The IRS says I owe them $18K, now what?
June 12, 2007 7:07 AM Subscribe
I have inadvertently ignored letters from the IRS and they have "filed a tax return for me"; the results they got are clearly absurd, and now they claim I owe them $18K. Do I have any recourse?
We had some uh.. "issues" with how our mail was getting handled when it was brought from the mailbox to our house, and as a result a bunch of notices from the IRS piled up and didn't get looked at until just now, when I was cleaning up piles of stuff in my office. What I found were various stages of "please file your tax returns for 2004 and 2005", including a final set where they filed my 1040 for me and quoted tax nubmers that seemed completely absurd to me (as I've *always* gotten a small refund), and then a bill for 9K for each of those years.
I *really* don't think that if I were to actually file for those two years I would owe that kind of money; has anyone dealt with this before? Do I have any recourse at all? I am 100% sure I don't have my W-2's for those years, so I'm not sure how I even would go about filing those years' taxes (if you have tips on how to deal with the W-2 bit, that would help too).
We had some uh.. "issues" with how our mail was getting handled when it was brought from the mailbox to our house, and as a result a bunch of notices from the IRS piled up and didn't get looked at until just now, when I was cleaning up piles of stuff in my office. What I found were various stages of "please file your tax returns for 2004 and 2005", including a final set where they filed my 1040 for me and quoted tax nubmers that seemed completely absurd to me (as I've *always* gotten a small refund), and then a bill for 9K for each of those years.
I *really* don't think that if I were to actually file for those two years I would owe that kind of money; has anyone dealt with this before? Do I have any recourse at all? I am 100% sure I don't have my W-2's for those years, so I'm not sure how I even would go about filing those years' taxes (if you have tips on how to deal with the W-2 bit, that would help too).
You can get the W-2 from the IRS. Instructions
You need to file an amended return that's correct.
posted by smackfu at 7:26 AM on June 12, 2007
You need to file an amended return that's correct.
posted by smackfu at 7:26 AM on June 12, 2007
Oh, no, do NOT go to H&R block. H&R Block is hit and miss. Some people are very good (including some retired CPAs), some are ... not. The gal I employ as a personal assistant used to work at H&R block. I trust her to organize me, I do NOT trust her to do my tax returns. Especially not with something like past-due returns.
What records DO you have from those years? Why don't you have W-2s?
I would talk to a type of tax return specialist called a "Registered Agent" -- these are effectively lawyers that can represent you in front of the IRS. They know all the loopholes and who to talk to to get the penalties reduced. A big % of your $9k per year that you owe is probably penalties.
Other good places to start are listed on the IRS website, including the taxpayer advocate service.
Remember, they're from the government, they're here to help you...
posted by SpecialK at 7:26 AM on June 12, 2007
What records DO you have from those years? Why don't you have W-2s?
I would talk to a type of tax return specialist called a "Registered Agent" -- these are effectively lawyers that can represent you in front of the IRS. They know all the loopholes and who to talk to to get the penalties reduced. A big % of your $9k per year that you owe is probably penalties.
Other good places to start are listed on the IRS website, including the taxpayer advocate service.
Remember, they're from the government, they're here to help you...
posted by SpecialK at 7:26 AM on June 12, 2007
Actually I'm not certain whether it's an amended return or a normal one (since you never filed an original). I suggest calling the IRS. They aren't that busy this time of year.
posted by smackfu at 7:27 AM on June 12, 2007
posted by smackfu at 7:27 AM on June 12, 2007
Why these returns aren't very accurate:
Why is the tax so high on an SFR? Well, IRS does not know who lived with you so they usually file the return single or Married Filing Separate (the worst tax table). A person might have had 3 or 4 dependents, but they won't be on the SFR. Also, if you worked contract labor and got a 1099, it is very likely you had deductable business expenses. Again, IRS does not know what your expenses were and will tax you on the total of 1099s. In addition, if you sold stock, IRS will tax you on 100% of the sales price because they do not know your basis in the stock. In this circumstance, you could have lost money on the stock and had a deduction, but will owe tax on it due to the SFR.posted by smackfu at 7:30 AM on June 12, 2007
If you never filed in the first place, just file a return. If you did file, file an amended return. You can buy and download previous years of TurboTax online direct from Intuit.
If you have a "final notice of intent to levy" (the words "final notice" are fairly obvious, and it's sent via certified mail), call the number indicated, and let them know that you'll be filing a return.
FILE IT RIGHT AWAY! It's not illegal to fail to pay taxes, but it IS illegal when you fail to file. In other words, if you don't file (or you file a fraudulent return) you could go to prison. If you file and don't pay, they can make your life hell with collections procedures, but they can't put you in prison.
If you don't have W2s (but they were issued), a tax lawyer can actually "pull your file" from the IRS, which will include W2s and 1099s that were filed against your social security number.
The IRS wants you to "get right" with them. If you're trying (and an attorney can help) to do this, they'll generally work with you. Don't be afraid to get this straightened out, the worst thing in the world you can do is ignore it.
posted by Merdryn at 7:42 AM on June 12, 2007
If you have a "final notice of intent to levy" (the words "final notice" are fairly obvious, and it's sent via certified mail), call the number indicated, and let them know that you'll be filing a return.
FILE IT RIGHT AWAY! It's not illegal to fail to pay taxes, but it IS illegal when you fail to file. In other words, if you don't file (or you file a fraudulent return) you could go to prison. If you file and don't pay, they can make your life hell with collections procedures, but they can't put you in prison.
If you don't have W2s (but they were issued), a tax lawyer can actually "pull your file" from the IRS, which will include W2s and 1099s that were filed against your social security number.
The IRS wants you to "get right" with them. If you're trying (and an attorney can help) to do this, they'll generally work with you. Don't be afraid to get this straightened out, the worst thing in the world you can do is ignore it.
posted by Merdryn at 7:42 AM on June 12, 2007
I had this problem after I failed to file for several years (long story). Got a letter saying I owed them 65k or some such nonsense. If your situation is like mine, you can still file a return and easily correct the situation. If it turns out you're due a refund, you'll get token interest on the refund amount. Of course if you owe money, prepare to pay penalties and interest, which add up the longer you leave it. In either case, you'll probably get another letter this fall notifying you that extra withholding is required. (In my case, my banks started withholding tax on interest bearing accounts.) This withholding lasts a year, assuming you clear up your situation now.
See an accountant and/or tax attorney if your tax situation is complicated. If not, you can probably take care of it yourself just by filing the late returns, and waiting 4 to 6 weeks.
posted by blue mustard at 7:46 AM on June 12, 2007
See an accountant and/or tax attorney if your tax situation is complicated. If not, you can probably take care of it yourself just by filing the late returns, and waiting 4 to 6 weeks.
posted by blue mustard at 7:46 AM on June 12, 2007
I should add my experiences with speaking with IRS agents over the phone were generally positive. They may not go out of their way to help you, and I wouldn't rely on their advice in lieu of a tax attorney, but it's definitely worth giving the, a call if you are in doubt about the proper actions to take.
posted by blue mustard at 7:49 AM on June 12, 2007
posted by blue mustard at 7:49 AM on June 12, 2007
(n my previous comment that should be "them" not "the,")
posted by blue mustard at 7:50 AM on June 12, 2007
posted by blue mustard at 7:50 AM on June 12, 2007
avoid h&r block and all those at all cost. you never know what you're getting until it's too late.
go to a website like http://www.myfinancialadvice.com and find a professional there.
I have made good experiences with the guy I found through them.
posted by krautland at 8:28 AM on June 12, 2007
go to a website like http://www.myfinancialadvice.com and find a professional there.
I have made good experiences with the guy I found through them.
posted by krautland at 8:28 AM on June 12, 2007
You've got to file. I didn't file one year because I knew I was going to owe money and freaked out when I was doing them on TurboTax and saw exactly how large a hole I'd dug myself. The following year, after gentle but firm prodding from my SO, I went to a good tax guy who prepped both that and the previous year's returns. I ended up owing less than what I'd figured through doing it myself on TurboTax - that, of course, was moot after penalties and interest I owed from the previous year and the tax preparer's bill.
Anyway, I filed, got a bill, and called the IRS to set up a payment plan. It was very easy - the agent was pleasant, helpful and very professional, and my monthly installment was based on the maximum amount I told them I could comfortably pay every month. It took me a year and a half, but I paid everything off.
FWIW, $18,000 is alot of money to you and me, but it's hardly the largest amount the IRS has tried to collect. I know someone who owed in excess of $60,000 after not filing for seven years - they hired a tax attorney who negotiated that figure down by $20,000. But they now have to pay $800 a month directly out of their paycheck and had to pay the tax attorney $4000.
Deal with this now because it will only get more unmanageable as time passes. Good luck.
posted by TryTheTilapia at 8:54 AM on June 12, 2007
Anyway, I filed, got a bill, and called the IRS to set up a payment plan. It was very easy - the agent was pleasant, helpful and very professional, and my monthly installment was based on the maximum amount I told them I could comfortably pay every month. It took me a year and a half, but I paid everything off.
FWIW, $18,000 is alot of money to you and me, but it's hardly the largest amount the IRS has tried to collect. I know someone who owed in excess of $60,000 after not filing for seven years - they hired a tax attorney who negotiated that figure down by $20,000. But they now have to pay $800 a month directly out of their paycheck and had to pay the tax attorney $4000.
Deal with this now because it will only get more unmanageable as time passes. Good luck.
posted by TryTheTilapia at 8:54 AM on June 12, 2007
"Registered Agent" -- these are effectively lawyers
No, they are not lawyers, and they are not effectively lawyers. They are just people who have studied the tax laws and passed a test. The hierarchy starts with them, ascends through CPAs and ends in Tax Attornies. For something this simple a registered agent should be fine. They can instruct you on what to file, help you maximize deductions and accompany you to any interviews if necessary (although I can't see how you will need an interview to solve this simple dilema).
posted by caddis at 9:14 AM on June 12, 2007 [1 favorite]
No, they are not lawyers, and they are not effectively lawyers. They are just people who have studied the tax laws and passed a test. The hierarchy starts with them, ascends through CPAs and ends in Tax Attornies. For something this simple a registered agent should be fine. They can instruct you on what to file, help you maximize deductions and accompany you to any interviews if necessary (although I can't see how you will need an interview to solve this simple dilema).
posted by caddis at 9:14 AM on June 12, 2007 [1 favorite]
"It's not illegal to fail to pay taxes..."
If willful, it most certainly IS illegal to fail to pay taxes, even if you file. See 26 U.S.C. 7203.
I'm a criminal defense attorney, by the way.
posted by mikeand1 at 11:14 AM on June 12, 2007
If willful, it most certainly IS illegal to fail to pay taxes, even if you file. See 26 U.S.C. 7203.
I'm a criminal defense attorney, by the way.
posted by mikeand1 at 11:14 AM on June 12, 2007
"fail to pay" is different than "willful neglect to pay", I'll note. But let's not argue semantics.
posted by Merdryn at 7:30 PM on June 12, 2007
posted by Merdryn at 7:30 PM on June 12, 2007
This thread is closed to new comments.
I would contact a tax advisor of some sort. Somebody at H&R Block should be able to tell you what to do. But you will have to file returns for those years, AFAIK.
posted by Koko at 7:19 AM on June 12, 2007