Did you really file your tax returns?

I was recently confronted with a frightening scenario. I did not prepare the original return but the client came to me because they couldn't find the original preparer. It was a letter from the state that she did not file her return. The preparer had taken a position that the state does not like to see. In essence, the state said she owed $15,000 on this return. The return was from 2002 and wisdom says that they can't go back past 3 years. Well, at the state it is four years. Now I immediately sent a letter stating that she had filed and a copy of the return. The state simply stated they had no record of it. A quick check of the state statute showed that the STATE'S definition of filed is that they received it. We can have her attest to the fact that she mailed it but this does not even touch (if you think about it) on whether the state actually did receive it.

This is a real problem that you should consider. How do you prove that the state or the federal government actually received it. This is extremely important because you can never close out the liability unless you did file it, and as I discovered, you can prove it. That means that 10 years later, when you and everyone involved has destroyed their records, the government can simply claim they didn't receive your return and claims all kinds of things that may or may not be accurate, leaving you with the bill.

There are two real ways of dealing with this. One way is to send each return by certified mail and keep the green card you receive back. Expensive but it would have saved this poor lady $15,000. Another easier way is to electronically file. That way there is a record of the filing and more important that the taxing agency actually RECEIVED the return.