IRS Debt....?

Question

Okay, so I have a friend that has not paid taxes for over 10 years. I am trying to help him straighten out his financial stuff. What can he do or how can he go about settling with the IRS, or get set up on a payment plan? He is a 10-99 employee.

I don't think he has kept up with any of his expenses/ income. He is paid cash and recieves a 1099 at the end of the year. So what if he has no records of anything, and he really wants to get all of this straightened out... What about those IRS debt relief hotlines advertised on TV? Are those any good?

Answer 1

If he's been getting 1099's, the income has been reported to the IRS. They would have no way of knowing what eligible expenses he would have that he could have deducted, so if he doesn't have records, he'll end up having to pay the taxes on the entire income.

This is going to be ugly. You say he hasn't paid taxes for over 10 years - I'm assuming he hasn't filed, either. If he has filed but just didn't pay, he can contact the IRS to set up a payment plan - but if that was the case, they'd have been calling him long ago. If he didn't file, he needs to file the returns, then either pay what he owes or work out a payment plan.

Working with a CPA could be a real good idea. Stay away from the companies you see on TV that offer to settle your IRS problems - he's got troubles enough already.

Lotsa luck.

Answer 2

Technically there is no such thing as a "1099 employee". The terms "1099" and "employee" are mutually exclusive.

First of all, the IRS will not accept and any settlement offers if he does not have all his returns current. So, get everything through 2006 filed ASAP. If you use a tax professional, it will be a little expensive. Independent Contractors file using a Schedule C and a 1040 with a Schedule C can run $200-$700 per year depending on the difficulty and the preparer.

Settlement offers with IRS are call "Offers in Compromise". They are very time consuming. They are based on ability to pay, not willingness to pay. What a taxpayer is able to pay and what the IRS believes they are able to pay seem to be two different things. The IRS has up to 2 years to decide on an offer and they say "No" about 85% of the time.
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Do not call one of the firms that advertises on TV or radio!!! Find a local CPA or EA.

Answer 3

He needs a lawyer that specialize in tax filings. They will be able to get copies of the 1099s and see what the government expects and also be able to negotiate an "offer and compromise", or a payment plan, or a possible bankruptcy to relieve some or all of the date.

Answer 4

Why don't you just go and give a cactus a big hug? It will be less painful. Here goes. If he has not filed returns and the IRS has done it for him he might look at the OFFER IN COMPROMISE program. If he has not filed any returns he will have to go to the IRS.GOV site and download all the necessary forms for each year of the ten year period and complete them; using his records of income and expenses. If you live in a state with state income tax you will have to do likewise with state tax forms for each of the ten years involved. You might also consider shopping around for a different friend.