, the Collection Statute Expiration Date or CSED for short. The 10-year period begins to run with the date of the “assessment” of the tax, not the tax year for which taxes are due. For example, if a return for 2017 is not filed until 2020 and the tax is assessed in 2020, the 10-year period begins to run in 2020 and expires in 2030.

If you’re not working or have a reduced income due to Covid-19, it could result in a “deal” with regards to your tax debt. When it comes to settling ones tax debt, it all comes down to the IRS term referred to as reasonable collection potential or RCP. The RCP is how the IRS measures the taxpayer’s ability to pay on the taxes they owe. It includes the value that can be realized from the taxpayer’s assets, such as real property, automobiles, bank accounts, and other property. The RCP also includes anticipated future income, less certain amounts allowed for basic living expenses. It is the last point that can get you a deal during these “unprecedented times” we will be facing until about 2021.

You see, if you have no assets and your income is reduced, your RCP could be $0 or even negative once the IRS factors in those allowable expenses. If your RCP is in fact $0, then that means that you won’t have to pay them anything (at the moment). Why? Because the IRS will place your account into Currently Not Collectible (CNC) status. But what is also good about not having income coming in at this time is that you may be able to settle all your tax debt via an Offer In Compromise (OIC). The OIC program allows eligible tax debtors to pay the IRS an amount of money that is less than what they owe in order to wipe out their entire tax liability.

Now is the perfect time to “reset” your life and taxes. Covid-19 will force some people to hit “rock bottom” so to speak. But this is the best time to reset your life, get rid of the past and move forward. Why?

When you hit rock bottom, you let go of everything. You start again with nothing and get rid of all the stuff in your life that doesn’t make sense.
Pain is the momentum and the motivation you’ve probably needed to make you actually deal with your tax situation once and for all.
Rock bottom is where your gratitude increases ten times, if not more. That’s because life is a battle and it’s not easy. It’s not meant to be a walk in the park, but it can be so much better when you appreciate all that is around you.

Need help filing those old tax returns? Why not make today the day you FINALLY deal with those old tax returns? Why not take the first step to getting that IRS monkey off your back? Take the first step RIGHT NOW and call our office or shoot us an email via the signature in our footer. We can help you get any missing documents, file your returns and even deal with the IRS debt should you owe back taxes. Trust us, you’ll feel much better once you put this behind you!

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A W-9 is used to confirm a person’s name, address, and taxpayer identification number (TIN) for employment or other income-generating purposes

IRS Form W-9 is officially titled the Request for Taxpayer Identification Number and Certification. This form is used to provide the correct Taxpayer Identification Number (TIN) to a person (or company) that is required to file an information return with the IRS. This information return (e.g. Form 1099-MISC, Form 1098) is to report, for example:

Non-employee compensation;
real estate transactions;
mortgage interest;
acquisition or abandonment of secured property;
cancellation of debt;
and contributions to an IRA.

Now let’s look at the exact steps to correctly complete a Form W-9.

Line 1 of the form asks for your name. If you’re running a sole proprietorship you would enter YOUR name. To clarify this point, the name on line 1 must match with the name the IRS associates with your TIN (i.e SSN or EIN). The name on line 1 should never be a disregarded entity – a single owner LLC.

If you have a business name, trade name, doing business as name or disregarded entity name you can enter it on line 2 business name.

On line 3, select just ONE box. Check the appropriate box for the U.S. federal tax classification of the person whose name is entered on line 1. For example, let’s say that Jared Rogers is the name on line 1. However, Jared owns and does business as Jared’s Dirty Little Secret LLC. Since the LLC is owned only by Jared, he would check the “Individual/sole proprietor or single-member LLC” box on line 3. By contrast, of the LLC was owned by 2 people, then the would check the “Limited liability company” box and enter in P (for Partnership) in the box to the right.

Line 4 is for exemption codes. Exemption codes are for those payments that are exempt from backup withholding. Usually, individuals aren’t exempt from backup withholding. Corporations are exempt from backup withholding for certain payments. Refer to the instructions provided with Form W-9 for the appropriate code to use if you believe your business is exempt from potential backup withholding.

In line 5, enter your address. If you have already provided the requester an address and this is a new address write “new” at the top. If you discover that the requester has been using the wrong address or TIN for your business, let the requester know as soon as possible and provide the correct information.

Enter your city, state and zip in line 6. Line 7 is optional. Some businesses have multiple accounts with a vendor and this line is available to specify which account this W-9 pertains to.

You’ll complete Part I next. Enter your SSN, EIN or individual taxpayer identification as appropriate. If you’re asked to complete Form W-9 but don’t have a TIN, apply for one and write “Applied For” in the space for the TIN, sign and date the form, and give it to the requester. Requestors of Form W-9 will have to deduct backup withholding from any payments that are subject to it until you provide your TIN.

Next, you’ll complete Part II. This is where you sign when required. Form W-9 is officially titled Request for Taxpayer Identification Number and Certification. By signing it you attest that:

The TIN you gave is correct. This can be a Social Security number or the employer identification number (EIN) for a business.
The taxpayer (you, the payee) isn’t subject to backup withholding.
You’re a U.S. citizen or other U.S. person.
Any FATCA (Foreign Account Tax Compliance Act) codes on the form are correct. FATCA reports are required of U.S. citizens to report foreign financial assets held outside the U.S.
If you’re a recipient of payments that are reported in Box 5 or Box 7 for nonemployee compensation on Form 1099-MISC you must give your correct TIN. You must sign the certification if you’ve been notified that the previously provided TIN is incorrect, or there is a problem with the information provided to the IRS at an earlier date.

Although Form W-9 is a standard tax document and by itself, it doesn’t pose many problems, there are a few situations worth watching for.

Make sure a person knowledgeable about your business is filling out the form.
If you’re starting a new job and your employer hands you a W-9, ask if you’ll be working as a self-employed independent contractor or as an employee. Employees complete Forms W-4, not Forms W-9, to set their tax withholdings.
Make sure you understand and agree with the worker classification the requestor has in mind.
If you’re unsure why you’re being asked to complete the form, ask what types of tax documents you can expect to receive when the information is used. Form 1099-Miscellaneous, for example or Form 1099-DIV.
Make sure the person taking your information is authorized to do so.

You should always exercise caution when giving out sensitive information like your name, address, SSN or EIN so take steps to transmit W-9 information securely. Protect the confidential information by sending it via an encrypted email, by hand delivery, or by mail.

You might have other questions as you complete a Form W-9. With that said, it’s advisable to download the instructions and review them prior to completing and submitting the form to the requestor.

What To Do If You Have Unfiled Tax Returns

Did you know that per statistics in the 2017 IRS Data Book, there were about 14 million delinquent taxpayers at the end of 2016 and 2017? That means that the IRS has identified 14 million people who should have filed tax returns but did not. With that said, falling behind on filing your taxes is something that happens to many people.

We know that this can be scary, and can cause one to have many questions about how to make it right with the IRS. Luckily, there are steps that you can take to satisfy what the IRS will require of you and get you back into the system so you can get rid of the worry! So, here are 10 things you should know about the situation:

File even if you don’t think you owe. If you were employed with wages and had taxes withheld from your paycheck, it is possible that you may not owe the IRS at all. This will depend on the amount withheld from your wages and any other deductions you may have (mortgage interest, etc.). If you have refunds, you should actually receive those for the last three years’ returns UNLESS you have amounts owed for other years. In that scenario, the refunds will be applied to any balances due for the other years.

File original returns to replace IRS created returns. Sometimes, when you don’t file a return, the IRS files one for you. In IRS terminology, this is called a Substitute for Return (SFR). Our experience has been that a SFR is the worst tax return ever! It reports the income that shows up on W2s and 1099s but doesn’t give you any deductions or exemptions. You may already have a bill from the IRS that was created in connection with a SFR. The good news is that you can correct these returns, and possibly lower the associated tax and penalties, by filing an “original” return.

Gather your records. When you have old tax returns to file, it is important for them to be as accurate as possible. So the first things you want to do is pull together your records for the years where you did not file. This may include 1099s or W2’s you received for work your performed, mortgage interest you paid, or interest, dividends and stock sales. Don’t worry if you are missing records because if you are:

Secure your IRS transcripts. Your records are supplemented by securing the IRS transcripts that will show what has been reported to the IRS. Basically, you want to make sure you report everything the IRS has for your SSN, otherwise, they will send you some notices claiming that you under reported income. Getting the transcripts will cross-check your records, filling in anything that is missing. The appropriate transcript to request is called the Wage and Income Transcript. You can get it via this page on the IRS website and you can request it online or you can use Form 4506-T to request it via mail.

Review the past six years of activity. If you have six or more years of unfiled returns, make sure you do the above two steps for each year. Why? In most cases, the IRS requires the last six years’ tax returns to be filed as an indicator of being current and compliant. This is per Policy Statement 5-133 and Internal Revenue Manual 4.12.1.3. As such, make this your starting point of your analysis.

Review other sources of income. The IRS transcripts are a checking point, but you will also need to check for things that aren’t reported on them. For example, if there is income you earned that is not on the transcripts (e.g. cash payments), you need to make sure you calculate it and include it on your return.

Review your business income and expenses if you’re self employed. Income can be recalculated using several methods, including 1099 reporting to the IRS or your bank deposits. Working with this number, determining what you spent to generate that income. When done, take a look at what is left (i.e. the profit). You can then compare that number to what you spent for that year to live (e.g. rent, mortgage, utilities, etc.) to make sure it appears reasonable/logical. Too often, we see tax returns where there is no business profit, which then begs us to ask “so just how did you live that year?” Rest assured, if we can ask that question, the IRS WILL also be thinking of it too!

Perform a financial review if you think you may owe. Unfiled returns are really a two-step process:

Getting the returns prepared and filed and,
Negotiating solutions for any balances due with the IRS collections division.

To perform the second step, one has to prepare a financial analysis of their situation and present it to the IRS. This involves a review of your current income, living expenses, property and debts. It is often the case that the amount owed on unfiled returns cannot be repaid. So performing this analysis will help you determine if your “resolution” will ultimately be to enter into a payment plan, request an offer in compromise, or have your account be put in an uncollectible status.

Consider filing the returns separately if you’re married. If you’re married, but only one spouse was responsible for creating IRS debt, strong consideration should be given to filing a separate return. Filing separately can limit who the IRS can collect from – protecting the non-liable spouse.

File your returns in person if possible. If possible, the unfiled returns should be hand-filed at an IRS Taxpayer Assistance Center. Note that the centers are by appointment only so you will need to schedule it via the previous link. If you bring an extra copy to the center, you can get it stamped by the IRS as proof of filing. If you are working with an IRS Revenue Officer, the returns should be filed directly with that person. It can take the IRS several months to process the returns. But if you file them directly with their personnel, it can speed up the processing time, which will then “stop the clock” in terms of certain penalties.

If you owe money, the next step is to enter into one of the 10 resolution options solutions to solve your IRS tax debt as discussed on our sister site.

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April 15th is the annual deadline for most people to file their federal income tax return and pay any taxes they owe. But what happens if you can’t file on time? What happens if you file your return after the due date? If you were owed a refund, can you still receive it? This post will answer all of the above questions and then some.

Annual Due Date For Filing Return. Everyone is pretty familiar with the date of April 15th here in the US. This is “Tax Day” or the date that most people are required to file their Form 1040 U.S. Individual Income Tax Return. While this date may move slightly from year to year (due to local holidays) note that it is actually mandated by law. 26 U.S. Code § 6072 actually stipulates the due dates for individual and corporate tax returns.

Can’t File By Due Date? By law, the IRS may assess penalties to taxpayers for both failing to file a tax return and for failing to pay taxes they owe by the deadline. Now, one way to avoid the late filing penalties is to file an extension. Filing Form 4868 Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, will give you an extra 6 months for you to file your return and have it be considered on time. Now, if you owe money, that is still due on April 15th. If you fail to make a payment by then, you will still be subject to the late payment penalties noted above.

Filing After Extension Due Date? If you file after the extended due date, then one of two scenarios occurs:

You had a balance due and are now subject to the late filing and late payment penalties
You have a refund and are NOT subject to any penalties, but the clock is now ticking for you to claim your refund or lose it.

3 Year Deadline To Claim Refund 26 U.S. Code § 6511 outlines that a taxpayer basically has 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever of such periods expires the later, to claim their refund. So while you won’t pay any penalties for late filing a return in which you were owed a refund, know that you generally only have 3 years to claim it. What happens if you don’t file by then? Well, that refund becomes the property of the US Government and you lose it forever!

What If You Don’t File Voluntarily If you fail to file file a tax return, the IRS may file a substitute return for you. This return might not give you credit for deductions and exemptions you may be entitled to receive. The return the IRS prepares for you will lead to a tax bill, which if unpaid, will trigger the collection process. This can include such actions as a levy on your wages or bank account or the filing of a notice of federal tax lien.

Need Help Filing Your Past Due Return? For filing help, you can call the IRS at 1-800-829-1040 They can help you obtain wage and income information to help prepare a past due return. If you don’t want to speak to anyone at the IRS, you can obtain your transcripts electronically by using the IRS’ Get Transcript tool to request a return or account transcript. You can also get tax forms and instructions to file your past due return by calling 1-800-Tax-Form (1-800-829-3676).

Now, if you would rather avoid all of the above and have a service file your tax returns for you, we’d be more than happy to help. Just go to this page to get started and you can be filed in as little as 24 hours!

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Why Is Your Tax Refund Being Offset?

Instead of receiving that nice tax refund check (or direct deposit) you’ve been expecting, you get a notice in the mail. It tells you that your tax refund has been offset. What exactly does this mean?

Well, a refund offset means the government has determined that you owe a debt and has applied your tax refund towards that debt. Now, tax refunds can be offset for many types of debts through the Treasury Offset Program (TOP). This post will address some of the questions that one commonly has after an offset occurs.

When is a debt sent to the Treasury Offset Program?

In most cases, your name can be sent to TOP if your debt is more than 90 days delinquent. The government agency must then determine that your debt is valid and legally enforceable. The agency will then send you notices about your debt and provide you with opportunities to resolve or dispute your debt. They must also respond to questions and inquiries regarding your debt. If you have not received a notice about your debt, the first step you should take would be to call the agency to which you owe the debt and talk to them.

How do I determine if I have an offset or who I may owe?

To determine if your Federal tax refund has been, or will be offset, it is best to contact the TOP. They can be reached at 800-304-3107.

What types of debt does an offset cover?

Even if you don’t owe the IRS money, your federal tax refund can still be offset through the TOP. Your refund may be seized to pay the following types of debts:

State income tax debt
Federal non-tax debt (such as delinquent federal student loans)
Past-due child support
Certain unemployment compensation debts. You should receive a notice that tells you which agency is getting the money from your tax refund check. If you don’t agree with the refund offset or want to work out a payment arrangement, you’ll have to contact the agency listed on the notice. The IRS won’t be able to help you if your debt is not federal tax debt.

How does an offset for a Federal tax debt work?

If you owe the IRS money, say for a previously unpaid balance on an older year, then know that they they will seize your tax refund check. There’s no way around this. Even while you are making payments as part of an installment agreement, the IRS may continue to seize your tax refunds and apply them towards your outstanding balance.

The IRS has the right, and the ability, to offset all future tax refunds until 1) the balance is paid in full or 2) the tax debt is no longer enforceable. You can read this post from our sister site on just how long the IRS has to collect on unpaid tax debt.

What if the refund offset was for my spouse’s debt?

If you file a joint tax return, your full refund can be seized when your spouse owes any of the debts listed above. However, you generally aren’t legally responsible for debts your spouse incurred prior to your marriage, so it is possible to request relief from part of the refund offset.

In order to do this, you can claim an injured spouse allocation to get the portion of the refund you are entitled to receive. You can either file an injured spouse allocation along with your tax return or after you receive notice that your refund has been offset.

Also note that in the future, you can simply file your return as Married Filing Separately. This will keep your refund separate from that of your spouse, and it will not be used to pay for any of their outstanding debt.

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Filing A Late Tax Return With A Refund Due?

If you have not filed your tax return, and you are entitled to a refund, did you know that the deadline for you to claim the refund is 3 years from its due date (including extensions)? For example, if you were due a refund on your 2013 Income Tax Return (which was due April 15th 2014), you have until April 15th 2017 to claim it. If you don’t file a claim for a refund within three years, the money becomes property of the U.S. Treasury.

Note, there are no interest and penalties for failing to file a return in which a refund was owed. However, if you have a balance due, those items can be pretty stiff as outlined in this post.

Here are some of the facts you need to know about filing a late tax return in which there is an unclaimed refund:

Some people, such as students, part-time workers or seasonal employees may not have filed because they thought they had too little income to require filing a tax return. However, if you did not have a filing requirement, you may still have a refund waiting if you had taxes withheld from your wages. A refund could also apply if a taxpayer qualified for certain tax credits, such as the Earned Income Tax Credit.
The law requires that you properly address, mail and postmark your tax return within 3 years of the due date to claim your refund.
The IRS may hold your refund if you have not filed tax returns that were due at a later date.
The U.S. Treasury will apply the refund to any federal or state tax you owe. It also may use your refund to offset unpaid child support or past due federal debts such as student loans.
If you’re missing Forms W-2, 1098, 1099 or 5498 for 2012, you should ask for copies from your employer, bank or other payer. If you can’t get copies, get a free transcript showing that information by going to IRS.gov. You can also file Form 4506-T to get a transcript.

This post here will provide the instructions on how to file the return either via paper or using an authorized E-File provider. If you would like us to assist you, give us a call or visit the main page of our site. We have the software to file tax returns going all the way back to 2004 so we’re sure we can help you out with any of your old returns.

jaredrogers2022-05-03T18:24:58-05:00November 26th, 2016|Categories: Tax Questions|Tags: can you still get a tax refund if you file late, file back taxes online, file old tax returns late, Filing A Late Tax Return With A Refund Due?, how far back can you claim tax refund, how long can you claim tax refund, how many years back can i get a tax refund, how many years can you file back taxes, how to file back taxes without records, need transcript for old tax return, the time to claim your tax refund is expiring, what happens if i file my taxes late and i am due a refund|

Can I Claim My Spouse As A Dependent?

It’s not uncommon for us to get this question. However, because people sometimes don’t know the nuances of how a tax return is actually filed, this one can get lost in translation. In this post on our sister site we discuss the filing status options for those who are married. In summary, if you are legally married then your options are Married Filing Joint (together) or Married Filing Separate. So where does this whole claiming a spouse as a dependent thing come in? Read on.

When you file a tax return, you are allowed to claim an exemption, which will reduce your taxable income. There are two types of exemptions: personal exemptions and exemptions for dependents. For tax year 2015, the IRS recently announced that each exemption will be worth $4,000 on your 2015 tax return. That means that if you file with your spouse and had no dependents, you would claim 2 exemptions. If you had dependents, you would claim the 2 exemptions for you and your spouse and then 1 additional exemption for each dependent. Clear right? So now the question about your spouse being claimed as a dependent.

As we stated above, when you are married you only have two choices when it comes to filing status. As such, your spouse is never considered your dependent. Thus, on a joint return, you may claim one exemption for yourself and one for your spouse. If you’re filing a separate return, you would normally claim just the exemption for yourself. However, if you’re filing a separate return, you may claim the exemption for your spouse only if the following three items apply:

they had no gross income,
are not filing a joint return,
and were not the dependent of another taxpayer

We tell most taxpayers that it is usually advantageous for them to file together. Why? Because they will often pay less taxes by doing so due to the fact that the tax brackets for Married Filing Separate are much more narrow that even that of someone filing Single. What we mean is that if you had taxable income of $160,000 and your spouse had $0, you would be in the 28% marginal tax bracket if you filed Married Filing Joint. If you were single with the same income, you would also be in the same 28% bracket. But if you filed Married Filing Separate, you get penalized and are thrown into the 33% tax bracket. Makes sense to file with your spouse even if they have no income right? That’s what we said! However, there are certain instances when you wouldn’t want to file with your spouse. Like when you are due a nice refund and they have a balance with the IRS from some time ago. Then you will want to file separately do the IRS doesn’t take your refund and apply it to their balance due.

So in summary, you can never claim your spouse as a dependent. However, if you are filing as Married Filing Separate, there are some instances when you can claim their personal exemption.

Is Unemployment Compensation Taxable?

The short answer is YES – now continue reading for some important details.

Whether you do (or don’t) have to file a tax return doesn’t have anything to do with if you were (or were not) employed. It depends entirely on how much income you received during the year. Thus, those who were unemployed AND earned more than the filing threshold should know that unemployment benefits do qualify as taxable income. In other words, Uncle Sam will count unemployment payments received as taxable income.

How To Report Unemployment Benefits Received On Your Return
Around late January or early February of the year FOLLOWING the year in which you received your benefits, you should get a Form 1099-G. Box 1 will contain the amount of benefits you received. If there were any Federal or State taxes taken out, they will be listed as well.

When you file your return, report your unemployment income on line 19 of Form 1040

[U.S. Individual Income Tax Return], line 13 of Form 1040A [U.S. Individual Income Tax Return], or line 3 of Form 1040EZ [Income Tax Return for Single and Joint Filers with No Dependents], depending on which form you use. The Federal withholding’s will be tabulated in the appropriate section and the net result will either be a refund or a balance due.

What If You Didn’t Have Enough Taken Out?
In this post on our sister site we discuss how taxes work and how the refund or balance due is derived. If you are still unemployed and receiving benefits when you discover you didn’t have enough withheld, contact the paying agency ASAP. Instruct them that you would like to increase your withholdings. As discussed in the post above, you will probably have to simply complete Form W4 and submit it to them.

What If You Can’t Pay The Balance Due?
In this post, we discuss what you can do if you can’t pay all at once. The general options are set up a payment plan or tell the IRS why you can’t pay (e.g. unemployed, it would cause an undue hardship, etc.). Just note that with the latter, you will have to supply some paperwork as proof as to why you can’t pay. What, you expected the IRS to just take your word for it?

If you find yourself in the predicament of needing to set up an installment agreement and owe less than $10,000, take a look at the Got IRS Debt? page for our current pricing to assist you.

jaredrogers2020-04-04T12:12:57-05:00October 15th, 2015|Categories: Tax Questions|Tags: Are Unemployment Benefits Taxable?, can't pay tax debt, do you pay tax on unemployment compensation, Form 1099-G, How To Report Unemployment Benefits Received On Your Return, income tax on unemployment benefits, Income Tax Withholding from Unemployment Compensation, is unemployment compensation taxable income, Is Unemployment Compensation Taxable?, is unemployment taxable federal, is unemployment taxable for federal taxes, owe irs more than 10000, owe irs over 10000, owe less than 10000 to IRS, tax on unemployment benefits, What If You Can't Pay Tax Balance?|

Misclassified Employees & Taxes

Sometimes you take a job and it seems like it will be the best gig in the world. The employer tells you that they will pay you weekly, that they won’t take taxes out and that they’ll even give you a 1099 at the end of the year so you can file your taxes. But then you get that 1099, take it to your tax preparer and they tell you that you owe a bunch of money in taxes. Wait? How can this be? Your preparer tells you that your 1099 causes you to be treated as an independent contractor or self-employed for tax purposes. Self-employed? That can’t be right. I worked as an employee for that company for the entire year! Thus, the problem at hand.

In this post on our sister site, we discuss how an employer is supposed to make the proper determination as well as what the tax differences are via being W2 versus 1099. But when they improperly classify you as an independent contractor, it can cause you a whole lot of grief come tax time. So how do you fix it? Well, it’s really a two step process of trying to resolve the situation and filing the tax return.

Obtaining Proper Classification
The first thing you want to do is bring the matter to the attention of your employer. Let them know that you don’t believe that the classification is correct and that you believe you were an employee. This IRS site will give you a little assistance in making that determination. If the employer is uncooperative or flat out refuses that you were an employee, you can ask the IRS to make the determination via filing form Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. The employer will then need to respond to the IRS. Once the IRS rules, they will send a determination to you and the employer. If it is deemed that you were in fact an employee, the employer will then become liable for their share of the employment (payroll) taxes. The unfortunate thing is that so will you.

Filing A Misclassified Employee Tax Return
Listed below are the steps on how to file your taxes if you are a misclassified employee and don’t have a W2.

File Form SS-8 so that you can begin the determination process.
Review Form 8919 Uncollected Social Security and Medicare Tax on Wages.
If you have a Form 1099-MISC from the employer, then you will have most of what you need to fill out columns A and B. If you don’t have that form, then you will need to obtain the information from the employer (who may not want to give you their EIN if the two of you aren’t on good terms).
Tally up the amount of income that you received from the employer and enter it on line 6 of the form as well as line 7 of your Form 1040.
Use lines 7 through 12 to calculate your share of the Social Security and Medicare tax. You will then enter this on line 58 of your Form 1040.

The downside to this is that you WILL have a liability with the IRS. No income, Social Security or Medicare taxes were taken out. But if you visit this page of our site, you can learn how we can help you resolve the issue with the IRS if you don’t want to tackle it on your own.

jaredrogers2020-04-04T12:12:57-05:00September 24th, 2015|Categories: Tax Questions|Tags: 1099 Employee vs. Independent Contractor, Employee Misclassification as Independent Contractor, Filing A Misclassified Employee Tax Return, Form 1099-MISC, Form 8919, Form SS-8, Independent Contractor or Employee Status?, irs employee misclassification, misclassified as 1099, misclassified employees, Misclassified Employees & Taxes, misclassified employees IRS, misclassified independent contractor, misclassified workers, Recourse for Employees Misclassified as Independent Contractors, What Should You Do If You've Been Misclassified as an independent contractor|

How To Assemble Your 1040 Income Tax Return

If you are filing an old tax return, then unfortunately, it must be sent to the Internal Revenue Service via paper (versus electronically). As we’ve become accustomed to E-Filing returns, sometimes it seems that the nuances of assembling a paper return have become something of a lost art (even for us practitioners). The IRS processes paper tax returns in a specific manner, but don’t worry about decoding their system. After you’ve finished preparing your return, it will take you just a few minutes (by following the steps below) to have your tax forms organized and ready for mailing/processing.

Step 1
Check your return for completeness and errors. We recommend reviewing the following:

All of your personal information (e.g. name, address, etc)
Be sure your Social Security number is entered correctly
Ensure only one filing status is checked
Ensure that an allowable exemption is entered for each dependent you are claiming
Ensure that you’ve included a daytime phone number

Step 2
Sign your return. The IRS won’t accept your return for processing unless it’s signed. If you’re married and file a joint return, both of you must sign it. The person whose name appears first on the tax return must sign in the “Your Signature” box, and the spouse listed second signs in the “Spouse’s Signature” box.

Step 3
Prepare your refund or payment information. If you’re due a refund and want direct deposit, include your bank account information in the “Refund” section above the signature boxes. If you owe taxes, prepare Form 1040-V, the voucher used to make a payment. Just make sure not to staple your payment or voucher to the return.

Step 4
Gather your tax forms and schedules for assembly. Place your Form 1040 on top and other forms and schedules for your return behind it. On the schedules and forms you’ll notice an “attachment sequence” number in the upper right corner. Use the attachment sequence numbers as your guide, following them in numerical order, starting with the lowest number.

IRS Sequence Numbers

Step 5
Attach any additional statements that are needed. In some cases, you might need more room to list deductions or report entries on your return. If you prepare an additional statement, write your Social Security number at the top of your statement and note which form the statement is supplementing. You’ll attach your statement behind the related IRS form in your tax return. For example, if you list additional investment expenses on your statement for Schedule A, you’ll write “Additional Statement for Schedule A”, write the line number and amount of expense you’re reporting and attach the statement behind your Schedule A.

Step 6
Staple all your forms and schedules together in the upper right corner.

Step 7
Attach W-2 and 1099 income documents. You’ll receive a few copies of each income document that’s mailed to you. Find the federal copy of each form and staple them to the front of your Form 1040 in the income section. Only staple these forms to the first page of your 1040 – do not allow your staple to go through all the forms in your return.

Step 8
Check this post for information on the addresses where the return should be mailed to.

Processing Times & Refund Status
If you file a complete and accurate paper tax return, your refund will usually be issued within six to eight weeks from the date it is received.

If it hasn’t been received in the time frame outlined above and you are wanting to know the status, feel free to check the Federal or State Where’s My Refund Page(s) outlined in this post. You can also check by calling the IRS Refund Hotline at 800–829–1954. If you use the online tool or call, just be prepared to provide your Social Security number, your filing status and the exact whole dollar amount of the refund shown on your return.

jaredrogers2020-04-04T12:13:00-05:00August 16th, 2015|Categories: Tax Questions|Tags: assembling federal tax return, assembling tax returns, Form 1040-V, How can i assemble my tax return like schedued a or c etc, how to assemble paper tax return, how to assemble tax return 1040, how to assemble tax return staple, How To Assemble Your 1040 Income Tax Return, How to file your income tax return, IRA attachment sequence, paper tax return how long, paper tax return processing time, paper tax return status|

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