If I’ve amended a prior year tax return within the 3 years applicable via the IRS website, do I have to check “no” or “yes” on question 26C? It asks if you’ve failed to file or pay any federal, state, or local taxes as required by law? I don’t want to over analyze the question since I did file my original return on time, paid my taxes and actually received a refund. I added two additional W-2’s for side income earned during that year when I submitted the amended return after the 15th of April. I ended up paying the IRS penalties and interest through a payment plan. Thank you for the advice.
I think if you paid penalties and interest, you should probably report it. I dont think it will be an issue if everything is paid up. One concern would be if you only cleared up the debt after you realized you’d have to get a security clearance, but it doesnt sound like that is the case here.
And of course you’ll want to have copies of all the returns and other records handy. You can create an online account at IRS.gov and download additional records to show there is no current tax owed.
I do taxes for a family business, on the side. What you describe is so common that my first inclination was to say not to report it. You have, at this point, paid ALL of the taxes that you owe and filed ALL of your tax returns.
But, on further consideration, this MAY come out when they examine your returns. At the least, you need to have an explanation prepared for WHY you didn’t include the W-2’s on your original return. “I thought that I was working under the table” isn’t a good one!
I would answer “Yes” on 26C and provide an explanation at the same time.
Thank you for the advice. I will definitely make sure to keep copies of those tax records etc. in case any questions come up during my re-investigation. I’m just trying to be transparent as possible to mitigate any concerns during the investigation process.
My question as a tax preparer, and the one I expect the investigator to ask you, is: Why didn’t you include all of the W2’s on the original return.
Of course, you do not have to answer me!
BTW . . . For what it’s worth, I know of case where an employees spouse failed to file federal or state returns for 10 years. The employee kept their clearance after a hearing.
I appreciate the response EdFarmerIII. I completely understand the question. I didn’t include those W-2’s with my original return because I had already filed and submitted my return with the IRS prior to receiving those W-2’s in the mail. The IRS had already accepted my initial return and deposited my refund in my bank account. In my ignorance at the time, I was much younger(early 20’s) and wasn’t fully aware of timelines etc. of tax filing. After I received the additional W-2’s I looked up the guidelines for amending returns on the IRS website. It stated I had three years to file an amendment to include additional income. That’s why I wasn’t concerned initially.
Well . . . That’s why us professionals are professionals! I understand the mistake completely.
I’ve had people come in and say, “I forgot to file this W2 last year so I want to include it this year” and I’ve had people come in with a second or third W2 and say, “You mean I was supposed to wait until I had ALL of my W2’s?”
The IRS isn’t likely to point out that you MAY owe more taxes when you amend your return or that they will charge you interest back to the original filing due date.
As to your original question, I doubt that the investigation will even turn this up if it happened a few years ago. You did file within the time allowed and you are current on all taxes. I think that I would check “Yes” and then either add an explanation OR bring it up to the investigator if you have an interview.
If you are interviewed, the investigator will go over your SF86 line by line. You could volunteer the information when you get to that question.