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socrateaser
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 33509
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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Tax expert needed. I have missed filing a few returns over

Customer Question

Tax expert needed. I have missed filing a few returns over the years after a large obligation was added to my tax bill, and I am looking to get back on track, as well as settle my debt with the IRS. I need an expert plan of action to accomplish this. Around 2008 I claimed a tax credit which I was not entitled to and received the funds. Later, the IRS notified me that there was an error on my return and "charged back" the credit I claimed. It didn't mention any type of legal action, however there has been interest tacked on to the original amount, which continues to grow to this day. What is the best way to go about settling this? Can I settle for less than I owe or will that be risky?
Submitted: 11 months ago.
Category: Bankruptcy Law
Expert:  socrateaser replied 11 months ago.
Hello,

In order to straighten out your tax obligations, you must first file all of the unfiled returns. Until you do, the statute of limitations never runs on your payment obligation, and if you were to have to file for bankruptcy, on the three year period before you can file to eliminate taxes.

Once you have filed the returns, the IRS will establish your entire tax liability, and you can then make an Offer in Compromise (OIC), which is an offer to pay a lump sum or an installment payment amount for an extremely reduced amount of your total tax liability.

The OIC info can be found at this IRS link. But, you can't even start filling out the forms, until you file your tax returns. So, there's no way around that problem. You must file your returns first, and then you must quickly start working on the OIC forms, because the IRS will start winding through the collection process, and you could have assets or accounts frozen. So, you may want to get yourself a little house safe, and put some cash in their for a rainy day, when you wake up and your bank accounts are suddenly inaccessible. This may not happen, but just in case, you need to be prepare for it, because it's a lot easier to deal with the situation, if you know you're not totally cut off from paying your bills, while trying to resolve the tax issues.

Please let me know if I can be of further assistance. Hope this helps.
Customer: replied 11 months ago.

Thanks for your reply.


 


I heard once that if you don't file your return yourself, the IRS does it for your somewhat. Is there any truth to that? My problem is that I have had several jobs in different states over the years, and I no longer have any documentation to file the proper returns. I don't know exactly which years have/have not been filed, etc. What can I do to remedy this?


 


I'm worried that if I don't settle with the IRS they will come after me, but at the same time if I start filing old returns and trying to settle then I'd become a target. The original credit I took was for $7500 and I know the interest has been huge every year since. The IRS website states I am not eligible for the OIC, and that I should consider the installment payment. I'm worried with the large interest and my low income that it will be a never ending circle of payments. What would cause the IRS to place a tax lien or take other action? What are the possibilities? Recommendations?

Expert:  socrateaser replied 11 months ago.

I heard once that if you don't file your return yourself, the IRS does it for your somewhat. Is there any truth to that?

A: Yes. Sometimes the IRS will file a return based upon whatever income information it has about you, without anything other than the standard deduction. This is roughly, a 1040EZ form, and it is almost always at least three years after the failure to file, because it is at that point that you cannot claim any other miscellaneous deductions from your income.

If you work for cash, or for customers/clients who do not give you a 1099 at the end of the year, then the IRS will have no records. But, if you receive a W-2 from employment, then the IRS will have at least that much info, and it will file a return and then commence to collect on it, if you don't file it yourself.

My problem is that I have had several jobs in different states over the years, and I no longer have any documentation to file the proper returns. I don't know exactly which years have/ not been filed, etc. What can I do to remedy this?

A: See this link to obtain copies of the information from your W-2 returns over the past 10 years.

 

I'm worried that if I don't settle with the IRS they will come after me, but at the same time if I start filing old returns and trying to settle then I'd become a target. The original credit I took was for $7500 and I know the interest has been huge every year since. The IRS website states I am not eligible for the OIC, and that I should consider the installment payment. I'm worried with the large interest and my low income that it will be a never ending circle of payments. What would cause the IRS to place a tax lien or take other action? What are the possibilities? Recommendations?

A: The IRS prequalifier rejects practically everyone. It's useless. The IRS wants the amount of money that it believes it can collect from you during the next 5 years. That is a highly subjective analysis. The only way that you will know is to actually fill out the forms and submit the offer. And, you can't do that without filing the returns. But, even if it's a 100% installment plan, you will at least be clearing up your tax liability. The alternative is to never pay taxes again and remain in the background until the IRS files all the returns for you, and then starts levying your wages. It won't take all your money. Probably 15-25% of your disposable/after-tax income. And, you'll just keep on paying until it's paid off (or you die, or become unemployed -- whichever comes first -- yes, I'm serious).

As far as filing a lien, once the IRS has established your debt, it will file a general lien, to protect its interests. But, if you don't have any property with equity value (home, car, etc.), then the government is not going to come to your home and start selling your furniture. It will just wait and see what happens to you. If you suddenly inherit some money, then Uncle Sam will just as suddenly appear and take the share.

 

The point is that the longer you wait, the further behind you get, and eventually you will pass the point of no return, where the only way out will be to win the Powerball lottery. Otherwise, you will have to live with an ever increasing tax liability, because you cannot even get rid of the debt in bankruptcy, until at least three years after the due date of the tax return, or 240 days after the IRS issues a Notice of Determination of Tax Liability (for each independent tax return).

 

Hope this helps.

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