I need tax help. I am 21 with a tough problem, I fear Imprisonment!?

Question

I am 21 years old and have never filed taxes before. I've had a number of jobs in atleast 3 different states, over the past 3 years. Also on my 18th birthday I received an inheritance of more than $20,000. I went to College for only half a summer and mainly traveled. I am scared to file my taxes. I am afriad if I file I will have to pay ALOT of money, have my car repossessed or worse, Jail time. Any one have any idea what type of penelties I might be facing?

Answer 1

pay the money to have them done it sounds like this will be you best option as they may be able to find things that will even you out so you wont get anything back but might not owe either.

Answer 2

The inheritance shouldn't matter - you don't owe income tax on that.

For the rest, you'd be wise to gather together all the information you have, and take it to a CPA (NOT to H&R Block) and tell them your situation. If you don't have your W-2's for some of the jobs you've worked, at least make a list of the places you worked, and the times as closely as you can remember.

The CPA can work with you to figure out what you owe. It's probably not nearly as bad as you think. For some of the years you might not even owe anything, or could even have a refund coming.

The one thing that's sure is that if you don't do anything toward fixing this, it won't get better on its own - it'll get worse. If you do owe, then interest and penalties will just keep accumulating. An accountant can pull it all together, and let you know where you stand. If you owe money and can't pay it all at once, the IRS will set up a payment plan for you.

You're not going to go to jail if you get this taken care of quickly.

Answer 3

A couple of things. First, the states and the Feds are two different things. For right now, worry less about the states and more about the Feds (IRS).

Second, contact your city or state bar association and find out about low-cost and pro bono attorneys who do tax. You might find it clearly on the bar association website, or you can call them. Understand something - while you're nervous and think this is detrimental (and it IS, for a reason I'll get to), you WILL run into attorneys, even on the bar association service, who will say your problem is too small and you won't get a break from IRS anyway; but don't let it stop you, keep searching and you WILL find one.

Third, you DO need to file those tax returns, even if you don't have the money to pay. Line up an attorney first before you do this - but make this a priority. Your goal is something called an Offer in Compromise (OIC) - your attorney can advise on whether to file that with your returns or later... but VERY IMPORTANT is that you DO NOT use the term "Offer in Compromise" or "OIC" when talking with the IRS - it will make you seem like you're trying to game the system. In fact, only your attorney should talk with them anyway.

Fourth, back to the total dollars you might owe.... I said that many attorneys will look at a tax burden of, what, several thousand or even tens of thousands and tell you to buck up and make a payment plan for the full amount. They'll gently laugh you off - and it's because there actually are individuals who owe MILLIONS of dollars, and you're not worth some attorneys' time. BUT, as you rightly know, it's still serious for YOU - because the IRS is trolling for small-fish cases like yours who are not likely to have an attorney or know what to do. So you ARE right to be concerned... but you're not going to jail, either.

Fifth, about those three states, you'll want to check with your attorney about the best timing, but most likely you want to work on the IRS first. IRS doesn't care about the states and won't notify the states - BUT, you want to clean up and fly right.

Sixth, there are lots of books that talk about how to handle owing money to the IRS. Check your library or bookstore and read one or two to put your mind at ease.

Finally, there ARE penalties, for sure, but your lawyer can help you, depending on your particular circumstances. For the future, what you MUST start doing is ALWAYS file on time, starting with the ones due this coming April - the penalties come NOT from not paying as much as from not filing. The IRS *hates* that.

OK, I've gone on long enough. You have some work to do, but ASK FOR HELP. There are lawyers who specialize in this stuff - and DON'T call the 1-800 guys you see on TV... get a good attorney through your local bar association. It doesn't have to be wildly expensive - I worked with a smart, young attorney who had left a big firm and was trying to build a private practice, so he helped me so I could give him referrals later... just good business for him.

Good luck!

[added] Yes you DO owe tax on that inheritance, unless your benefactor filed it as a one-time payout per IRS rules, and even then it's capped at $10K.

Answer 4

Its probably not as bad as you think--- but DO hire someone to help you out. (Even just HR Block, or one of those--- doesn't have to be an expensive accountant.
Your inheritance might have no tax at all, depending on how it was set up by the person you inherited from. Also, even if they did not set it up in an A/B trust (which allows over $600,000 tax free/per person) usually all taxes are paid out of the estate before distribution to the heirs. Chances are you have nothing to worry over.
Believe me, it is much worse to have this hanging over your head than finding out how much (if any) you owe--- The only people who go to jail are BIG offenders-- and the IRS does not take your car or house (one per person).
Chances are, unless you were making really a lot of money in your jobs (and at 21 that is not likely) you will not owe much money, if any.
Good luck--- Trust me, this is not so bad as you fear.

Answer 5

I wouldnt worry too much, gather all the information from the past three years and bring it to a tax professional. Also, if the $20,000 received when you were 18 really was an inheritance than it isnt taxable to begin with so that you wont have to worry about, but you should still see an accountant as soon as possible to limit the penalties and interest if you owe money.

Answer 6

First of all, what you need to do is spend the money on a qualified tax preparer that can help you. You need to document all of your income from all of your jobs, the amount of taxes that were withheld etc, so you need to get copies of your W-2 forms from all your previous jobs. Once that is all together, your tax preparer can get you as many deductions as possible and will prepare all the forms for you for the past 3 years and get a grand total of the amount you owe. Once you get that total, then you send in what you can and then make payment arrangements with the IRS. You will not have your car repo'd or go to jail unless you continue to not file your taxes. I owed the IRS $10,000 in back taxes because I filed my taxes but could never pay what I owed and instead of making arrangments just let them take my tax returns for years, but then they decided they wanted more so I now only owe them another 700 bucks and they have never taken my car or sent me to jail. It will be okay, but you need to get on it and get your taxes filed, that is the only way they can send you to jail, is if you fail to file your taxes.

Answer 7

I think you are worrying unduly. If you made under

$7,800 in 2003
$7,950 in 2004
$8,200 in 2005
$8,450 in 2006

you owe no tax and are not required to file.

The $20,000 inheritance you received is not taxable income and does not appear anywhere on your tax returns. If you have any earnings from that inheritance, it is also income that you should add to your wages to determine if you are required to file.

For the years you are required to file, you can go to irs.gov and print out the forms you need. Or, go to a commercial tax preparer and have the returns done for those years. You will need your income documents like W2s, 1099s, and bank statements showing interest income.

If you owe back taxes for any of the years in question, there may be penalties and interest. The IRS can bill you for those amounts.

Answer 8

Well if you do nothing it is guaranteed that some or all of this will happen. You need to file for this and past years. Yes you might owe money but you also might get money back. Go to a tax professional and get it done.