Old tax returns – will they deny my license app?

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  • #2797140
    CPA hopeful
    Participant

    I’ll try and make this concise. My employer withholdings have always exceed my tax liability. Knowing this, I got lazy starting in 2011. First off, I didn’t know how to complete my return. Second, I knew I wouldn’t owe the IRS anything (and in fact would be owed a refund) so in my head I wasn’t worried about nonpayment of a debt. So I just didn’t file anything. Had no idea it was a big deal since I was essentially just choosing to not take the refund owed to me (…wasn’t great at money management back then either). The years began to pile up. Fast forward to 2018, and I got around to finally studying for the CPA exam.

    It wasn’t until I started studying for REG that I realized failure to file taxes (even if you don’t owe anything) could be grounds for denial of a license. I have since filed all required 2018 and 2017 federal/state forms with all required penalties (still got paid a healthy federal refund). I confirmed that I have no liability to the IRS via their online tool.

    I’ve passed all 4 parts of the exam, and have been certified in Illinois. I have no criminal history. However, there is still a gap from 2011-2016 whereby I have filed nothing. So I’m holding off submitting the licensure application for now.

    Should I be worried? Should I just churn through all the missing forms to cover my bases? Has anyone ever heard of a state board denying a license for similar reasons? Any advice or feedback would be welcome.

Viewing 6 replies - 1 through 6 (of 6 total)
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  • #2797884
    fassopony
    Participant

    Oh for Pete's sake. File the returns! You can go online here – https://www.irs.gov/individuals/get-transcript and get the info you need. Just print out the 1040 and any schedules and write it in, mail them in (takes longer) or drop off at the IRS. Or, go down to your local IRS office and they will walk you through it.

    If you're getting refunds you probably only have W2 wages and use the standard deduction. It should take very little time.

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    #2798439
    AusNat
    Participant

    What's the downside of just filing the returns? Get your transcripts and spend a few hours filling out the forms. Don't forget state returns. You should even still be within the refund window for 2016 as well.

    Maybe they'd approve if you provided proof that you don't owe back taxes, but maybe not. It's a silly thing to get licensure denied or even delayed over when you can take care of it quickly. After the work you've put into school, studying and sitting exams, and everything else, this is a relatively quick problem to solve.

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    #2799141
    Silent
    Participant

    While you will not be denied the license per say, it will be delayed. You will be asked to write 10 pages, single line letter with explanation on why you have failed to file your taxes on time, what lesson you learned from this experience and what you will do to make sure that you will never fail to file your taxes on time again. Punctuation and spelling is very important and this will be graded. Base on how you write it, you might or might not get your license.

    #2800125
    jenpen
    Participant

    Pretty sure you have to certify that you are current on filing your return in order to be licensed. Failure to file is considered an act discreditable to the profession under AICPA guidelines.

    1.400.030 Failure to File a Tax Return or Pay a Tax Liability
    .01 A member who fails to comply with applicable federal, state, or local laws or regulations regarding (a) the
    timely filing of the member’s personal tax returns or tax returns of the member’s firm that the member has
    Part 1 — Members in Public Practice
    106
    the authority to timely file or (b) the timely remittance of all payroll and other taxes collected on behalf
    of others may be considered to have committed an act discreditable to the profession, in violation of the
    “Acts Discreditable Rule” [1.400.001]. [Prior reference: paragraph .08 of ET section 501]

    Source: https://www.aicpa.org/content/dam/aicpa/research/standards/codeofconduct/downloadabledocuments/2014december15contentasof2014june23codeofconduct.pdf

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    #2800329
    Recked
    Participant

    This would be more of a problem if you did not file and actually owed money, but given you have theoretically paid all of your tax liabilities, and the IRS is not sending you notices… you might have a shot of this NOT causing a problem.
    If it were me I would file the returns. You won't get any refunds for the returns more than 3 years old, but at least you start the clock on the statute of limitations for those years.

    Memento Mori - Kingston NY CPA & EA (SUNY Albany 2002)

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    #2800380
    CPA hopeful
    Participant

    Correct – never received any notice that I owed anything.

    Thanks everyone – there were other circumstantial factors that played a role as well, but I'll expand on those to the IL Board if required. Will follow the advice here and get everything filed before submitting the application.

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