Ask HN: Owe over $100k US backtaxes. Not sure what to do.
I know I deserve snarky you are stupid and you are an idiot comments. I'm wondering if there's anything else I can actively do to lessen the burden, or interest or penalties, or if there is something outside the you're screwed for next 5 years plan. I have already talked to a CPA, but they seem to vary greatly in quality and knowledge. The one I got to file my taxes seemed pretty cookie cutter. I haven't talked to a tax attorney, and considering my stressed finances, I'm not sure if it makes sense to.
edit: I am now a salaryman. The installment plan monthly amount due to my high cost location ends up being total after tax dollars minus rent and very frugal and basic living expenses. I could move to a cheaper location (which I am considering), but that doesn't seem to address the more immediate and core problem.
48 comments
[ 1.7 ms ] story [ 100 ms ] threadSince it seems the poster has income still, the bankruptcy court may or may not come up with a better plan for repayment than the IRS.
Anyway, tax attorney is the way to go here. But the system is set up such that if you can pay it, you probably will.
I think the last step for you is the Offer In Compromise - in simple form you'll show them how much your net worth is, and give it to them. In return they'll retire your tax debt. Obviously, it's going to depend on how much you are worth/vs owe, and if they think you operated in good faith or not. You need to not be in bankruptcy, and current on all filings to offer it. They also will come down HARD on you if you miss any filings/payments for 5 years after.
Where did the money go? Did you turn it into assets? If so then you may want to simply sell all or part of what you have.
If you did not turn your income into assets but it has all burned up see what you can do in terms of documenting your business related costs over that time. Conditional on the IRS agreeing with all this you could then make them a proposal on how much you'll pay month-to-month.
If you feel that that is not going to be a possibility you might end up having to declare bankruptcy. That's a real pain in the ass, but if you have no assets and no income that's probably where you're headed. If you have assets or income then likely you can make a deal. If you have assets that are somehow worth something to a bank you could possibly use these as collateral for a loan.
Best of luck!
I am now a salaryman. The installment plan monthly amount due to my high cost location ends up being total after tax dollars minus rent and very frugal and basic living expenses. I could move to a cheaper location (which I am considering), but that doesn't seem to address the more immediate and core problem.
So what's the problem? You are highly in debt, and you worked out a payment plan that will have you pay off your debt in five years.
Mind you my experiences are with the UK tax system where you are guilty until proven innocent.
I will put you in touch with someone who is good at this.
Appeal to authority: I am a tax lawyer.
edit: I see it. Wow I am so stressed that I fail basic reading right now.
I promise you I am not the accountant himself :) and this is not a spam comment. He can help!
I don't give a fuck because God is perfectly just. They get punished.
All my jobs were fake CIA jobs.
I own radio stations and shit.
- Move to a country without an extradition treaty with the US.
- Change your identity. I don't imagine they'll put that much effort into hunting you down for just $100k.
- Create a Kickstarter campaign.
- Ebay the next 2 years of life. That way you are only in hock for 2 years, not 5.
- Marry someone and don't tell them about the debt until it's too late.
Typically the IRS can set you up with a payment plan that's a portion of your income. Its time to find a tax lawyer, not a CPA about this. Settlement/compromise, installment plan over a long term, and even bankruptcy are options.
If you are unable to legitimately pay (not working and unable to find work by being on unemployment) you will be able to qualify for the irs' settlement plan.
You are facing being broke either way, your basically going to have to figure out how long your going to be broke...
Also, a (relatively) healthy, single person with no children isn't going to qualify for many other programs.
Unemployment has also been severely cut, and the term severely shortened since the days of the 99ers. There's really not any government support other than unemployment available for able-bodied single people (they've even cut food stamps recently, which is one of the cruelest things you can do in a depressed economy.) Of course, if you become homeless the IRS will definitely leave you alone.
Note: be sure you file your taxes. You legally have to file, whether you can pay or not.
Once you file, after two years the debt can be part of a bankruptcy, but you have to keep filing.
As you know, this is a really sucky spot to be in. I believe the IRS has a program for people who have no chance of repaying -- not sure what the title is. It's worth looking into.
You did a brave thing coming online with this. I imagine a lot of folks would just call you names and be done with it. Speaking for other guys in the same situation, thank you.
Good luck!
B. I don't think this is the thing the IRS forgets about anyway.
The temptation here is to let sleeping dogs lie, but I think this just makes it worse. I imagine if you don't make a lot, it's probably not worth their time to chase you, but heck if I'd want to live with that constantly hanging over my head. It's bad enough owing money you can't pay.
ADD: For what it's worth, I have a sneaking suspicion that there are a ton of people in this situation.
In some circumstances, this can even include later years in which a return was filed, if the unreported income affected the income, deductions, credits, losses, or other tax items in that later year. This is usually not an issue for individuals, as the problem usually arises from carried-over losses or credits that are generally available only to corporate entities.
[1] http://nypost.com/2014/05/22/wolf-of-wall-street-wannabe-all...
I have responded to two people from this thread and I thought I should make it publicly available to help others who might be out there.
At some point you owe money to the IRS. You've filed the tax returns, you've wrestled with the IRS about waiving penalties, and there is a number. You're looking at it, and it's big.
This is what tax lawyers call "collections work." You owe money, and the IRS is trying to collect. As I noted in my previous comment, the Internal Revenue Manual is the operating procedure manual for Revenue Agents in handling collection of taxes owed. Plus of course there are shards of wisdom here and there that are important to know. Some are published by the IRS (they have an assortment of published documents, like things called 'Revenue Procedures') but some of this wisdom is informal, learned through experience with the system.
The work is time and paper intensive. Going to a tax lawyer is probably not cost-effective, because the hourly rates are too high, and you don't have money. So you need help. Where do you go?
Well, call tax lawyers, accountants, and (most importantly) Enrolled Agents. Enrolled Agents are regular people who pass an exam administered by the IRS that enables them to represent taxpayers in tax controversies.
The particular type of human I would look for is an ex-IRS employee who has left government work and set up shop as an Enrolled Agent. You now have the best of both worlds: someone who knows the inside baseball game, and is out here in the real world, working for you. Also, the costs are likely to be more reasonable that an attorney or CPA.
Look particularly for an Enrolled Agent who specializes in collections work. Buzzwords include "offer in compromise", "Lien", etc.
In the case of the two people who contacted me directly, I pointed them to John Knight in Southern California. His website is www.knight-ea.com (don't judge him by his website) [EDIT: thanks 'dewey for pointing out that it is really www.johnknight-ea.com] and he fits the criteria I mentioned. He gets frequent referrals from the top tax lawyers here in Los Angeles. (I know, because I talk to my colleagues.) I send him 100% of my collections problems.
I am not competent to give advice on exactly what to do in this area -- if you owe a ton and need to figure out what to do. I would recommend that you stay away from any tax law firm that advertises heavily on the traditional media. There are no miracles, but the "One Day at a Time" mantra will carry you through. You will, eventually, be (tax) debt free.
Again, anyone else out there -- if you're in this boat shoot me an email. But now you know what you'll get when you email me. :-)
/Phil.
Charles Markham: http://www.markhamandcompany.com/
His website is terrible and he screens his phone calls ruthlessly. Don't let either of those things put you off; he's worth it. Feel free to use my name or not; it won't get you (nor me) anything. Maybe it will get him to pick up the phone the first time...
My email is in my profile, but most of what I'm going to tell you is above: call Charles. :)
Good luck!
PS: Yes, you probably are a little screwed for the coming few years until you get this cleared up. It is a very good feeling once you emerge from the other side, having caught up on filing, and having cleared up the IRS debts. This is money that you owe; you lived beyond your actual means for a while. It's going to suck a while, but assuming you have your health and earning power, you'll get out of it and it's bright on the other side.
I had one really good year as a freelancer and wound up spending the money I'd put aside for taxes because a client who had been paying me a retainer suddenly cut me loose right in November (the absolute worst time to try to pick up work as a freelancer). I was burned out and depressed about losing the gig so I didn't work for almost 8 months and wound up burning through the $30k I had set aside for taxes. I missed filing my taxes or an extension and the penalties just mounted until eventually my bill came out to about $40k.
After "negotiating" with the IRS (complete bullshit, they tell you how its going to be and you just have to deal) They decided that I could pay $2k a month on a $80k salary (how insane is that?). I lucked out and got a job that paid me almost double about 3 months later, if not for that I'd be toast.
Its easily the most stressful thing that has ever happened to me. Tax Lawyers were rude and dismissive ("Maybe get a cheaper car?" said one) once they realized I wasn't Mr Moneybags. And nobody can or will loan you that kind of money.
The only thing I can offer up apart from the Offer in compromise is that once you get the bill under $25k. You can negotiate directly with the people you talk to on the phone, once your bill is over that, everything they say/offer you has to go to some faceless manager somewhere, and it can be rejected and ridiculous alternative unilaterally offered back to you.
Knowing what I know about affiliates, it's at least possible on the outside that you might not have had the world's most businesslike records. Can you reconstruct better records, at least for the major expenses for the business? If so, you can have your CPA file amended returns. You'll still be looking at principal and interest for your taxes but it's in your interests to pay principal of $80k and interest versus principal of $100k and interest.
I've seen this sort of question asked a hundred times on Slashdot/Reddit/etc. The top answers are always "find a lawyer", and at best general advice.
In this HN thread, however, there's all that plus multiple offers for personal assistance and contact information for the exact pros bad_decisions needs.