I will try to keep this as concise as I can and not waste everyone's time as I simply try to start cleaning up my mess. I am years behind on filing self employment returns and completely broke and unemployed, but want to make it right and hopefully stay out of prison.
This started when things with my work started to go south years ago. Long story short I was involuntarily committed for being a danger to myself, which resulted in a 5 figure medical bill on top of things already failing, plus then lost contracts and my client base while I was detained, so at the time I really just wasn't mentally able to keep up anymore as things spiraled and I failed to get things on track in more ways than one for a long time. Things have very slowly improved, I am lucky to have a supportive family who I am staying with but really have nothing else right now just trying to get healthy and moving forward. I am still behind on everything as I try to rebuild the foundation of my life, so just looking for some cold hard truths and any kind of 'this is how you get your s*** together' advice or guidance.
Some quick questions I have in addition to whatever the community may suggest: File with no money? Which years first? Call them first? Are there free resources to help? I am of course going to file for the unable to collect status for now (happy to pay what I owe once employed, but really have nothing, only food I have for now comes from the local pantry and what I can get from online surveys), when should I do that? When should I inquire about an offer in compromise? The IRS site has me as compliant at the moment, but I'm guessing that's simply because they need me to file the missing years to see how screwed I am.
Thank you for your time reading about my mistakes.
Point me in the right direction to make it right
byu/Key2todoor2 intax
Posted by Key2todoor2
2 Comments
Jail is highly unlikely. Just start filing by using a tax pro or DIY using an available online free tax software. You can use your Wage and Income Transcript as a starting point if you lost the income documents.
Do not engage one of those tax relief firms you hear advertised on TV/Radio. They overpromise and underdeliver while trying to bill you in perpetuity.
First, file any returns that are missing. The IRS will not work with you unless you are compliant (last 6 years of returns filed). You can’t set up payment plans or do other things about the balance until you are compliant.
File the returns even if you owe and can’t pay. The penalty for owing and not filing is 10× higher than the penalty for owing and not paying.
If all returns are filed and you believe the balances are accurate, then it’s just a matter of paying the bill. You can set up the balance for all years combined onto a single payment plan.
A version of Form 433 Collection Information Statement (a financial statement) may be required for some options. The purpose of the 433 is to determine how much you can pay based on ALLOWABLE expenses. Little Johnny’s karate and Brynleigh’s cheerleading are not allowable expenses. You can still pay them, but the IRS won’t consider them in calculating your disposal income.
The IRS will only accept less than the full tax if they believe they will be unable to collect the full amount in the allowable time based on your income, assets, and allowable expenses.
Liens are placed to protect the IRS’ interest. They may be removed before the debt is paid, but you must meet certain criteria and be paying towards the debt.
Your best bet may be to sit down with a credentialed tax professional (CPA, Enrolled Agent, or attorney) who can represent you in front of the IRS. You can find help in various ways:
* The [IRS Directory of Credentialed Preparers](https://irs.treasury.gov/rpo/rpo.jsf)
* The [National Association of Enrolled Agents](https://taxexperts.naea.org/expertdirectory)
* Your state board of accountancy
* Your state Bar Association
* A [Low Income Tax Clinic](https://www.taxpayeradvocate.irs.gov/about-us/low-income-taxpayer-clinics-litc/)
You have several options to address the debt:
* Penalty Abatement
* Short term Installment Agreement
* Long Term Installment Agreement
* Partial Pay Installment Agreement
* Currently Not Collectible
* Offer In Compromise
You may qualify for more than one or for none.
You can do any of them yourself, though I would suggest a local CPA or Enrolled Agent for the Offer In Compromise.
Prices charged by pros will vary based on complexity, location, types of tax debt, and other factors.
If you can’t afford to pay the balance once all returns are filed and the tax is assessed, get a Form 433 and fill it out. Call the IRS with the form in front of you and request Currently Not Collectible status. They will do a roughly 30 – to 45-minute financial interview that follows that form. If it is determined that you can’t pay, they basically put it on the back burner for a year or until your financial situation changes.
You still owe the money, but they won’t seek bank levies or wage garnish. Any refund you have in future years will be taken and applied to the debt.
For every year where you had earned income over the standard deduction, or unearned income over [the threshold](https://www.irs.gov/individuals/check-if-you-need-to-file-a-tax-return) then file a return.
You can’t file for an offer in compromise until the returns are processed. Then go to https://irs.treasury.gov/oic_pre_qualifier/ to see whether the IRS is likely to accept your OIC.
You can also apply for currently not collectible status if you make under … off the top of my head about $30k/year, presuming you’re single with no dependents.
Then consider the national financial standards for collection. $839 for food, clothing, etc., $84 for out of pocket healthcare, $224 for public transit or https://www.irs.gov/businesses/small-businesses-self-employed/local-standards-transportation, then at least $1,008 for housing but probably more at https://www.irs.gov/pub/irs-sbse/all-states-housing-standards.pdf for at least $25,860/year. If you make less than that then you automatically qualify for currently not collectible and technically don’t have to pay taxes. Basically, if you’re under the standard deduction then you probably don’t have to pay taxes. Apply for that and the IRS will likely give you a year where they won’t bother you about your tax debt (penalties and interest will continue to accrue).
You can’t set up a payment plan until either missing returns are filed or a collection officer is assigned to your case.