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If you have not filed an income tax return
for a given year, the IRS may very well file one for you. This is
called a Substitute Return. It has several purposes, not the least
of which is to bring you to your knees and force you to file. A
substitute return is collectible by the IRS but does not start a
collection statute of limitations clock ticking. Therefore, until
you file the actual signed return, the IRS has until the end of time to
collect against the substitute return. The following steps are
necessary:
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File all returns due whether you can
pay them or not. A substitute return will be for only 1
exemption, single or married filing separate, and give you no
deductions except the standard deduction. Most times, a real
return will result in lower tax liability than a substitute return.
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When you receive acknowledgement from
the IRS that they have processed your return, it has been
assessed. Consider getting professional help for ridding
yourself of the IRS problem permanently.
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If you owe a balance after you file
your own returns, the IRS will proceed with enforced collection action
including lien, levy, seizure, whatever it takes to make you
miserable. This process can be avoided by being proactive and
knowing the next step to get clean. This will be getting
classified as temporarily uncollectible, setting up an installment
agreement, filing an offer in compromise, waiting until the tax is
dischargeable in Chapter 7 Bankruptcy, (2-4 years after filing), or
waiting until the statute of limitations to collect expires (10 years
after assessment, generally).
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