The IRS Shredded 30 Million Tax Returns – What Does This Mean For You?
An article last week in the Journal of Accountancy and a few other sources told us that IRS just shredded 30 million unprocessed tax returns. That’s 30 million. Now that’s not good news for those who filed those tax returns.
This event, this shredding of 30 million tax returns, will cause problems for business owners and other taxpayers in three different ways.
Problem # 1
The IRS looks for filing compliance. They want to know, and they want to see a tax return filed every year. And sometimes for payroll taxes, every quarter.
Now the IRS has likely shredded many millions of these tax returns. This means a few things for business owners. One, they don’t get credit for having filed the tax return. Second, they may have to recalculate and refile those tax returns.
Worst of all, the IRS only gets three years to change or audit a tax return. But, if the return was never processed, that three-year clock does not run until a new return gets filed. And that’s a real disadvantage for businesses that spent the time, spent the money, and spent the resources to file their tax returns correctly.
No business owner wants to have to maintain their records and worry about audits indefinitely.
Problem # 2
The second problem is that when tax returns aren’t filed on time, IRS will assess a penalty when the return is filed. They will assess a penalty for the late filing, which isn’t fair considering that the tax returns were filed on time, and the IRS shredded them.
Unfortunately for most of those people, they will have no way to prove that their returns were actually filed on time.
Problem # 3
The third problem is Automated Underreporter Audits. What are underreporter audits?
The IRS’s automated system will scan through the returns and process and compare those returns against income reported to that business owner or individual. IRS compares income reported with what’s on the tax returns. It’s a very efficient automated system.
This is the source of the CP 2000 Notice.
If the IRS shredded all of these tax returns, then that income can never be compared with the processed tax returns. Many individuals and businesses will get audit notices and have their records audited for not reporting their income when they did report it.
To defend yourself in an IRS audit is not a simple or inexpensive process. It is also emotionally draining for any individual or business owner. And unfortunately, IRS just put many individuals and business owners in a situation where they will get audited simply because IRS did not process their tax returns.
Be aware that IRS shredding these 30 million unprocessed tax returns will undoubtedly impact millions of taxpayers.
If you find yourself in one of the situations described above – contact Tax Law Offices! We’re a trusted, experienced IRS Attorney and legal team that can help.
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