Nonfiler getting in compliance

[taxms]

Have a client that had not filed tax returns since 1999. We prepared all seven years hoping to actually receive the refunds for 2004, 2005, 2006, realizing that 2000 - 2003 were too late. He had been getting IRS levy letters for 2002 and 2003 since the IRS had compiled their own returns and determined that he owed money. My question is, and I'm hoping for a good answer for the client, will the actual tax return filed for 2002 and 2003 supercede the IRS compiled returns now that they have been filed, even though they are filed after the statute of limitations is up. IRS took his 2006 refund and applied it to 2003 even though the return we filed for 2003 shows refund. Hope I am being clear.

[Pacun]

let me see if I understand correctly... client got letters from the IRS stating that his/her tax for 1999, 2000, 2001, 2002, 2003 was calculated by the IRS using the standard deduction. Instead of answering those letters in time, the client waited and then filed using itemized deductions and/or dependents and therefore the 1040 resulted in a refund. Among those letters sent by the IRS, there must have been one with a 90 days dealine to take the IRS to court and the client failed to do so. (I believed the IRS is required to send that letter to the last known address which was the address client provided when filing 1998).

I think you will have hard time to convincing the IRS that they are wrong.

[kcjenkins]

Have a client that had not filed tax returns since 1999. We prepared all seven years hoping to actually receive the refunds for 2004, 2005, 2006, realizing that 2000 - 2003 were too late. He had been getting IRS levy letters for 2002 and 2003 since the IRS had compiled their own returns and determined that he owed money. My question is, and I'm hoping for a good answer for the client, will the actual tax return filed for 2002 and 2003 supercede the IRS compiled returns now that they have been filed, even though they are filed after the statute of limitations is up. IRS took his 2006 refund and applied it to 2003 even though the return we filed for 2003 shows refund. Hope I am being clear.

Yes, the SFR that the IRS prepared is not considered a 'filed' return, so the filing of the return should result in removing the debt from the old years. Then, you should be able to get the refund that was applied to the old year refunded to the client. I'd wait a couple of months to allow it to get processed and in the system, then contact the IRS and ask for the refund that was erroneously applied, if you have not gotten it back by then. IF they say no, contact TA office for help.

[taxms]

Thanks for your opinions. We have letters sent and will have to see how it goes. I agree that it would be a lesson well learned if client did not get any refund money after ignoring the IRS for years but on the other hand, refunds always make you look better in a client's eyes...