Help with taxes and late payment penalties?

Question

I just received a letter from the IRS claiming that I owe over $10,000 for failing to file a tax return from the year 2000. I know, I know...unbelievably dumb. I agree. Suffice it say, I went through trying time personally and wasn't exactly sure I was going to be around in another year or two for it to make a difference.

I've picked up the pieces of my life. I'm still very much struggling financially but at least want to stay in the game and get back on track. I don't know, though, that I can pay this fine with my limited financial resources (actually, it's absolutely 100% impossible). Can I plead for an installment plan? Can I get the interest removed? I know I don't deserve pity as I didn't act in good faith at the time, but I absolutely cannot just fork out 10 grand to put this to bed.

Answer 1

If you want to pay off your tax debt through an installment agreement, call the number shown on your bill. Since you owe less than $25,000, the process can be handled entirely by phone.

There is a one-time set-up fee that ranges from $43 to $105. If you are low income eligible (your income is below the poverty line) and you agree to have your monthly installment payments automatically deducted from a checking or savings account, the one time fee is $43.

If you are not low income eligible, the set up fee is $52 provided you agree to have your monthly payments automatically deducted from a checking or savings account.

If you are not low income eligible and do not agree to an automatic monthly deduction from your checking or savings account (or you don’t have a checking or savings account and will make your payments using money orders), the one time fee is $105.

The IRS representative will ask you how much you can afford per month. Do not overstate what you can pay because you cannot under any circumstances fail to make your monthly payment; however, when determining the amount you can pay per month take into consideration that interest and penalties will be added to the amount you owe each month (that is in addition to the interest and penalties you have accrued since the 2000 tax year). You can always pay more if you have it but you can never pay less. If you default on your Installment Agreement, the entire tax bill becomes due. At that point, your wages can be garnished and/or you can be criminally charged for failure to pay income tax.

You can submit a request (in writing) to have penalties waived. You have to provide an explanation that your failure to file your tax return was outside of your control. Ask the IRS representative (who you talk with on the phone) for the address to send your request. Even if you think they penalties won't be waived, there is no reason not to ask. If you request to waive the penalties is related to a health problem you were suffering in 2000 and 2001, include a statement from your physician with your request.

You can find more information at www.irs.gov

Answer 2

Getting an installment plan shouldn't be difficult. Getting the interest and penalties removed is unlikely. It's possible to do something called an Offer in Compromise that might cut down what you owe, but that's pretty complex so you'd be wise to work with a CPA or enrolled agent if you decide to try that - and very few such offers get approved.

Answer 3

Go to a professional tax adviser with all your documentation for that year. If you can file your 2000 return at this late date you may find that you don't owe as much as the IRS says you do.

You do need professional help and it is worth the fees. You may want to speak with an enrolled agent who has the credentials and usually the experience to help you. In your case you really want someones whose expertise is in taxes and not just in accounting that is why I recommend an enrolled agent.

Answer 4

Penalty is an cost. as quickly as you paid it, you not owe it. A criminal duty is something which you owe and characteristic not paid yet. in case your business enterprise is on money base then the only liabilities you have are unpaid costs, loans etc. set up the tax penalty the comparable way the taxes are setup.

Answer 5

Before you do what the previous poster recommends, get your W-2s together and file a correct return. You can not get interest removed and it is doubtful you have reasonable cause for waiving the penalties but you are going to have to file this return and any others that are missing if you want consideration from IRS.

Contact me through my profile if you want some additional guidance privately.