What are the chances of me getting audited by the I.R.S.?

Question

For the last two years and some months, I worked as a self employed contractor. The company I worked for gave me a 1099 miscellaneous at the end of each tax year.

Well, at the end of the first year, I filed my taxes. I am still paying on them in monthly installments.

Well, I got my 2nd year's 1099 miscellaneous, and never filed my taxes. The deadline was in April 2007 of course. It is now July.

My income for each year was less than $17,000. I got ripped a new one when I filed my taxes the first year of this job.

I have never been audited before.

I no longer work for the same company, and will never get another 1099 miscelaneous from them. I am thinking about letting this go, and avoiding filing my taxes for the second year at all. I simply can't afford them. If you are considered self employed, you get such a huge tax bill it's unbelievable.

Does anyone have any idea, what are the chances of my getting audited for this?

I forgot to add, I am no longer self employed. I went to work for a different company in march 2007. My self employment ended in Octrober 2006, after which I was unemployed until March 2007.

Answer 1

You won't get audited unless you file. But you will get a demand letter because of the 1099 MISC. The problem is that the IRS will not take into consideration any expenses you may have had. I can not imagine how an independent contractor making only $17,000 could have gotten "ripped" for taxes. You need (and needed) help from a professional tax preparer. Find one that is open in your area and go see them. The longer you put it off the greater the penalty will be.

Answer 2

This isn't good news - it won't exactly be an audit, but there's pretty much 100% chance that at some point, maybe a year or so out, you'll just get a bill from the IRS for the taxes on the 2006 1099 - plus penalties for not filing and for not paying, and interest. A copy of the 1099 you got was also sent to the IRS. Their computers match up the paperwork they get, and yours will kick out that it wasn't filed, and they'll just send you a bill.

This isn't going to just go away - and the longer you wait to file, or if you wait until they notify you, the more the penalties will add up.

The reason that your taxes are so high on 1099's is that you're seeing all of the social security and medicare at once, at the end of the year, if you didn't file quarterly estimated returns. If you're an employee, 1/2 of your total ss and medicare payments are deducted from your paychecks and the employer pays the other half. If you are self-employed, then YOU are the employer so you pay both halves.

Answer 3

Since the income was reported, the odds of the IRS hitting you with an assessment for the 2006 tax year are virtually 100%. It WILL happen. It might be 12 to 18 months after the filing deadline, or it could be next week. There's NO way to predict, but if I were going to take a wild guess I'd say that since you are already on their radar screen it will probably be sooner than later.

You should have been making quarterly estimated tax payments using Form 1040-ES all along. This would have avoided the massive bill at tax time. If you took the time to research this on the IRS website you would be aware of this. Unfortunately you chose to ignore the beast and now it is coming home to roost. And bite. Rather nastily at that.

Since you have not filed yet, the penalties for late filing are continuing to add up daily. Get that return filed ASAP! At least that will stop the late filing penalties. You'll still be facing penalties and interest for late payment but you need to minimize the damage quickly and you do that by filing your 2006 return IMMEDIATELY. As in as soon as you finish reading this post!

I'll argue the point with a couple of posters on your tax liability though. With $17k in income there's going to be $2,600 in self-employment taxes alone plus up to another $1,000 for income tax plus any penalties and interest as well as any state taxes if your state levies an income tax. That's a lot at your income level and it will continue to climb until you get the return filed and get it paid.

Answer 4

Chance of audit? 0-5%
Chance that you will get a bill from the IRS anyway? 100%

If you do not file, the IRS will generate a return for you using the information that they have. Remember, they have a copy of the 1099 also. They will tax the 1099 without regards to deductions. The tax number that they come up with will probably be higher than if you filed on your own.

Get the return filed. The failure to pay and failure to file penalties are per month so, the sooner you get this done, the lower the final bill will be.

Answer 5

received a notice dated 4/16/07 for my 2004 taxes, which was the only year in my career i happened to make any money as an outside sales rep for an advertising company.

i had quit the company and moved....my '04 records were in a box which got very, very, very wet, so the guy helping me moved conveniently threw them away.

so far it's cost $135 to have the bank reproduce the checks, and i'll never be able to prove the charitable donations, cash expenses.....

luckily, i have a friend who is a cpa, he said to let him take over from here.

otherwise, i'd have to find someone to do this for me, and i'm currently unemployed and wondering where my next meal is coming from, might as well who i can beg to help make a car payment.

get professional advise!!!

Answer 6

if you only made 17k working for yourself you shouldnt have to pay much if any for taxes If you dont file and they reported that income to the irs then irs will eventually come after you.

let me refer you to a website that can help
www.cnbtaxservices.com