Tax Time! THis time I won't avoid it!
January 24, 2007 8:39 AM   Subscribe

Tax-filter: I'm being stalked by the IRS. Unfortunately, this is completely my fault. I've been remiss in filing taxes for the past few years, and they finally caught up to me. I've been paying taxes, I just haven't filed.

With any luck--and a good accountant--I could possibly come out ahead, as I think I qualify as a freelancer (journalist), so I can deduct like crazy! But I don't know the ins and outs of taxes (obs., since I've avoided it altogether in the past).
Here's what I need: Recommendations on accountants in the Brooklyn area, and any other tax advice y'all can give me. I also need to know how much an accountant costs, so that I can save up before I go in. One more thing: Anybody know what qualifies someone as a freelancer (able to deduct all sorts of biz expanses)? Thanks in advance!
posted by mixer to Work & Money (19 answers total) 5 users marked this as a favorite
I'm in a similar situation, but not a freelancer. How did you discover the IRS is "stalking" you?

I'm probably in the clear since all my income is very on he books (standard salary employee) and they owe me money and I just haven't collected it. Still, I need to get my P's and Q's in order this year now that I'm a homeowner. I'll be watching this thread closely...
posted by twiggy at 8:46 AM on January 24, 2007

How have you been paying taxes if you have not been filing and you are a freelancer? Have the taxes been deducted from your paychecks? If so, you may not qualify as an independent contractor and may not be able to deduct all of your business expenses. The rules for deducting employee business expenses are much tighter than those for deducting expenses as an independent contractor. An accountant can help you work this stuff out. Since you are now in some trouble having an account walk you through the process will help limit future trouble and keep what you pay to the IRS to the minimum necessary.
posted by caddis at 9:05 AM on January 24, 2007

If you're really a freelance journalist, working check to check, then that's probably how you got in trouble. They try to make paying taxes pretty easy on you. It's usually automatically set up with your employer that taxes are deducted out of every paycheck; I'm guessing, from what you say, that you weren't being given regular paychecks, your taxes weren't being deducted, and therefore you ended up with lots of owed taxes.

Some important details that will matter, first of all: do you own a home? Do you have large assets of any kind-- big trust funds, large stock holdings, property, et cetera? Do you have any kind of significant debt aside from college debt? If so, this might become a bit more complex. That's when you'll really need to talk to an accountant, and I am not one.

If you don't have any large assets, then this becomes fairly simple. You're expected, every year, to get your W-2 forms from every employer you've had in the past 12 months (they are required by law to give them to you), do the math on the 1040, and send in any money that you owe. The IRS isn't too concerned that you file the paperwork, although that will help you in the long run. They're more concerned that you pay the money. I say this because it might be that a lot of the taxes were actually deducted from your paychecks without your noticing it.

The first thing you should do is call the IRS and determine exactly how much you own them. You say that they've 'tracked you down;' I'll assume this means they've sent you notices. The notices should have a phone number on them; call it and set up a repayment plan. They are very flexible about this repayment; you can choose any amount per month to repay, and you won't pay any interest.

You should do that right away because the IRS can authorize the seizure of your cash in the bank. That's not pleasant; and believe me, I know this from experience.

That's really all there is to it. The IRS knows how much you owe them; just pay that back, unless it's an insanely large amount. Do your taxes regularly from now on; you won't have any trouble.

(I should say that you aren't very clear about the scope of the problem, so it's hard to know exactly what advice to give you. Suffice it to say: if you owe the IRS more than $10,000, you should probably take this up with an accountant, although I don't know if they can help much.)
posted by koeselitz at 9:08 AM on January 24, 2007

IRS Form SS-8 (pdf) to determine whether you are an independent contractor (freelancer) or an employee.
posted by caddis at 9:10 AM on January 24, 2007

By the way, you can't "come out ahead" on past-due taxes. In my understanding (and again, I am not an accountant) deductions must be claimed on tax forms in the year the taxes are due; you can't go back and change the amount the IRS is asking for, unfortunately. Sorry.

It's pretty easy to pay them back very, very slowly, fortunately.
posted by koeselitz at 9:11 AM on January 24, 2007

IRS brochure on Independent Contractor vs. Employee (I should have put that in the last comment, sorry)

On preview, you certainly can recalculate your taxes, and for you it won't even be a recalc as you never calculated them in the first place. Talk to an accountant.
posted by caddis at 9:16 AM on January 24, 2007

Response by poster: Sorry that I didn't give more information.
I work on an hourly basis at a newspaper (for editing services); additionally, I occassionally file stories for that paper and others, getting paid a flat rate per article. And in addition to that, I pick up editing work from various companies, which I do from home (I edit in-office at the newspaper).
All of these jobs deduct taxes from my paycheck, and I've lately been able to qualify for the health plan at my newspaper. (Although this has only happened late last year and for the years that the IRS is ticked off at me for I never was part of the plan.)
So the IRS has been paid taxes for all of the years in question. What prevented me from paying (besides stupidity) was that I always seemed to owe something once I filled out the taxes; I usually thought to myself, "Well, don't send this in; wait till an accountant looks at everything and I'll probably be owed money instead of owing it." Then I promptly forgot to actually CALL an accountant.
Talking to people in my business, it seems that an accountant is the way to go: Most people get money back from The Man.

I ignored a lot of letters and then finally called them. They weren't as hardcore as I thought they'd be, but I'm sure if I procrastinate any more they will kick my ass up and down.

koeselitz: I have spoken to the IRS. They gave me time to file my past-due taxes, and said if I didn't, they would and then just send me the bill. So I'm not quite at the point where they're taking money out of the bank (not that that would get them a lot of bucks!).

caddis: Thank you, I'll check that out ASAP.

And lastly: Any suggestions for accountants in Brooklyn--particularly ones that work with writers/editors/media layabouts?
posted by mixer at 9:22 AM on January 24, 2007

I've been remiss in filing taxes for the past few years, and they finally caught up to me. I've been paying taxes, I just haven't filed.

I was in this situation, and I called the IRS and talked to someone there. This was definately the right thing to do: the person I talked to was super nice and super helpful, and she gave me a month to sort it all out before they took any further action. My specific problem was that I'd lost the file in which I kept my W2s and other forms, and it turned out that they could just send me a copy of my file with all my information in it. The actual taxes were much less complicated than I thought they would be, and I did have to pay self-employment tax for that year.
In my understanding (and again, I am not an accountant) deductions must be claimed on tax forms in the year the taxes are due; you can't go back and change the amount the IRS is asking for, unfortunately. Sorry.
I don't think this is right. I took the standard deduction, and they seem to have been ok with that. What I do think is true is that at some point, after they've been harassing you for a while, they'll just do your taxes for you, without taking any deductions, and demand payment from you. At that point, it's too late to fix it. But if they're just leaning on you to fill out a return, and they haven't sent you a bill yet, I believe that you can still take deductions. That's another reason to call the IRS and let them know that you are dealing with the problem.
posted by craichead at 9:25 AM on January 24, 2007

Response by poster: caddis:
Thanks much! I do definitely need an accountant. Skimming theough the distinctions of independent contractor/employee, it looks like various work I've done in the past few years falls into both categories. My main work looks to be employer-employee relationship, but I've definitely got some independent contractor work.

Oh crap. Now I really need an accountant!
Worst part: My money goes to the debacle in Iraq!
posted by mixer at 9:30 AM on January 24, 2007

Response by poster: craichead:
that's scary, because my deadline has passed. i thought they could just do it themselves, send me the bill, then I'd get an accountant and refile it.
posted by mixer at 9:31 AM on January 24, 2007

Did you get W-2 forms (for employees) from your employers or 1099 forms (for independent contractors)? If the payments for the articles and editing are reported on a 1099 I doubt the IRS will challenge your status as an independent contractor. You will be able to directly deduct from your payments the expenses associated with performing that work - mileage on your vehicle, photocopying costs etc. (you did keep records, right?).
posted by caddis at 9:34 AM on January 24, 2007

On preview, nothing I said above was at all helpful!

Did your employer send you a W2 or a 1099? I think that's a clue as to whether they consider you a contractor or an employee.

Your money already has gone to the debacle in Iraq, since you've already paid taxes, so I wouldn't sweat it.
posted by craichead at 9:36 AM on January 24, 2007

Seconding what craichead said. Several years ago I didn't file (I wasn't earning much as a freelancer. Decided to pay rent rather than taxes.) and last year the IRS figured it out. They sent me a not that said they were curious about my 2000 taxes since they didn't get any. They gave me a very reasonable time frame to send them the info (6 months or more, as I remember) or they would file with the information on hand (from my W2's, using a standard deduction.) and bill me the difference. (Plus 6 years interest. Which is something like 150%.) I didn't have my w2's but the IRS happily sent me the info after a reasonably quick phone call (please wait 4-6 weeks.)

Going to an account cost me around $250, but saved me a few thousand dollars. The accountant will be able to tell you what kind of things can be deducted and take care of that for you.

Not sure about NY, but in CA the state tax board has a bad case of "me too" and will eventually come after you if the feds have, so you'll want to file any state/local taxes at the same time.

However: Get an accountant right now! Today! It's getting tax season and they will be getting busy.
posted by Ookseer at 9:37 AM on January 24, 2007

that's scary, because my deadline has passed.
Take a deep breath. My deadline passed too, because I put off doing them until the night before the deadline and then realized too late that I had a problem. You're probably on thin ice, but I bet you can salvage it.

Call an accountant today. I would worry less about finding the perfect accountant than about finding any accountant so you can stop procrastinating and deal with this. Then call the IRS back, apologize profusely, tell them that you thought you could do your taxes yourself but realized as the deadline was approaching that you needed professional help, and that you've found an accountant and can get them in by (date that your accountant said). They won't be as nice this time, but they might give you another extension.
posted by craichead at 9:41 AM on January 24, 2007

Mixer: when you say you had to owe money after doing your taxes - do you owe money to the federal government or new york state? people who work/live in new york city have a specific tax associated with living in new york city - some employers don't remove that tax from employee's paychecks and so you'll end up owing money to New York State (which is around 1300 if you make 50k).
posted by Stynxno at 9:50 AM on January 24, 2007

Yeah, see, I didn't know what I was talking about there. Sorry.
posted by koeselitz at 10:34 AM on January 24, 2007

Response by poster: I've recieved both 1099's and W2's. The majority of my income comes from the W2 employer.

Ah, and I've blown off both state and federal, so I'll have to deal with NYS too.

Yes, I need an accountant. That's the truth. Any suggestions, folks?
posted by mixer at 10:57 AM on January 24, 2007

My accountant is in Park Slope and he rocks. Send me an email and I'll give you his contact information (my address is my profile). Good luck.
posted by discokitty at 12:18 PM on January 24, 2007

I could possibly come out ahead

Then you'd better hurry up. After three calendar years without filing, you are no longer entitled to a refund of overwithheld tax. The IRS keeps it.
posted by ikkyu2 at 7:25 PM on January 24, 2007

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