Living in the Philippines can raise many tax issues, not encountered in the U.S.
For example, because I am in the Philippines, can I have my attorney-in-fact in the U.S. sign my tax return for me? The answer is, yes, but is your attorney-in-fact reliable. What happens they don’t file your return timely. Are you responsible for the late filing? Yes, you are responsible for the late filling.
IRS attorneys have said privately, relying on a power of attorney to file a return won’t avert a penalty for late filing or payment. This discussion dealt with an elderly woman who appointed an individual to serve as her power of attorney and authorized the POA to prepare, file and sign her returns. Unfortunately her tax return was filed late. This in turn cause her to be liable to the delinquency penalties.
So if this were to happen to you, what can you do? Although relying on your POA for tax matters, that in and of itself isn’t reasonable cause to waive the delinquency penalties. But there are two other potential avenues for penalty relief in this situation. The taxpayer may be able to qualify for IRS’s first-time penalty abatement.
Under this program, if a filer has paid or otherwise arranged to pay the overdue taxes
and has been tax-compliant for the past three years, IRS will generally allow a onetime waiver of the late payment and late filing penalties. Filers generally need to ask for this relief.
Another argument to avoid the tax penalty is inability to file. For example, the taxpayer in the above example may also escape penalties if she can show she suffered from dementia and wasn’t able to handle her own affairs around the time the tax return was due. Someone on behalf of the taxpayer would need to ask for this relief. The main point to keep in mind, you or someone on your behalf has to ask for the relief you are entitle to. Don’t count on the IRS doing it for you.
Sometimes a little bit of luck goes a long way tax wise, as illustrated in a recent tax case.
An IRS slip-up lets a man walk away from a tax bill. If the Service concludes that a person owes tax, it must send a notice of deficiency to the last known address before assessing the amount due and beginning collection proceedings. In a recent case, the IRS mixed up the numbers in the address when mailing a deficiency notice to a man who failed to file his returns, and he claimed he never got the letter.
According to the Tax Court, the typographical error in the taxpayer’s mailing address rendered improper IRS’s later actions to collect the tax (Talbot, TC Memo. 2016-191).
Although the taxpayer won this one based on the facts of the case, most likely the taxpayer is not out of the woods yet. If you don’t file your tax return, the statute of limitations for collecting taxes by the IRS never begins to run. Most likely the IRS can bring s new action to collect taxes.
It is much better to not let one’s tax problems get to this stage. In the long run, it is much better to be proactive. If you receive an IRS billing notice, review it to determine if it is correct or has any errors. If you owe the IRS taxes, and can’t pay, there are a number of options available to workout a payment plan. For example, you may be able to do an offer in compromise, where you pay only a percentage of what you owe.
Doing nothing is the worst thing you can do.
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Author’s email: wolff2000@earthlink.net
