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Wendy Reed
Wendy Reed, Enrolled Agent
Category: Tax
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Experience:  15+ years tax preparation and tax advice.
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These are the years that I have not filed for both State and

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These are the years that I have not filed for both State and IRS:

2005, 2006, 2007, 2008, 2009, 2010, 2011

No excuses but I had two deaths in my family. Plus My business was a lot harder to get off the ground. Then the downturn of the economy happened and my business went bust.

OK, this is the deal. The last W-2 I had from a Corporate Employer was in 2005. I never filed that year. I was laid off in 2006.

I then started my own Recruiting Agency in 2005. I registered my business, got a license and opened a bank account. I was and remain the only employee. Regarding this business only: I made money in 2004 = 18K + my 50K salary but all my taxes were taken out of my salary not my 18K placement fee that I did through my business. However, I never filed taxes that year. I made money in 2006 through my recruiting agency totaling 80K. However, afterwards I was not able to make money from my recruiting agency. I made zero money in 2007, zero money 2008, zero money in 2009 and zero money in 2010. In 2011, I broke open my 401K plan of 27K and used that money. I had no other choice because I was out of money.

I also during 2009, 2010, 2011 created an online job board. I made $515.00 in 2009, $1665 in 2010, $2775 in 2011.

During 2009, I had a charge off Visa for $4410. Chase Bank reported it to the IRS. So, I'm sure I'm going to have to report that as income.

During 2010, I had a charge off Visa (#2) for $9000. Bank of America reported it to the IRS. So, I'm sure I'm going to have to report that as income.

Regarding property. I am a home owner. I own two condos. I bought them in 2004 before the lay off. Now I live and own in one condo. I also own and rent the other condo. I have NEVER made a monthly profit on my rental. I lose money every month. I have to pay mortgage and condo fees. I bought both properties in 2004 almost at the height of the housing market. My properties cost me each $160K, they are now worth 90K. I've tried unsuccessfully to dump both properties during these 7 years but I can't sell them. I can't even break even.

Geesh, I'm a freaking mess. I still do not have a job. I still am trying to do my recruiting agency business. I made 27K this year from my recruiting agency. I have not paid any business taxes on it because I know my business license has exprired and I've never paid business taxes. Anyway, I was soo behind on mortgage and a bunch of other things that I've spent a LARGE portion of it because I had to catch up and my credit report was soo damaged by my extremely late mortgage payments. On my rental I was eight months behind!

Currently, I've got some deals coming my way and should have about 30-50K coming to me in Nov or December.

How do I fix this. I know I need to see an enrolled agent. The IRS sent me TWO letter last week. So, they're after me. Since, I haven't had a w-2 since 2005. What kinds of information do I need to gather up, to straighten this out?

Can anyone copy and paste a list of what you need to have when you are trying to file back taxes. Keep in mind, I have only one W2 from the last 6 years. So, my situation is complicated.

Also since I have not filed any State taxes how long will it be before the state is after me. Geesh, I'm a freaking mess. Will they put a lien on my properties. Can anyone give me a estimation of when the IRS swoops in and takes everything from you?
Submitted: 2 years ago.
Category: Tax
Customer: replied 2 years ago.
This question is for Wendy Reed who is an enrolled agent. Can you please opt out. Thank you.
These are the years that I have not filed for both State and IRS:

2005, 2006, 2007, 2008, 2009, 2010, 2011

No excuses but I had two deaths in my family. Plus My business was a lot harder to get off the ground. Then the downturn of the economy happened and my business went bust.

OK, this is the deal. The last W-2 I had from a Corporate Employer was in 2005. I never filed that year. I was laid off in 2006.

I then started my own Recruiting Agency in 2005. I registered my business, got a license and opened a bank account. I was and remain the only employee. Regarding this business only: I made money in 2004 = 18K + my 50K salary but all my taxes were taken out of my salary not my 18K placement fee that I did through my business. However, I never filed taxes that year. I made money in 2006 through my recruiting agency totaling 80K. However, afterwards I was not able to make money from my recruiting agency. I made zero money in 2007, zero money 2008, zero money in 2009 and zero money in 2010. In 2011, I broke open my 401K plan of 27K and used that money. I had no other choice because I was out of money.

I also during 2009, 2010, 2011 created an online job board. I made $515.00 in 2009, $1665 in 2010, $2775 in 2011.

During 2009, I had a charge off Visa for $4410. Chase Bank reported it to the IRS. So, I'm sure I'm going to have to report that as income.

During 2010, I had a charge off Visa (#2) for $9000. Bank of America reported it to the IRS. So, I'm sure I'm going to have to report that as income.

Regarding property. I am a home owner. I own two condos. I bought them in 2004 before the lay off. Now I live and own in one condo. I also own and rent the other condo. I have NEVER made a monthly profit on my rental. I lose money every month. I have to pay mortgage and condo fees. I bought both properties in 2004 almost at the height of the housing market. My properties cost me each $160K, they are now worth 90K. I've tried unsuccessfully to dump both properties during these 7 years but I can't sell them. I can't even break even.

Geesh, I'm a freaking mess. I still do not have a job. I still am trying to do my recruiting agency business. I made 27K this year from my recruiting agency. I have not paid any business taxes on it because I know my business license has exprired and I've never paid business taxes. Anyway, I was soo behind on mortgage and a bunch of other things that I've spent a LARGE portion of it because I had to catch up and my credit report was soo damaged by my extremely late mortgage payments. On my rental I was eight months behind!

Currently, I've got some deals coming my way and should have about 30-50K coming to me in Nov or December.

How do I fix this. I know I need to see an enrolled agent. The IRS sent me TWO letter last week. So, they're after me. Since, I haven't had a w-2 since 2005. What kinds of information do I need to gather up, to straighten this out?

Can anyone copy and paste a list of what you need to have when you are trying to file back taxes. Keep in mind, I have only one W2 from the last 6 years. So, my situation is complicated.

Also since I have not filed any State taxes how long will it be before the state is after me. Geesh, I'm a freaking mess. Will they put a lien on my properties. Can anyone give me a estimation of when the IRS swoops in and takes everything from you?
Expert:  Megan C replied 2 years ago.
Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

You don't need to see an EA - you need to see a CPA or Tax Attorney. The IRS will take measures to ensure that they collect the taxes due to them. And yes, they will put a lien on your properties if the situation isn't rectified. Even if you turn in all your returns, if you can't pay your liability in full, they could STILL swoop in on you.

The problem is that you will need to have a professional contact them on your behalf and work out a solution. You may not owe as much tax as you think - in fact, you might even get a refund. You have rental property which will assist you in lowering your overall tax burden.

In addition, your charged off credit card's don't necessarily mean you will owe taxes on them - if you were insolvent (meaning your assets were less than your total liabilities at the time the debt was discharged) then you won't owe taxes on the full amount.

Your 401(k) is also taxable as income the year you use it, plus a 10% early withdrawal penalty. However, this is usually taken directly from your check before you receive it. Therefore, you have already remitted this to the IRS.

So what do you need to do? First, you need to order your account transcript, your return transcript, and wage & income statement from the IRS. You do this by filling out IRS Form 4506T (Request for Transcript of Tax Return). Make sure you check boxes 6 a,b,c and 7, 8 and on line 9 you can add up to four years. Therefore you will need to complete TWO form 4506-T's.

You can do this right away, or you can hire a professional and they will do that for you. From that information, you will know what your withholding is, and what income was reported to the IRS on your record. You will use this in conjunction with your business records to determine your tax liability for each of the years you have not filed.

Some items to give your professional include:

- bank statements for your business (will be used to calculate income, and expenses)
-receipts for business expenses
-If you paid cash for business expenses you have to have a receipt. No proof = no deduction.
-1098 forms received for mortgage interest paid
-any 1099 forms received from customers
-personal bank statements

As for your last question about your state - they will be notified by the IRS regarding your account, and shortly thereafter they will also be looking for payment.

First thing Monday, get a local reputable CPA or tax attorney. They will assist you in getting this situated. Many have good relationships with local IRS field offices

Until then, try to relax. Don't be upset - I know it's hard. From your scenario I don't see much tax being owed. A professional advocating on your behalf will limit your overall liability.

Thank you for using JustAnswer. Please take a moment to rate my response as "EXCELLENT" So that I may be compensated for assisting you today. If you need follow up assistance, please hit "reply" or "continue conversation" before giving a rating of less than "OK SERVICE"
Expert:  Lindie-mod replied 2 years ago.
Hi, I’m a moderator for this topic and I wonder whether you’re still waiting for an answer. If you are, please let me know and I will do my best to find a Professional to assist you right away. If not, feel free to let me know and I will cancel this question for you. Thank you!
Expert:  Wendy Reed replied 2 years ago.

Hello and Thank you for requesting me. I am sorry I have not been online yesterday or I would have addressed your situation sooner.

 

An experienced EA can definitely assist you with your situation--as enrolled agents are professional experts in individual taxation matters. You also have the option to see a CPA or a tax attorney, but this is not absolutely necessary.

 

I know it does seem overwhelming to you---and that your tax issues involve multiple years. However, from what you have described---your back years can still be filed and the outcome may not be as bad as you fear. Keep in mind that the IRS will do mock returns for you based on the information that they have and send you a bill--but this may not represent what you actually owe.

 

As the other expert pointed out, it would be prudent to order transcripts of your 1099s and W2s for the open years that you did not file:

"Form W-2, Form 1099 series, Form 1098 series, or Form 5498 series transcript"

on the 4506T. This can help you reconstruct your income/expenses.

 

For the years 2005 and 2004, since you worked as an employee and taxes were taken out of your pay, you may actually not owe for those years. However, it is too late to claim a refund. (refunds may generally be claimed up to three years after the due date of a return). You should still do returns for these years for completeness. The W2 information can be received from the IRS transcript that you order.

 

For the years that you had a business, you need to file returns. You will need to compile your business records, and complete Schedule C for each year. (Tax professional can help you with this). For the years that you had the business but did not make any money, you will probably be able to use what is called a "Net Operating Loss" which can be carried back or forward for a certain # XXXXX years to offset tax liability in a different year. (You will definitely need an experienced tax professional for help with this).

 

For the years that you had charge-off income, this is considered "income" but if you have no other income that year it should not generate a tax liability. Also, if you were considered insolvent (liabilities greater than overall assets at time of chargeoff) then those amounts will not be considered taxable, but a Form 982 will need to be filed for each year that this applies.

 

The 401K is income, and I presume that some taxes were taken out of the proceeds before you were paid---but keep in mind you have condos so you will probably be able to benefit from rental losses and personal deductions such as mortgage interest and real estate taxes.

 

Regarding the condo that you are renting---This will be considered real estate converted from personal use to rental use. When you rent real estate, even if you do not have an initial profit, you should be reporting your rent/expenses on your tax return. Generally, a person is allowed up to a 25K rental loss. This may offset other income that year.

 

So the steps that I would take regarding your situation are:

 

1.) find a reputable experienced tax professional in your area and negotiate a price for assistance with your situation.

 

2. Have the tax pro contact the IRS on your behalf (usually will need power of attorney specifically designed for this situation) to alert them to the fact that you are settling all tax issues and see if they will give you an extension before placing any leins or levies on your property.

 

3. Order transcripts of returns and W2, 1099 series for all open years. (It may help to get actual copies of W2s as the IRS transcripts do not include state tax information)

 

4. Compile your business and rental records for applicable years.

 

5. Work with tax pro to get open returns filed.

 

 

As far as State tax goes, I don't know what state you are from. Some are more aggressive than others in tax collection matters. Also, the IRS and states work together and share income information. So it would be prudent to complete your state tax returns contemporaneously with the federal returns.

 

To answer your questions of how long before the IRS swoops in and takes everything from you, that will vary depending on the situation, how much they think you owe, etc. Seeking help from a tax pro and asking for time to compile your information can halt collection procedures. The IRS also must follow guidelines such as giving you notice letters before placing leins or levies. I am going to link you to several publications regarding your rights and collections. For finding an enrolled agent, you can use the NAEA database: https://portal.naeacentral.org/webportal/buyersguide/professionalsearch.aspx

 

Or you can go to a district HR Block office. HR Block does provide audit assistance and EA representation even for clients who did not have taxes done there.

 

Here are pubs on rights of a taxpayer and collections:

 

http://www.irs.gov/pub/irs-pdf/p1.pdf

 

http://www.irs.gov/pub/irs-pdf/p594.pdf

 

 

I am confident that everything will work out for you--I wish you the best. You are wise to try to take control of this situation.

 

 

 

Wendy Reed, Enrolled Agent
Category: Tax
Satisfied Customers: 3346
Experience: 15+ years tax preparation and tax advice.
Wendy Reed and other Tax Specialists are ready to help you
Customer: replied 2 years ago.
This was an excellent answer. Thank you for answering my question.

I'm just confused what's better a CPA, Tax Attorney or Enrolled Agent. I do not have much money. So, I'm thinking an Enrolled Agent will be the least expensive but equally as qualified as a CPA OR Tax Attorney.
Customer: replied 2 years ago.
Thanks for the response. This is my absolute last question. As I stated above I have a recruiting agency I'm the only employee. I made some placements last year but got paid this year. In February (2012) I got $27K this year but have not paid on taxes. Will my taxes for this amount be due this year or next year? Someone told me that I'm going to have to include 2012's (27K) taxes when dealing with the IRS. I won't be able to make any kind of compromise until I'm current on this years's taxes. If this is the case, I'm pretty messed up. As I stated above, I've spent a huge chunk of that money because I was soo far behind on my mortgages. Plus I've been told that the IRS, I only have to go back 6 years which means I do not have to file my 2005 returns. Does this seem right?
Expert:  Wendy Reed replied 2 years ago.

I understand that money is an issue, but in the long run, the money you spend on this will be worth saving penalties and interest from the IRS/State that could plague you for years.

 

Your question, what is better, a CPA, Tax Attorney, or Enrolled Agent? Is a little difficult to answer because:

 

1. They all have slightly different backgrounds and areas of expertise, one may be better in one situation, and another may be better for a different situation.

 

2. There are good and bad professionals in each profession.

 

IN general terms, a CPA is an accounting expert, an EA is a tax expert, and a tax attorney is a legal expert.

 

I do not believe at this point that you need an attorney. Your goal right now is to get your returns filed. You technically do not need an EA or a CPA to file your returns. You can either do this yourself or use a non-EA or CPA preparer. However, as far as tax professionals go, only an EA or a CPA can represent you at all levels for audits, collections, and appeals--and you may eventually need this type of service considering the complexity of your situation.

 

It is best to "shop around" and find a tax professional that you are comfortable with and charges fairly, whether it is an EA or a CPA

 

http://www.betterbusinessventures.com/cpa_or_ea__which_.html

 

http://www.taxformprocessing.com/tax/enrolled_agent.htm

 

Wendy Reed, Enrolled Agent
Category: Tax
Satisfied Customers: 3346
Experience: 15+ years tax preparation and tax advice.
Wendy Reed and other Tax Specialists are ready to help you

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Wendy Reed
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