Late Taxes: Graduate Student Edition (USA)
September 6, 2017 12:17 PM   Subscribe

I only filed taxes for both 2015 and 2016 a few months ago, as one of the pieces I'm picking up after an extended bout of clinical depression. Now I have a tax bill from 2015 that I cannot pay in full immediately, plus a tax refund from 2016 that has neither been applied to my 2015 bill nor deposited in my bank account. I am trying to figure out how to pay, how to get my refund applied, and how to navigate fees and penalties. Would appreciate any help.

I don't really have an excuse for not filing the past two years. I was going through a serious bout of poorly-treated clinical depression, and my finances and budgeting were just a few of the many, many responsibilities I ignored in favor of staring at my bedroom wall. However, I was never hospitalized or anything like that, so I doubt that qualifies for an abatement or anything else. I finally filed back in May and just received the results on Tuesday.

A summary of my situation is below. All of my income has been in the form of research stipends. I am required to pay federal taxes, but not Social Security, Medicare, or state taxes. Funding sources were different in 2015 and 2016, hence the differences in withholding.

Income: ~$31k, no federal taxes withheld, no W-2 issued. I believe I should have been calculating my estimated tax and sending it in on a quarterly basis.
Tax Bill: ~$3600 (due 9/25)
  • ~$2600 owed in taxes
  • ~$580 failure-to-file penalty
  • ~$220 failure-to-pay penalty
  • ~$200 interest
Income: ~$15k, federal taxes withheld, W-2 issued.
Refund: ~$600

  1. Why hasn't my 2016 refund been applied to my 2015 bill or deposited in my bank account? As I said, I filed for 2015 and 2016 a few months ago (May?) so I am surprised nothing has been done with it.
  2. How can I get my 2016 refund applied to my bill, or at least deposited in my bank account so that I can pay it back to my bill?
  3. If my refund gets automatically applied to my bill, would that qualify as a first payment on a payment plan?
  4. I can't pay $3.6k by 9/25 (nor $3k if I can get the refund applied by then). I can't pay it in 60 days, and paying in 120 days requires no emergencies or extraneous expenses whatsoever in the next four months. But apparently applying for a 120+ day monthly payment is going to result in a bunch of penalties and high interest rates. Is this my only option?
  5. What's the difference between an online payment agreement and an installment agreement? What are the advantages to each?
  6. What kind of proof or explanation is required to qualify for fee/penalty abatement?
  7. Should I apply for a fee/penalty abatement just to give it a shot?
  8. Is this the right form to apply for abatement? Does it apply to both the failure-to-file and failure-to-pay penalties?
  9. Is there an additional letter I should send in with the above form? Like a recommended form letter or explanation?
  10. Are there only abatements for fees and penalties, not interest?
  11. Is there anything else I can do to reduce my bill? I checked Offer-In-Compromise screening tool, but don't qualify.
I am sorry for all the questions. I would hire a tax pro for this, but I am struggling already. While the IRS says I have $500/month in disposable income, the other bills that do not qualify for their calculations eat that up.* I understand this is my fault and if I don't qualify for any kind of reduction in the bill then so be it. I would very much appreciate at least getting help on the 2016 refund problem, though.

Thanks very much for any help.

*i.e. minimum payments on various debts. These are now very high due to a mix of both missing payments and ringing up a bunch of extra debt from all the extra expenses one incurs when one is consistently paying late fees on various bills, hasn't been cooking at all, doesn't do preventative car maintenance, isn't getting checkups at the dentist and doctor before health problems become a crisis, and on and on.
posted by Hey nonny nonny mouse to Work & Money (14 answers total) 1 user marked this as a favorite
To look for a volunteer tax assistance program, look here.
posted by Mr.Know-it-some at 12:27 PM on September 6, 2017

Have you tried phoning the IRS to ask them some of these questions? I just recently cleaned up a late filing for 2012 that also stemmed from long bouts of depression. I only ask because talking to a human being who can see your account status is pretty helpful, and I put it off for years because I felt so guilty--so I thought you might be in a similar boat.

So my first step was ginning up the courage to call the IRS and ask them about the status of my 2012 taxes. Once I got through the lengthy call menus and hold period they were not judgemental at all and were fairly helpful--although they didn't do any calculations for me and they certainly weren't my advocate the way a hired tax pro would be.

Assuming you are now under a professional's treatment for your depression, I would talk to them about the abatement letter issue. They may have had experience with this before.
posted by col_pogo at 12:28 PM on September 6, 2017 [3 favorites]

My experience is, if you do nothing, eventually they'll set you up with a payment plan, I think the minimum payment is $175/month. They are also very helpful, so if you call, they can explain all the details to you.
posted by rabbitrabbit at 12:31 PM on September 6, 2017

I agree with calling the IRS to help resolve some or all of these issues. My wife and I had to contact them a couple years ago to fix a problem related to an audit, and the agent we spoke to was incredibly helpful - not at all judgmental like one might expect.
posted by Roger Pittman at 12:36 PM on September 6, 2017 [1 favorite]

To answer question #5: from what I can tell, the "Online Payment Agreement" is just a payment agreement that you apply for online; it's an automated system that you can apply to and get an instant decision, rather than needing to mail in a form and/or visit an IRS office.
posted by Johnny Assay at 12:36 PM on September 6, 2017

Abatement covers both failure-to-file and failure-to-pay penalties. A first-time abatement (basically, a "you get one mistake" abatement) might be available to you, regardless of whether there is reasonable cause, but you will have to set up a repayment agreement first. You may possibly also be entitled to a reasonable cause abatement, but I think only an experienced tax advocate can say whether a mental illness that did not result in unemployment or hospitalization would qualify you.

Your 2016 tax return has almost certainly been intercepted, but the way to find out is to call and talk to them. As a general matter, many of your questions are best addressed first by talking directly to the IRS.
posted by praemunire at 12:45 PM on September 6, 2017

P.S. Beating yourself up for not being able to magically overcome a serious mental illness is not only futile, it's counterproductive.
posted by praemunire at 12:47 PM on September 6, 2017 [5 favorites]

First: you can do this! Plenty of people with no mental health problems, more money and longer overdue payments find themselves in your situation. Don't be so hard on yourself. The IRS are not the police and you are not a criminal. You are working to make this right. You spent a lot of time in this post apologizing, and that's understandable but not necessary, and probably hurting you more than helping. Starting now, when you talk about this in the future, I recommend you make a rule: you give yourself max 2 sentences to discuss how you messed up/failed, and instead refocus on "what can I do today to help square this debt?" Two sentences is plenty to acknowledge your role in this fiasco, and it gives you a hint to stop unhelpful ruminating if you find yourself using more than 2 sentences.

Second... just call the IRS. Ultimately, your interests and the IRS' interests are aligned. You both want to square away the debt. Although it may feel adversarial and scary, thats only because you haven't had much chance to talk to a human. The truth is that the IRS humans will help you. The IRS as an organization doesn't need or plan on your late payments as part of its financial goals - it only plans for your original taxes as revenue. So the staff don't even super-super care about late payments and will help you (however they can) find ways to make your original debt/tax payments. When you call they will help you, because you both want the same thing: for this debt to go away.

Third: good work cleaning this up. We all make messes sometimes and it can be difficult to face them alone. You are doing well. Don't be afraid to ask for additional support from others in your life, whether on this issue or others, while you knuckle through this. You got this!
posted by samthemander at 1:01 PM on September 6, 2017 [7 favorites]

Most of the free tax help clinics only run during tax season, but if your state or locality has a special tax season, they may also be running at that time. The best way to answer these questions is to talk the IRS.
posted by soelo at 1:02 PM on September 6, 2017

Response by poster: When I last called the IRS (back when I was first filing) I was on hold for a long time, bumped around, and then the person I talked to wasn't terribly helpful. I can try again, though.
posted by Hey nonny nonny mouse at 4:22 PM on September 6, 2017

Is there an IRS office near you? When we had tax troubles a couple years ago, walking into an office and talking with a kind, understanding human not only alleviated a lot of anxiety, but it resulted in a recalculation of what we owed in our favor. See if you can find a local office and call to see if they take appointments or have walk-in hours.
posted by donnagirl at 5:28 PM on September 6, 2017

My experience with the IRS (different issue but similar complexity and anxiety) took approximately 6-7 phone calls over 3-5 months. Each time I was on hold for about 20-40 minutes, only to be told, "you need x thing. Do x thing then call us back." So I would do X thing, wait on hold, and figure out the next thing. It took persistence but it worked.

Also, I used this phone tree dialing shortcut:
posted by samthemander at 5:37 PM on September 6, 2017

Arrgh, looks like gethuman changed their site structure. Here's the phone tree shortcut I used (most recently in August 2016, so it's possible it's changed in the last year):
Press 1 for english
Press 2 for personal income taxes
Press 1
Press 4
Press 2
Press 0# when they ask for social security number (do this twice)
Press 2
posted by samthemander at 5:40 PM on September 6, 2017

Do you qualify for services from a low income tax clinic and is there one nearby? (I think the IRS link in the first comment is more for tax prep resources, whereas this link may include issues outside of tax season. Good luck.)
posted by cdefgfeadgagfe at 3:06 PM on September 8, 2017

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