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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.

#41

Post by trustfundbaby »

So very sorry my man, I had the same thing happen to me, so I COMPLETELY understand what you are going through.

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.

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

#42

Post by patio11 »

Stupid question, but bear with me: have you filed your taxes correctly now? There are CPAs and there are CPAs. If you don't have someone wise in the ways of net commerce, find someone who is to give you a second opinion. Mine consistently finds me a tens of thousands of dollars every year versus equally valid but less advantageous ways of filing a return with the same underlying economic facts. (e.g. I've used the Foreign Earned Income Exclusion since forever, but when I have a good year, taking the foreign tax credit and some provisions of the US/Japan tax treaty is more advantageous, even though that means I can't take the FEIE. This saved me low five figures one year.)

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.

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

#43

Post by claar »

Sorry to not contribute anything but a circle-jerk, but -- WOW, HN.

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.

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

#44

Post by hluska »

philiphodgen wrote: post #37
dewey wrote: post #35

Earlier quoted context omitted.

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. :-)

You took the time to write an extremely thorough and compassionate reply. I'm not trying to be argumentative, but I'd give you an A+ at internet!!

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

#45

Post by hluska »

Oculus wrote: post #8
philiphodgen wrote: post #5

Email me. Contact info in profile. The IRS cannot waive interest. That's the law. They can waive penalties but not just because. There has to be a reason. The IRS has procedures to follow. It's a bureaucracy. See if you can fit yourself in the rules. (The rule book is the Internal Revenue Manual and it is online). I will put you in touch with someone who is good at this. Appeal to authority: I am a tax lawyer.

This is why I love the HN community. HN can be a harsh bunch, but I'm in awe how whenever a member needs help someone always step up to the plate.

I was just thinking that exact same thing. How many places are there on the entire planet where you have access to this many compassionate, intelligent people with bonafide expertise??

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

#47

Post by CocaKoala »

smartician wrote: post #24
bad_decisions wrote: post #18

Earlier quoted context omitted.

I made a multiple of that amount. I thought that the good times would last. They didn't. 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.

> 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 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.

I'm inclined to agree with this comment. Saying "The IRS wants all my after-tax income" is a very different statement from "The IRS gave me a payment plan that allows me to pay an expensive rent and basic living expenses while also paying off my debt in five years". Living frugally and paying down debt might be uncomfortable, but it's not unusual and is fairly well understood. If you can move to a different area, you can allot more money for your living expenses.

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

#48

Post by gamblor956 »

temp4009 wrote: post #23
DanielBMarkham wrote: post #15

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?

There is a statute of limitations for the IRS to audit you on a properly filed return (3-6 years, depending on the specific return). However, there is no statute of limitations for imposing back taxes/penalties/interest on income that was never reported.

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.

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