One of my clients recently asked me a great question:

“Can I just send the IRS a payment now and figure out the tax return later?”

The answer isyes… but with an important warning.

Many taxpayers believe that making a payment satisfies the IRS. Unfortunately, it doesn’t.

The IRS Wants the Tax Return

Sending money to the IRS doesnot replace filing your tax return.

Even if you estimate what you might owe and send a payment, the IRS will still consider your returnunfiled until they receive the actual tax return.

Your payment may reduce interest and some penalties, but itdoes not eliminate the filing requirement.

What Happens If You Don’t File Your Tax Return?

If enough time passes, the IRS may prepare what is called aSubstitute for Return (SFR).

This is a return prepared by the IRS using only the information they receive from employers, banks, brokerage firms, and other third parties.

Here’s the problem:

• The IRS generally doesnot know about your business expenses.
• They usually donot include deductions or credits you may qualify for.
• They don’t know your complete tax situation.

As a result, the IRS-calculated tax is oftenmuch higher than what you would owe if you filed your own return.

Once that tax is assessed, it can eventually move into collections if it remains unpaid.

What About S Corporations?

This is an area that causes a lot of confusion.

AnS corporation generally does not pay federal income tax. The income usually flows through to the shareholder’s individual tax return.

However, the corporationstill has a filing requirement.

Even if you send the IRS money personally, the IRS still expects the S corporation return to be filed.

Failing to file an S corporation return can result in significant late-filing penalties.

If You’re Missing Records, Don’t Panic

One of the biggest reasons people delay filing is because they believe they need every document before getting started.

In many cases, I begin by obtaining the client’sIRS Wage and Income Transcript, which shows many of the income documents that were reported to the IRS, including Forms W-2, 1099, and other information returns.

That gives us a solid starting point while we work on gathering the remaining information.

The Sooner You Act, the Better

I understand how life happens.

Business gets busy.

Family comes first.

Months turn into years before you know it.

The important thing isnot to ignore IRS notices.

The earlier you address a missing return, the more options you usually have, and the easier it is to prevent additional penalties, interest, and collection issues.

Final Thoughts

Making a payment to the IRS is often a good idea if you expect to owe tax.

But remember:

• A payment isnot a tax return.
• It doesnot satisfy the IRS filing requirement.
• It doesnot stop the IRS from pursuing an unfiled return.
• Filing the correct return is almost always the best way to minimize taxes and avoid unnecessary problems.

If you’ve fallen behind on filing your tax returns or have received IRS notices about missing returns, don’t wait until the IRS prepares a return for you. Addressing the issue early can often save significant time, stress, and money.