We SpEAk Tax

Why File if I don't owe? • What is an EA?

Why File?

We at ABC LLC are often asked, "If I don't owe any money, why should I file a tax return?" ABC LLC advises you to always file your tax returns timely, even if you do not owe any money and here are several reasons why.

• There are filing requirements-if you meet a filing requirement, filing is NOT optional. 

In general you are supposed to file when you make over a certain amount, which varies by filing status, age, whether or not you are blind etc.  If the IRS finds that you made money and haven't filed a tax return, they will create one for you - it is called a Substitute For Income Tax Return (SFR).  If the IRS finds you owe money, you will not only be assessed tax and interest, but also the "failure to file" penalty as well.  The failure to file penalty is in addition to tax owed and interest and can be quite high. Even if you owe money it is always a good idea to file just so you are not assessed the failure to file penalty too.

• Tax returns prepared by the IRS (SFRs) benefit the IRS not you! The IRS will calculate the maximum tax possible.

The tax return the IRS prepares for you will not acknowledge any deductions you might have.  These SFRs do not allow any deductions or expenses that could reduce your income tax.  Where as you might know of deductions and expenses that clearly show you do not owe any money, the IRS does not. If you are married with children, the IRS will not prepare a married filing joint return and account for all your little children, they will prepare a Married Filing Separate return with no dependents and no business expenses. Furthermore problems can arise for when the IRS prepares an SFR years after the tax return is due and you have misplaced or thrown out their records relating  to your business deductions.    It is always a good idea to file just to get your expenses and deductions on record even if you do not owe money. 

It can get even worse if the IRS levies your sources of income after calculating an astronomical amount of tax penalties and interest - not only do you get hit with a whopping tax bill, but the IRS might also garnish any money you are currently making.

• You may not be aware you owe money, when you in fact do. 

Most people are aware of the income filing requirements, but do you know if you make as little as $431 ($108 for the clergy) from self-employment, you may owe self-employment tax?  Self-employment tax is NOT reduced by individual deductions and non refundable tax credits.  This income can be reduced by business expense deductions, but if the IRS finds a 1099-MISC with your name on it, they are not going to figure those business expense deductions, they are going to figure the self-employment tax and income tax on the entire amount. 

Similarly, taxes on unreported income, IRA & other pension penalties, household employee taxes and AEIC are also NOT reduced by individual deductions and non refundable tax credits. 

• The IRS has a time limit to assess tax. 

When you sign and file your return, the 3-year clock on the statute of limitations for tax assessment begins to run. BUT if you do not file (or file a false/fraudulent return), the clock does not begin to run.  If you do not file, the IRS can always assess tax no matter how long it has been.  (In a similar vein, when you owe tax you have not paid, the IRS has 10 years to collect it.)

ABC LLC advises you to always file your tax returns timely, even if you do not owe any money. 

We can help!

• We at ABC LLC are tax specialists. ABC LLC can prepare your current year's tax return.
• If you haven't filed tax returns in a number of years, but the IRS has not caught up with you, ABC LLC can help you get caught up with those delinquent tax returns, before the IRS decides to assess tax and levy your income and assets. 
• If it turns out the IRS owes you money, your time to file a claim of refund is also limited.  ABC LLC can help you amend your tax returns in the event the IRS owes you money.
• If the IRS has filed an SFR (or more than one SFR) for you and assessed tax, they likely have assessed it such that they can collect the maximum amount possible - in general it is nearly always better to file your own version of those returns to reduce the tax that the penalties and interest are figured from.  ABC LLC can help you file your own version of the tax returns. 

Contact Us! The first consultation is free!

What is an Enrolled Agent?

An Enrolled Agent (EA) is a federally licensed tax practitioner who has proven technical expertise in the field of taxation.   Enrolled Agents are empowered by the US Department of the Treasury to represent taxpayers before all administrative levels of the Internal Revenue Service (IRS) for audits, collections, and appeals.  Only Enrolled Agents, attorneys and CPAs may represent taxpayers before the IRS.

Unlike attorneys and CPAs, who may or may not choose to specialize in taxes, all Enrolled Agents specialize in taxation.  Only Enrolled Agents receive their right to practice from the United States government; attorneys and CPAs are licensed by the states. Enrolled Agents have demonstrated their proficiency in tax to the Federal government, which licenses them to represent YOU before the IRS and other agencies.

Every year there are numerous changes to the tax laws and the tax code.  Enrolled Agents take continuing education courses each year to keep up with the changes and also have research tools at their disposal to constantly monitor updates.  Only Enrolled Agents demonstrate their competence in matters of taxation and report their hours of continuing education to the IRS.

Jake Beckman, accountant for Art and Business Consulting LLC is an Enrolled Agent and is a member of the National Association of Enrolled Agents, the Arizona Society of Enrolled Agents and the Central Arizona Chapter of Enrolled Agents

Two IRS employees you hope not to meet are Revenue Agents (RAs), who are senior auditors, and Revenue Officers (ROs), who aggressively collect the taxes you owe.  If either one contacts you, you need professional help.  Call an Enrolled Agent.  An Enrolled Agent is YOUR Tax Advocate! An EA can stand in your place with an RO or RA or any other IRS employee.

We SpEAk Tax page of Art and Business Consulting, LLC (ABC LLC). Accounting as Easy as ABC!