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Ask HN: Owe over $100k US backtaxes. Not sure what to do.

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Re: Ask HN: Owe over $100k US backtaxes. Not sure what to do.

#31

Similar spot here. 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 onli…

Is there a statute of limitations on not filing? E.g. if you forgot to file a decade ago, and nobody ever came after you, is it better to come clean or let sleeping dogs lie?

A. I don't think so, and if there were it would be a very long time.

B. I don't think this is the thing the IRS forgets about anyway.

Re: Ask HN: Owe over $100k US backtaxes. Not sure what to do.

#33
Follow up comment:

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.

Re: Ask HN: Owe over $100k US backtaxes. Not sure what to do.

#34

Similar spot here. 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 onli…

Why did I get a down vote for responding with the link that he was looking for???? http://www.irs.gov/Individuals/Offer-in-Compromise-1

There is really no point in complaining about downvotes. Maybe someone misclicked.

Re: Ask HN: Owe over $100k US backtaxes. Not sure what to do.

#35

Follow up comment: 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 t…

For those wondering why the website isn't working, the URL is: http://www.johnknight-ea.com/home.html

Re: Ask HN: Owe over $100k US backtaxes. Not sure what to do.

#36
post #2

File for bankruptcy?

Possibly. Probably not. That'll only help if the tax debt is > 2 years old. Some of it might be. However, not filing on time will probably make the tax debt non-dischargable.

Since 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.

Re: Ask HN: Owe over $100k US backtaxes. Not sure what to do.

#37
post #35

Follow up comment: 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 t…

For those wondering why the website isn't working, the URL is: http://www.johnknight-ea.com/home.html

Thanks. I fail at Internet today, I guess. :-)

Re: Ask HN: Owe over $100k US backtaxes. Not sure what to do.

#38

>but basically the IRS wants all my after tax earnings for 5 years. 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.

I might get backlash for this advice, but If you are considering bankruptcy, you might want to first consider quitting any job that is providing you income and going on unemployment. Once you have done that for a while, go ahead and take a look at this: http://www.irs.gov/Individuals/Offer-in-Compromise-1 If you are unable to legitimately pay (not working and unable to find work by being on unemployment) you will be…

Depending on where you live, you might have to wait six months to a year to go on employment after you quit a job or are fired for cause, as opposed to being laid off.

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.

Re: Ask HN: Owe over $100k US backtaxes. Not sure what to do.

#39
My regular tax preparer is an Enrolled Agent, and I can heartily recommend him. He helped me clean up some old tax messes that I'd made; he's very smart, very knowledgeable, and very much not cookie-cutter.

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.

Re: Ask HN: Owe over $100k US backtaxes. Not sure what to do.

#40

Similar spot here. 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 onli…

Is there a statute of limitations on not filing? E.g. if you forgot to file a decade ago, and nobody ever came after you, is it better to come clean or let sleeping dogs lie?

I don't think there is a statue of limitations for the debt, but there might be for failure to file each years. Best I understand it, they could throw you in jail for "hiding", but they can only come and take everything you own for filing but failing to pay.

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.

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