What is best way to resolve failure to file tax returns for multiple years? Earned income through an S-corp but did not receive a salary and did not file a w-2.

[bjm3819]

Can I file now and just treat income as distributions? Or should I file the w-2 late?

[tagteam · Accepted solution]

If you have not filed tax returns "for multiple years", then you need to consult with a tax attorney in your area.

See https://www.avvo.com/tax-lawyer.html

[xmasbaby0]

Each tax year is separate and must be prepared and filed separately using the forms for the specific tax years.   You cannot combine past years into one tax return so do not even think about trying that.   Each tax year has its specific tax laws too so it is very important to use the right tax forms for each tax year.   If you are way behind in filing tax returns it will probably be best for you to seek local paid tax help.   

What if I do not file my tax return?

https://ttlc.intuit.com/questions/2572308-what-happens-if-i-don-t-file-my-taxes

[Mike9241]

This is not a do-it-yourself project. you face substantial penalties for failure to file and failure to pay personal taxes and failure to file S-Corp return.  My state requires filing a state S-corp return and imposes a tax. there are substantial penalties. your state could also assert penalties for failure to carry workers' compensation insurance and failure to pay unemployment insurance taxes. there is also the issue of failure to report compensation. I agree with @tagteam you need a tax lawyer. 

[AmeliesUncle]

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@tagteam wrote:

you need to consult with a tax attorney in your area.

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Out of curiosity, why do you suggest an attorney?  Unless they will be going to court or if there are other legal problems involved, I don't see any need for an attorney.  Based on what was presented, a good tax professional would be able to handle it.

[tagteam]

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@AmeliesUncle wrote:
Out of curiosity, why do you suggest an attorney?  Unless they will be going to court or if there are other legal problems involved, I don't see any need for an attorney.  Based on what was presented, a good tax professional would be able to handle it.

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I agree, generally, but then not all tax professionals can practice before the IRS (only CPAs and EAs can do so) while all licensed attorneys have that ability. 

More importantly there is a legal problem involved here, at least a potential one in the form of a risk that a criminal violation will be alleged.

[better safe than sorry]

[Rick19744]

This really depends.

If you are concerned, possibly the best method would be to contact an attorney and have that attorney utilize a tax professional to complete the late filings.  That way you have attorney-client privilege in your favor.

[tagteam]

I concur 100%. The absolutely best and safest approach is to engage an attorney (specializing in taxation) who, in turn, will hire a tax professional for this scenario.

[AmeliesUncle]

I guess I just don't get it.

ANY tax related thing is legal.  So are you suggesting that anybody who has a late return or made a mistake with taxes should go to an attorney?  Again, maybe there is more involved that hasn't been mentioned, but in my opinion there is no need for an attorney based on the information presented.

[tagteam]

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@AmeliesUncle wrote:

So are you suggesting that anybody who has a late return or made a mistake with taxes should go to an attorney?  

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No, clearly not for simply filing one late return or making an honest mistake.

The key phrase here, however, is, "failure to file tax returns for multiple years", which could potentially be considered a willful attempt to evade. 

[Rick19744]

In forums such as this, we rarely get the full picture; usually a snippet.

I don't disagree, that in most cases, an individual filing a late return(s) can simply meet with a tax professional to file the return(s).

In the facts presented, we don't have sufficient information / details as to why the returns were filed late (actually not filed for multiple years); nor is this forum the place to have that discussion.

Section 7525 privilege is a very limited scope of privilege provided a federally authorized tax professional.

So since we don't have the facts, nor the scope, my initial reply provided an alternative for the safest way to approach a matter.  I, in fact, utilized the method noted, when a taxpayer won a state lottery and had not filed returns for 10 years.

In my mind, at least from my perspective, I'm not suggesting getting an attorney involved unless the situation may become ugly.  We have no idea of the history of the OP or anything else related to the situation other than the very limited statement in the original post.

[tagteam]

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@Rick19744 wrote:

Section 7525 privilege is a very limited scope of privilege provided a federally authorized tax professional.

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I agree; the privilege does not apply in criminal tax matters or proceedings. That was actually my point here.

[TomD8]

@bjm3819 --

Just to clarify:

Was it the S-Corp that failed to file. or you personally?

Did your S-Corp file its 1120S corporate tax returns each year?  Did it issue Schedule K-1's to the shareholders?  The S-Corp failure-to-file penalties are steep.  See "Penalties for filing late" on this TurboTax help page:

https://turbotax.intuit.com/tax-tips/small-business-taxes/s-corp-federal-tax-filing-dates/L1U6tYGMt

Or is the issue that the S-Corp did issue Schedule K-1's to you, and you failed to report the K-1 income on your personal tax returns?