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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3991
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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I have fallen behind in paying my taxes. I havent filed taxes

Resolved Question:

I have fallen behind in paying my taxes. I haven't filed taxes for the previous 2 years not including April 15th this year. I was mostly unemployed during that period of time. While I was unemployed I lost my house but asked the mortgage holder to do a deed in lieu of foreclosure instead of a straight foreclosure. The mortgage company agreed to this on the condition that I accept the tax liability (basically a tax liability the same as making more income - probably 40k - 50k increase). I just recently got a job but still don't have any money in savings to pay taxes. Here are my questions: (1) how much will the penalties be for paying taxes late? (2) Since I still don't have any money is there anyway to get the IRS to settle the debt for less than the amount owed and if so how difficult is this to do? (3) Can I ask for an extension to figure out my back taxes and then file all of these at once? (4) Will the IRS accept a payment plan and how bad might that be? (would they want monthly payments of 1k per month or something more reasonable - $200 per mo? (5) Will the IRS try to garnish may wages? Thanks
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

NPVAdvisor :

Hi, I can help you here

Customer:

I'm sorry, I thought you had a question for me

Customer:

i submited some questions for a tax expert

NPVAdvisor :

Sorry ... no... i WAS working on an aswer for your questions as you listed .... here's the first one

NPVAdvisor :


  1. how much will the penalties be for paying taxes late?





There are two penalties: Failure to File … and Failure to pay



But, if you didn't work and didn't OWE anything (or made less than the standard deduction and personal exemption) - In 2011 the standard exemption was 5,800 and the personal exemption was 3,700 – then you wont OWE or even need to file … you'd be below the filing threshhold.


Also, the failure to file, however, is based on the taxed OWED: The penalty is 5% of the amount of unpaid tax per month the return is late, up to a maximum of 25%.





And they do have the ability to penalize for a MINIMUM of $135, but in all my years I have never seen them apply this penalty when taxes were not owed at all





Now, if it works out that you DID make enough ti have to file AND that there was some taxes owed, even after offsetting any taxes withheld by your employer, then it works this way:





If you're required to pay an amount ... shown on your return, but you fail to pay that (even if the reason of nonpayment is a bounced check), there is a penalty of .5% of the amount of unpaid tax per month the return is late up to a maximum of 25%.”


NPVAdvisor :

So, lets start wit 2011 ... Did you make more than (5800 + 3700)?

Customer:

I'm sure that i did but to be honest i've forgotten

Customer:

i work as a computer contractor and make pretty good money when employed

Customer:

but unemployment can come quickly and unexpectedly

NPVAdvisor :

OK, well you (in doing the taxes, will subtract that amount before) subtract that amoumt before calculating taxable income, so it may not be as bad as you thought.

NPVAdvisor :

ALSO, once you do get your arms around it ... there a way to set up an installment agreement online if you owe less than 50K

Customer:

ok...good...thanks for the link

Customer:

when i lost my home i got depressed and didn't even try to do taxes

NPVAdvisor :

Believe me ... you are not alone

Customer:

dumb thing to do but thats what happened

NPVAdvisor :

its a situation that happens a lot

Customer:

thanks

NPVAdvisor :

sOK .. lets go from here...

Customer:

k

NPVAdvisor :

I can give you the process there too

NPVAdvisor :

LOTS of things would havge to happen before a garnighment or levy

NPVAdvisor :

but if you haven't heard from them

NPVAdvisor :

that would be pre-mature

Customer:

good / hopefully

NPVAdvisor :

I would just start by getting turbotax for the yuor you need and file (when you get to the part for efiling you'll have to print and send, but the addresses are thene)

Customer:

ok

NPVAdvisor :

Befor workng through all that let me give the form and process that will "stop the locomotive" in its tracks if you did get a notice of intent to garnish or kevy /// hang on just a sec

NPVAdvisor :

From IRS collection and appeal rights noptice (I'll give you the link) You may appeal many IRS collection actions to the IRS Office of Appeals (Appeals). Appeals is separate from and independent of the
IRS Collection office that initiated the collection action. Appeals ensures and protects its independence by adhering to a strict policy
of prohibiting certain ex parte communications with the IRS Collection office or other IRS offices, such as discussions regarding the
strengths or weaknesses of your case. Revenue Procedure 2012-18 has more information about Appeals’ independence and ex parte
communication

Customer:

ok...thanks

Customer:

i haven't heard anything from the irs but i changed addresses

NPVAdvisor :

For either one of the processes discussed on that pdf file, you just send in Form 12153, Request for a Collection Due Process
or Equivalent Hearing

Customer:

ok....thanks

NPVAdvisor :

Here's the form

NPVAdvisor :

.

Customer:

k....thanks

Customer:

i know i've asked alot but can we take a look at questions 2 and 3 again

NPVAdvisor :

But, again, I would just start by doing the taxes earliest first, then when you'e done with al ... see what you owe and send in the filings along with the request for installment payment plan

NPVAdvisor :

sure

Customer:

ok

Customer:

thanks

NPVAdvisor :

(2) Since I still don't have any money is there anyway to get the IRS to settle the debt for less than the amount owed and if so how difficult is this to do?

Customer:

i'm afraid the bank is going to say that we sold your house for 65k less than the loan so you owe taxes on 65k

NPVAdvisor :

OK that's another issue

NPVAdvisor :

Inder the Mortgage forgiveness act, the tax on that debt is forgiven if it was you primary home OR if you were insolvent at the time

NPVAdvisor :

you simply fill out form 982

Customer:

ok..thanks....i think i met both criteria

Customer:

awesome....

NPVAdvisor :

since it was the primaty ome, you don't have to jumpthrough any hoops, just send in the form with the taxes for the year you get the 1099 from the bank

Customer:

if i fill out an extension to file i guess i'll be charged the penalties then too?

NPVAdvisor :

Yes, and the extension will always say send in the money anyway

Customer:

yea

Customer:

ok....

Customer:

i think that you've answered all of my questions

Customer:

thank you very much

NPVAdvisor :

everything is MUCH easier ... if you can... if you can just send in the three 1040s

NPVAdvisor :

In myexperience, if you get to them before they get to you ... you'll be fine

NPVAdvisor :

Youre,welcome

NPVAdvisor :

If you need more help ...

NPVAdvisor :

To ask for me again, just go here: NPVAdvisor




And enter your question in the question box




Thanks again,


Lane


Customer:

thank you

NPVAdvisor :

anything else for now?

NPVAdvisor :

YW

NPVAdvisor :

If this HAS given you enough information, I would appreciate either an “accept” or a feedback rating of 3 (OK) or better. That's the only way they will pay us here. HOWEVER, if you need more on this, PLEASE COME BACK here, so you won't be charged for another question

Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3991
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and 3 other Tax Specialists are ready to help you

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