my friend made $50,000 in 2005 and over $100,000 in 2006 so far as an independent contractor (1099-misc). she did not file for 2005 income and believes she can get away with not paying as much as she owes for 2005 and will owe for 2006 by settleing with the IRS when and if they contact her. i want to give her some advice on this but do not want to scare her un-neededily. if she made this amount ($100,000) in 2006 so far i estimate she would owe almost $40,000 in taxes. she says she has $30,000 in savings but will get rid of it before the IRS contacts her and then will settle for a lesser amount. (maybe use the $ to buy a car, which she believes the IRS can't confiscate if it is her only means of transportation). is this true? why hasn't the IRS contacted her about the $50,000 she made last year (1099-MISC). any advice? thank you.
2006-11-30 08:05:53 · 8 answers · asked by john b 1 in Business & Finance ➔ Taxes ➔ United States
The IRS can be slow but when they finally catch up with your friend, if she is doing the things you say she is, she will probably end up in jail, with all her assets confiscated. Yes, they will confiscate her car, her home, anything she has of value.
It is a federal offense to not pay your income taxes. The sooner she gets things straightened out, the better. And it will be much better if she voluntarily tries to set things right than if the IRS comes after her.
Use every scare tactic you can. It still will not match the reality of what the IRS can do. Do you know that the way the government has caught a number of major crime figures is on tax evasion - not the many murders and other crimes they have committed?
Your friend may get away with it for a while, but the chances of her getting away with it forever are very limited. It is much better to face the music now and get it over with than to wait for the IRS to catch her - they will NOT be merciful.
2006-11-30 08:12:23 · answer #1 · answered by dreamweaver.629ok 3 · 1⤊ 0⤋
The short answer is yes. As a minimum, you are required to file, even if you owe nothing. If you're behind, they will add penatlies.
Settlements usually require an attorney,
If they have no specific numbers to go by, they use your "lifstyle," and compare it to the income of similar households.
Unllike the bankrupcy court, the IRS can confiscate anything they damn well please.
The IRS may wait just so they can maximize the penalities.
The best approach is to put the money into IRAs. Also, being an independent contractor makes all sorts of things, like transportation, work related magazines, home office expenses tax deductible. Mortgage interst and property taxes are always deductible.
My suggestion is to get all back copies of TurboTax Premium (tax deductible) and go through each year's income and deductions, and see where that puts her.
After that, unless she is REALLY lucky, or likes to gamble, she should start shopping for a tax attorney.
2006-11-30 08:28:30 · answer #2 · answered by bata4689 4 · 1⤊ 0⤋
The company I work for as Controller uses independent sales agents and issues 1099's for their commission payments. For the past 4 months, I have been sending the IRS 100% of the commission due to one of our agents as part of a garnishment for back taxes, penalties and interest. The penalties and interest amount to nearly 50% of the tax that was owed. There is no statute of limitations where fraud is involved in tax matters and this person is being levied for tax years between 1994 to 2002. This guy doesn't care any more because he is 82 years old, but he will never see another dime from us because the IRS made his levy permanent at 100% of his net.
Tell your friend about that!
2006-11-30 08:51:43 · answer #3 · answered by Andreas 3 · 3⤊ 0⤋
For starters everyone has to pay taxes. Independent contractors (1099-MISC) more so because they have to pay social security and medicare taxes(the Self employment tax).
Secondly, the IRS is about 2 years behind in auditing, so your friend will be contacted soon.
Thirdly, the IRS will go after any asset in the event the case reaches a collection agent.
2006-11-30 08:12:04 · answer #4 · answered by piths77 1 · 3⤊ 0⤋
Yes, she does have to pay taxes. All independent contractors do. The IRS has not audited her and that is why she is still free. They will confiscate anything that is an asset, even your house. They don't care. If you owe them money, you either pay or go to prison. It is not a joke.
2006-11-30 08:10:42 · answer #5 · answered by Nep-Tunes 6 · 2⤊ 0⤋
She is going to be in for a world of hurt in the future. She is not only looking at the taxes but, failure to file penalties, failure to pay penalties, and interest.
Yes, they can seize the car and pretty much anything else.
As stated earlier, there is not a statue of limitations on failure to file or fraud.
On the bright, some IRS Agent is going to be in for a nice promotion when they come across her.
2006-11-30 09:09:12 · answer #6 · answered by Wayne Z 7 · 1⤊ 0⤋
Expect an interest charge for filing late.
Why should the IRS settle with someone who deliberately did not file? Perhaps they will garnish her future income.
2006-11-30 08:08:46 · answer #7 · answered by fcas80 7 · 1⤊ 0⤋
they will catch up with her, it normally takes about 3 years , then they hit you with interest on all that you owed. I wouldnt want to be her
2006-11-30 08:08:46 · answer #8 · answered by zarem 3 · 1⤊ 0⤋