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If you do not file your back taxes within a certain period of time, IRS will either prepare a substitute return for you & charge you a late filing penalty, a late payment (if you owe) & possibly a 75 percent fraud penalty. Or, they may issue a summons for you to appear with your tax information, so that they can prepare a more accurate return.

For those who end up with a calculated refund, IRS, in the past, has issued a press release to notify the general public that millions of people are due a tax refund for a certain tax year & only have until April 15, of that year, to file a tax return & claim the refund.

Example: Earlier in 2007, IRS release a notice that over 1.6 million people were owed refunds amounting to billions of dollars $ for 2003. IRS went on to explain, in this same press release, that in order to receive the tax refund, a taxpayer had to file by April 15, 2007. Needless to say, millions of people did not meet the deadline & lost the refund.

This same process is repeating itself for the April 15, 2008 deadline & back tax refunds for tax year 2004. Year after year billions of dollars $ in refunds are not claimed.

How did IRS know that there was over 1.6 million people owed refunds? Substitute Returns.

Substitute returns are calculated based upon W-2s, 1099s & other income that is reported to IRS by your employer, clients & other sources.

Once IRS has completed a substitute return for a taxpayer; usually, the only way you can change the tax liability is file an actual tax return for that tax year.

We have found that Americans usually want to pay their fair share of taxes. People regardless of race, creed, color or religious background, understand that taxes enable us to live in a civilized society. Taxpayers understand this, yet, sometimes, they’re too frighten to contact IRS. (After all, IRS has put some famous people in jail)

Not everybody can keep up with the year to year tax cycle. There may be illness or death in the family, a divorce, depression or other reasons why a taxpayer may experience a delay in filing taxes. Some people need more time, & IRS appears to be willing to give you more time. Just remember, penalties & interest compounds daily.

Cassandra Ingraham is a Tax Accountant & Instructor for Basic Tax Classes in the San Francisco Bay Area. During the balance of the year she can be easily found at http://www.taxeswilltravel.com providing Formal Introductions to Lenders for Accounts Receivable Funding (Factoring), training Factoring Specialist & new Tax preparers through her e-bay store

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