How should a person approach the IRS when oweing them lots of money and after failing to file for 7 years?

Question

I have a friend who has not filed taxes in several years and owes the IRS a lot of back taxes he'll never ever be able to pay. He'd like to approach them and reach some kind of a settlement but he is afraid to do it and wishes for advise on how to approach them in the right way?? Any clue? Or tips?

Answer 1

He needs a lawyer. A real one, not the ones that advertise on TV. A lawyer will cost money, but it will keep him out of jail.
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Answer 2

A lot of people are seeing a 1-2 week delay when comparing the WMR date to the refund cycle chart. Most refunds are sent earlier than the WMR date but the IRS always shows the last possible date. The IRS simply has more returns in the first 2-3 weeks of e-file than what they can process so there's a back log. They'll work through it pretty quickly. It has nothing to do with where you filed. Its pure luck of the draw regarding when the IRS gets to your return but they DO prioritize by when it was filed. Your return is in a big group with millions of returns submitted in the window of the 17 to 18th. You will be processed before returns submitted on the 19th or later, but within that group of 17-18 submissions its just luck regarding who gets processed first.

Answer 3

He should simply file his delinquent returns and wait for the bills to come then deal with them then. I have a client who failed to file for 20 years and that is where we are with him. IRS has a long time policy of not conducting criminal investigations of persons who voluntarily file delinquent returns unless an investigation is already in progress. If an IRS special agent has not come out and read your friend his rights, he is still under the radar. IRS has plenty of other, probably better cases to work.

You do not necessarily need to have a representative you but the process of dealing with a large multi-year tax bill pretty intimidating if you haven't had any experience. To settle an account you have to file an "Offer in Compromise" ans offer an amount that IRS agrees represents the reasonable collection potential of the account (its jargon) and agree to make all payments of anything that is due for the next five years.

There are several tax resolution firms that advertise spectacular successes on cable TV but in real life nobody bats 1,000. I think their fees are outrageous and service often dubious. I have had a number of their cases end up on my desk. I am an enrolled agent, licensed by the Treasury Department and specialize in taxpayers who have large unpaid tax bills and handle these kinds of problems routinely. If you would like more information privately, you can email me though my profile.

Answer 4

I'm actually helping someone with a similar situation right now. However, she didn't file because she was in deep depression for 6 years (in and out of hospital) and has a letter from her doctor stating this. They were very good to work with her especially since she just turned 65. They even sent her copies of all her earnings for these past years so that we could start to prepare the returns. The paperwork was a nightmare to get everything together. They did offer to accept a settlement and she is now making payments. She approached them by saying that she knew that she needed to take care of this but had been scared. She admitted that she was negligent and they of course realized that they weren't going to be able to get blood out of a turnip. They did however make her empty any savings so she could pay them and also put a lien on her house. As long as you are willing to cooperate they wont press any charges but be prepared to make sacrifices to pay something. They are forgiving but only when you get to the point that you have exhausted all your resources to pay. If your friend is working, be prepared that they will be garnisheeing his wages and freezing his bank accounts.

Answer 5

Very contritely. Seriously, your friend is in a world of hurts, as he probably already knows. The IRS has the power to attach your home, any real estate, your personal property, your bank accounts, your stocks, your IRA, and your retirement accounts, if they choose to do so. All the same, it is better that he approach them, rather than waiting for them to catch up with him. Having been on the short end of a deal with the IRS, I would advise him to retain a law firm specializing in dealing with the IRS. It will cost him a lot, but it will be worth it. If he won't do that, then I would suggest contacting the IRS and telling them, "I owe back taxes, and I need to try to work out a payment plan" and just go from there. They will want every scrap of paper you can find, dating back to the time he stopped paying taxes....payroll stubs, bank statements, etc, etc. Without an attorney, he is in for a lot of grieve and stress.
Oh, and if he can't or doesn't ante up the records they demand, they will "estimate". Guess who comes out ahead?

Answer 6

Once all the tax returns are filed, your friend can complete form 9465 Installment agreement request and pay a USER FEE of $105.00, if he/she owes over $25,000 a form 433-F.Collection Information Statement, the Form 433-F requires attachment to be sent in, requested information is 3-months current bank statements, 3 months pay stubs etc. The balance owed will have to be paid off in 60 months.
Or can ask for Offer in Compromise (also requires to pay a fee)
All forms listed above can be downloaded from the IRS website and more information is available also on the website: www. irs.gov,or call 1-800-829-1040 for more information. If w-2 /1099 information is needed for any of the unfiled years your friend can call 1-800-829-1040 and it will be sent to him/her within 10 working days.
good luck.

Answer 7

The first thing to do is to get the returns filed. A settlement with the IRS is called an "Offer In Compromise" and the IRS will not even look at one if the person has outstanding returns.

Answer 8

He'd be wise to talk to a CPA or enrolled agent with experience in doing offers in compromise, and have that person deal with the IRS.

First he'll have to file the missing returns. Then he can file an offer in compromise, but filing the request does NOT mean that it gets accepted.

Answer 9

Before the IRS will even talk to him, he needs to file the missing returns and establish exactly how much he owes. Any attempt at doing anything without filing the missing returns will be fruitless; the IRS won't even talk to him.

Answer 10

Sounds like he should talk to a lawyer. That's what I would do.