Skip to comments.I will soon be ripped by the IRS and I need serious tax advice.
Posted on 04/18/2014 6:39:07 PM PDT by elahtap
Hi Fellow Freepers,
I am conservative to the core, and have been a long time lurker (8 years +) here, but I was finally spurred to set up an account. I wanted to get some advice. The potential stakes are high and I wanted to post this here because, as a group, you are the smartest people I know. I know my FRiends here will tell me what I need to know
I am a 58 y/o professional with a good job, and my wife had been a stay-at-home mom since our children were born. In mid 2010 we purchased a small business for 80K. She had done some fill-in work there and it looked like a good opportunity, and with both our kids soon to be in college, it would give her a shot a a career.
Here is what happened in the intervening years...
1) The business has tanked and we are coming around to making the decision to sell it and salvage whatever possible of our investment. My wife is a good worker-bee but absolutely lousy at running a business. Plus, after being in "remission" and well-controlled by medication, her bipolar illness has reared its ugly head again. We have lost tens of thousands of dollars, with most of this paid for by 3 withdrawals from IRA accounts.
2) State and Federal income taxes for the business have not been filed other than the first part-year (2010). So we have not even filed for 2011, 2012, and now, 2013. This is primarily due to not being able to afford an accountant to clean up the big mess and file the returns. Sometimes a mess gets so big you just don't know where to start.
3) Our personal income taxes have also not been filed for these same years (2011, 2012, and now 2013). Without the complicating factors (i.e. penalties) we probably didn't owe much (if any) because my deductions were always set up where I got a $500-$1000 refund every year. The primary reason I initially postponed filing was because we didn't have the business returns, and I didn't want to lose the deductions that would come about as a result of the big business losses.
But now we are living in fear that the IRS will come in and seize everything (including a big chunk of my wages, or our home, or retirement funds, etc.) and the snowball (crapball?) will just get larger.
We have always paid our bills and lived financially responsible lives, which means that, emotionally and logistically, we are in uncharted territory without any idea how to find our way out.
We SO want to get this all straightened out, and I had considered visiting the local IRS office and trying to get a friendly agent for a 45 minute sitdown and just throwing myself at their mercy, but I don't want to make it worse by doing this (like my friend who, years ago, accidently crossed into Canada with a handgun in his car and went back to the border to inquire about what he should do).
Quite honestly (and it is very humbling to admit this) we are overwhelmed to the point where we are paralyzed by fear and uncertainty, and we are unable to decide how to fix this.
I am open to criticism, but please understand that beating myself . Believe me when I say we already know we are woefully stupid for ever letting the situation get to this point.
My wife and I really need some educated and helpful advice on how best to begin the process of straightening this out while minimizing any additional damage. I'm counting on my FRiends here for some good solid guidance.
I need to leave the house for a while, so I will try to catch up on posts and answer any relevant questions in a few hours. Thanks, all!
get a tax accountant place to start working on it
Have you been notified that you are being audited or do you simply fear being audited?
I am not a tax professional, but I want you to realize you are a live person that can’t be defined by your monetary class.
Regardless of what happens, please live your life to the fullest and don’t let the IRS define your enjoyment of life.
Beg or borrow the money needed to hire a good tax attorney. That is the best thing you can do. Without it you’re walking into the lions den without a a weapon. You’ll more than make up the cost by what you save.
Find a lawyer.
Find a CPA.
Do not go to the IRS until you are FULLY prepared.
Get a good accounting firm. They will have bookkeeping types that bill at lower rates to sort through all your personal and business paperwork.
If the IRS comes calling, refer them to your accountant. Do NOT throw yourselves at their mercy.
Visit an accountant, explain the situation honestly, and ask their advice. You would do well to visit a few to find one you are comfortable with.
Move now, don’t wait (penalties can worsen, and you can lose opportunities). Time is not on your side.
I agree with the previous poster...bite the bullet and pay a professional to guide you through it. The peace of mind alone will be worth the price.
Get a CPA. Now.
I had a bad situation, and I got it all smoothed over, not by coming to the IRS, but coming to the CPA and *HE* did my talking.
It’s now in a payment schedule, and it’s down from 10k to under 2k.
I'm not an Accountant or an Attorney but from what I have read I believe you are going to need one or the other. There are some good Tax Attorneys but I recommend an Accountant. I hope you have good records and have all pertinent information categorized. If your information is not categorized I recommend that be done first. Know was of no help but want to wish you Good Luck.
What is the structure of the business? s corp, ptn, c corp, sole proprietorship?
Get something in and filed, to be honest, IRS is way overloaded now and you may slip through the cracks. Don’t work about perfection. The good people in IRS have left (people who think and know) and it is run by computers now.
Welcome to FR
For now... if you have any money get a tax attorney and an accountant.
Go over the books, see what profit/losses you have incurred.
File you amended taxes for the previous years.
It may not be as bad as you think, or it may be worse. you won’t know until you finish the paperwork.
Get right with it now before they start levying your bank accounts and seizing your real property.
Yes go to a CPA immediately. The IRS considers failure to file, if you owe money as much more serious than if you do not owe anything.
Yep, that will do it.
Get thee a tax attorney.
I have a local inexpensive CPA who is retired and fights for his clients. He has seen me through tough situations. I wish I had hired someone years ago.
You need a very good tax attorney, preferably one who has a CPA as well as a JD.
Do you listen to Rush...Some tax attorney type outfit advertises services for just your situation...don’t know if they take a bigger cut than a CPA...but sounds as tho their specialty is just right for you.
What letters have you received from them? You might want to make a list of each letter, including the letter date, which tax year(s) it is for, the $ amount on the letter, and the code number of the letter.
IRS letters have code numbers that you can look up to see how serious they are. The letters are usually sent by an automated system. There are some letters you should never respond to, because your response could trigger IRS action; these letters are bait.
You need to determine how much they think you owe for each year. And figure how much you think you owe. Filing the past year tax forms might reduce what they think you owe.
You can do an Offer in Compromise and get most of the alleged debt wiped out. Then the IRS can give you an installment plan for paying down what is left of the debt, or they can put you into a “Currently Not Collectible” status if you show that your income is less than your current expenses. This status can go on for many years while the statute of limitations ticks down.
I have serious tax advise for all that are here. Obtain self employed, cash only, vocation. My doctor colleges are going there rapidly. NEVER PLAY THE BANK GAME.— ONLY CASH!! millions are moving there. — No BANKS!!!
I love FR but wouldn’t come here for tax advice.
Hire a professional.
The IRS can be easy to work with, but unless you’ve been notified by them I don’t know why you think they are going to rip into into you.
Take this time to start getting organized. If necessary, tell the IRS that you’d like to work through one year at a time because you’re overwhelmed and low on funds. They will also do payment plans.
State revenue departments vary. I’ve read that California can be particularly vicious.
Get thee a tax attorney.
...you don’t need the attorney ..yet. Find a tax preparer who is an Enrolled Agent who has IRS experience. They have been on the other side of the desk and will do the filing and know how to negotiate with the IRS.
The tax attorney may bleed you dry and is in no hurry to complete things if the clock runs...
Get your numbers together and get one year at a time done and if there are penalties, at least the interest rate is low. Good luck.
A.)Hire an accountant
B.)Move to Belize
I'd go with Option A.
Anything I say shouldn't be interpreted as financial advice....ect...ect...ect
(I have no idea why people use such a disclaimer, but thought I should because everyone else does....)
Having said that, I will offer this ...
Just because you haven't filed returns, it doesn't mean you're in a huge pile of trouble (legally or financially). If you don't owe very much in taxes you won't owe very much in interest and penalties, either. In fact, for many tax filers the only real "penalty" they face for a late return is that they find out they're not eligible to collect a refund but they don't owe the IRS a dime.
The most important thing is to get the tax returns filed correctly, and ASAP. The IRS gets plenty of late tax returns filed, so your situation isn't all that unusual. In addition to demonstrating your good faith in meeting your legal obligations, this also starts the clock for the statute of limitations in the (very) unlikely situation where you could potentially face prosecution. I believe there is a statute of limitations of three years for tax evasion and six years for tax fraud, but there is no statute of limitations for a failure to file.
If it turns out that you owe the IRS a lot of money but you don't have the means to pay the taxes, then the situation changes and you may have to enter some kind of negotiation for a settlement with them. Do not do this without professional assistance.
I may think of some more things as I read through other posts here. In the meantime, good luck!
I think you need serious help from an accountant. A good one. Take the initiative now. All progress starts with knowing and admitting the truth. Get started. You will feel a load off your shoulders.
You need a professional. You have a lot at stake.
DO NOT contact the IRS on this until talking to an attorney and getting that person's advice first. It is much easier to fix problems now instead of post-audit if it occurs. It might not occur, but that's not a gamble I'd be willing to take.
One more thing to say to you...
You’ve been under a lot of stress for the reasons you named. It’s easy to let that color your world completely.
Somehow, take time to realize that your tax issues and financial issues are not the totality of your life or who you are. Your value and the value of your lives is so much higher.
Eventually, they will be behind you, but find ways to enjoy your lives now.
Tax attorney, tax accountant, now.
you gave the poster a good reputable link .
that was nice .
"While it is not a permanent fix to your tax problem, it does help greatly by stopping wage levies, bank levies and property seizures. To obtain uncollectible status, you need to file a financial statement on Form 433A for individuals, and Form 433B for businesses. The financial statement shows the IRS that all the money you earn is needed to provide necessary living expenses for your family. Uncollectible status helps you to stay afloat until you are able to pay the tax or apply for forgiveness under another program."
Do that right away.
Figure out your actual income - based on what you received personally. Work with your attorney, accountant or Enrolled Agent to file and pay those taxes ASAP. You, or your accountant, can always amend them later to catch extra deductions, depreciation, etc. you missed. If you can't pay the taxes due, have your attorney, accountant, or Enrolled Agent set up a payment plan that you can manage.
If the corporation lost money, and it sounds like it did, you probably have no separate corporate tax liability, or it is not significant. For a lot of corporate structures that liability is a corporate liability, not a personal liability. Your tax advisor will be able to figure those returns out, but often they are less of a pressing issue. You probably won't need to waste a lot of time and money figuring out corporate tax issues in the front end of the process.
Good idea facing this. Lack of filing will be the monkey on your back.
Get the CPA as has been advised. The IRS will negotiate the amount owed or lost then determine your penalty and tax due.
Your new CPA will be the one negotiating for you.
The IRS will work with you to put this under the bridge and out of their system as well.
Honesty is the best policy.
I agree with you Louis. Have received some advice over the years from a now retired CPA. I sure miss him and his advice. He too was very reasonable in his pricing. Family utilized his services for numerous years and always found his advice to be concrete or solid. Wish had paid more attention to my investments, where I made the decisions. Could have completely retired, by now, if had kept mind clearer and followed more of his advice.
I wouldn’t panic. The IRS isn’t going to suddenly show up and seize your house. your bank accounts, etc. You’re a long way from that. Start getting all the paperwork together obviously for the earliest year first. The easier you make it for the accountant, the less it should cost. Once you have the returns ready to go, you’ll know where you stand.
It’s after April 15th which helps some. Look around for a good accountant. A bookkeeper is out. I wouldn’t deal with any of the national firms. Once the accountant is finished, that will tell you if you need a tax attorney.
Again don’t panic. Be methodical. Chances are with the losses you’ve sustained, you don’t owe anything. My guess is you may have money coming back.
“Welcome to FR.”
Agree. I remember there was one time that a fed had set-up here trying to draw us into giving advice that is illegal. Thankfully we smoked him out.
Not audited yet. But I can’t “not do nothing” forever. That day WILL come.
Papers and records which you can assemble on your own mean that a $45/hour para-accountant will not be toiling over them.
The way to organize such things is to organize things WITH A VIEW to how you will need and summarize them for the process of filling out a tax return. I don't know how skilled or experienced you are working through a tax return. But get a copy of Turbo Tax AND HAVE IT INTERVIEW YOU as to what records you need to get. TTax does this, and has, for at least the last 3-5 years, maybe more.
Most very small businesses operate out of their checkbook(s). That's the central repository of transaction information. Additionally, you should be able to go to your bank and get a readout of every check and every deposit you've made to/from your biz ckg account.....assuming you made that move to create such an account. If you didn't you didn't and you will still need your bank statements and checkbook(s).
EVERY HOUR you avoid of "professional help" is probably $45 in your pocket, if not much more. "Professional help" is not an office worker asking you "OK, is this your 2012 checkbook"? Did you write business-related checks out of your personal account?" "OK, do you think you can find your 2011 checkbook?" Would you pay someone $150 an hour to ask you dumb question like whether you spent this check on a ream of paper for your personal life or for your business. You will pay thousands of dollars to arrange and organize such things and ANY POSSIBLE RESOLUTION will require you to organize them, whether it is the IRS, an accountant, or yourself so GET ON IT and DO IT.
It is also entirely possible that the exercise of commencing the filing of a Schedule "C" (even in arrears as you are contemplating) and the payment of SE Self Employment taxes, both of which are or will be triggers for certain lines of inquiry (where is your biz account? Is there a deduction for home office expense (don't even think about taking such a deduction) MAY NOT EVEN BE WORTH IT. You can't know without going through the exercise of filling out the tax forms, and you do that, and find out what forms you might need, by going through the Turbo Tax interview process. Don't concern yourself with whether the TTax is for whatever year. What has changed are the tax tables, which you can download from irs.gov for prior years. The flow of numbers through the forms hasn't really changed much.
Now, imagine two scenarios: In one, you are "I am an idiot and I did this and I can't remember whether this checkbook is for 2011 or 2012" In two, you walk into a CPA office with 3 years of draft tax returns on IRS-forms, together with organized supporting records gathered together and ask to be represented.
There's probably $5K in fee difference. If it was an attorney, it would be $50K.
I doubt it's as bad as you think, the business I assume will count as losses to help offset the taxes on the IRA withdrawals.
The sooner you deal with it the less it'll cost you... so get on it ASAP.
Never ever talk to the IRS directly... that's like a person charged with a crime trying to talk to the prosecutor directly.
I concur with your advice. I would also recommend getting your records as organized as possible, by year.
Then collect all documentation you can having to do with the business and personal finance and contact a tax accountant. Spending now on an accountant and attorney may sound expensive, but the alternative could cost a lot more. Many people don't want to bring up a spouse with bipolar, but many times it explains a lot of why things went the way they did. Don't be angry with your wife about her illness, but be straight with her and her doctor going forward. If she's really not doing well you may need to get power of attorney to move forward before she is ready to be a part of the process.
Generally this is good advice, but I’ve NEVER had anything like this over my head (never been in debt, never been arrested, etc.).
I try to take and enjoy life as it comes, but this is what they call a major bummer.
I listen to Rush (and Mark Levin) almost daily. My initial impression of those tax firms that advertise on their shows it that these firms are there to take advantage of people in desperation.
I might be wrong, but I have imagined they are one tier above title pawn operations.
I have not received ANY letters yet. Yet is probably the operative word.
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