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emc011075
emc011075, Enrolled Agent
Category: Tax
Satisfied Customers: 153
Experience:  Master Tax Advisor for H & R Block
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For 4 years, I trusted someone with doing my taxes. At this

Customer Question

For 4 years, I trusted someone with doing my taxes. At this time I was between the ages of 19-23. I had no idea what they were doing as I was only excited about the huge refund. However, at 25, I was in the process of buying my first home and the broker said that may trigger an issue later down the line with the IRS. She was writing off major Schedule C expenses without me knowing, so I stopped and started filing my following years correctly with a different tax person.

However, yesterday--the IRS sent me a letter to examine my 2010 tax returns, questioning the Schedule C information. I'm aware that I am fully responsible for this, so I am prepared to do whatever it takes to pay back whatever I owe the IRS. I consulted with a Tax Adviser who is going to personally see how much I will owe for all the years she's done incorrectly.

My only concern is, if I make the IRS aware of my mistake for 2010 and years beyond, and have my Adviser negotiate some form of payment plan, will it show up on my credit? Also, will a lien be placed on my home? I just purchased my home not even a year ago.

I know I made one of the biggest and dumbest decisions of my life. Which is why I prefer for them to audit me for all of the years and not just the year they're examining me for. So please respond politely, but informatively.

Thanks!
Submitted: 1 year ago.
Category: Tax
Expert:  emc011075 replied 1 year ago.

emc011075 :

Hi there. I am sorry to hear about the situation. If you already contacted Tax Adviser, she or he will advice you what you need to do to next. The bad news is you are still responsible for what's on your return, regardless who prepared it, you, a friend, or paid preparer. Here's the good news. If you agree on an installment agreement aka payment plan and you don't skip the payments and make reasonable effort to pay it back as soon as possible, IRS will cooperate with you. Unless amount you owe is huge, they will not place a lien on your house. But don't expect any refund until the balance is paid off. What you should be concerned about, however, is the state. If your federal return is audited and changed, state will receive the changes made to your federal return and they will recalculate your state return. Usually state use all resources available to collect their revenues, including collection agencies, liens and reporting to credit agencies (TransUnion, Equifax, Experian).

Customer:

I expect the amount to be around 25-45k. Is that huge?

Customer:

And my adviser plans on informing the state of the changes before they contact me. So is that good?

emc011075 :

everything over 25k is a big number. If you contact state before they contact you, you might avoid some penalties and late fees.

Customer:

So there's a possibility they might place a lein on my house? I've only been in it for roughly 8 months. :-(

Customer:

If I agree to a payment plan, will it prevent a lien?

Customer:

Sorry. I'm still fairly young and I'm trying my best to figure out what to expect.

emc011075 :

Chances are they will. But it doesn't mean they will take it. Lien is place as guarantee until the balance is paid off.

Customer:

Wow.

Customer:

So I could lose my house even if Im making the payments?

emc011075 :

You should also contact the agency who prepared your taxes, they should be responsible for penalties and late fees.

emc011075 :

If you have lien on the house it doesn't mean you will loose it as long as you make payments.

emc011075 :

It is like collateral, a guarantee. If you stop making payments than yes, you can loose the house.

Customer:

Okay. Is it any way possible to prevent a lien? So far they are only asking for supporting documentation for my 2010. But I told my adviser the truth about the things that my tax person did.

Customer:

So the adviser is working up something to present to the IRS ebfore they go back all the years.

emc011075 :

It is too early to say. You need to submit paperwork they ask for, amend your returns if needed.... it takes month before they reach the decision

emc011075 :

... and with the tax season just started and all the changes they are proposing, don't expect decision any time soon.

emc011075 :

probably 6 - 8 months

Customer:

Alright. Thank you. Sorry if I sound repetitive. But do you think they will try to work with me on this issue as long as I'm trying?

emc011075 :

IRS usually will.

emc011075 :

State is more unpredictable.

Customer:

okay. now what are some the disadvantages to having a lien on a house?

emc011075 :

One of the reason I know is that you might not be able to refinance your mortgage, it might effect your mortgage payments....

Customer:

Okay. Thank you.

Customer:

But my adviser should be trying to prevent all of this right?

emc011075 :

definitely.

Customer:

Okay. Thank you so much. I pray that the only thing I get hit with is monthly payments.

emc011075 :

Good Luck.

emc011075, Enrolled Agent
Category: Tax
Satisfied Customers: 153
Experience: Master Tax Advisor for H & R Block
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