Previous year tax returns

I have a new client (self-employed) who has not filed taxes since 2021 (for the 2020 tax year). Also no filings for 2021 and 2022.

They have apparently paid each year their estimated tax to the IRS and on a quick glimpse they overpaid about 10% each year.

They did not pay estimated taxes to their state dept of revenue during these years.

Currently they started getting notices from the state for failure to file for 2020 (so far the only year, I'm sure they'll get other years soon) so we're going through all records, getting all old documents, and filing the back taxes.

Question(s):

(a) we're filing the state tax return first since it has a deadline and payment is required; should we file the IRS/federal return at the same time?

(b) should we wait for an IRS notice for failure to file and submit the returns at that time (when requested)?

(c) what should the client expect for the IRS timeline of sending out these notices?

On a parallel note, we have just filed their 2023 IRS and state returns and going forward we're looking to have them caught up and out of arrears.

Thank you!

Does the state require a copy of the federal return to be attached to the state return?

They require the Schedules C, D, and E.

I don't see why you wouldn't just file the federal returns at the same time. Maybe your state has it's own distinct tax system but a lot of states are based on federal and take federal numbers and then adjust from there. In most cases I'd think the federal return has to be done before the state could be.

And then if there are refunds and you wait too long for an IRS letter, the refund could be forfeited by being beyond the statute of limitations.

And then there's just the extra hassle of having the pressure of meeting IRS demand letters and responding to possible proposals or statutory filings.

Just get it filed.

I don't see why you wouldn't just file the federal returns at the same time. Maybe your state has it's own distinct tax system but a lot of states are based on federal and take federal numbers and then adjust from there. In most cases I'd think the federal return has to be done before the state could be.

Thanks, I think this is a good point - the reason for filing separately was not to get in some form of a loop where the IRS may adjust, the state is in process and any numbers that may not match could create a confusion. I guess not doing it at the same time could lead to the same issue down the road.

Why would the IRS adjust? If there's a document mismatch, the state will probably be done processing well before the IRS automated letter comes.