i have a tax question?

Question

last year 2006 i filed taxes on my w-2's but my husband and i both recieved a 1099 that we were going to file this year(i thought we had 3 years) Dont know much about taxes.....now they are saying we owe them over 11,000$ ( ifound out since i filed some income and not all then i cant file last years for this year) we live paycheck to paycheck ..we have NO extra money...what can we do?

Answer 1

If the CP2000 is correct, agree to it. I have absolutely no idea why you thought you could pick and choose which year to report the income. (The 3 year rule is for late filing a return and still claiming a refund.)

You can then set up an installment agreement with the IRS to pay this off at say $200-$400 a month.

If this is "too much" you can ask them to do a financial analysis to determine the amount you should be able to pay per month (if it comes out $500, though, you have to pay $500).

Answer 2

Sorry, you thought wrong about having 3 years, you have to file income for the year when it's received. Even if this was your only income, you'd have had to file it for 2006 if that's when you received it. If you are due a refund and don't file on time, you have 3 years to file and still get the refund, but that's not your situation.

The amount you'd owe for income tax would depend on your total income for the year. You'd also owe around 14% on your 1099 income to cover social security and medicare. And by now, you'll also owe penalties and interest since you didn't file these when you were supposed to. And I hate to bring this up, but if you live in a state with an income tax, they'll be looking at you also over the 1099 income.

If you had any deductible expenses connected with earning the money on the 1099's, you might be able to cut the amount you owe down. The IRS knows about the income side, but wouldn't know about any expenses. If you'll post again saying what type of work you did to earn the 1099 income, somebody might be able to help you with suggestions of possible deductions.

Finally, if you do end up owing a lot, and you probably will, but can't pay it all at once, the IRS will set up a payment plan for you.

Good luck.

Answer 3

You do NOT get to choose what year you report the 1099 form. If the form is a 2006 - 1099, then it MUST be on your 2006 taxes, whether you like it or not. You need to file an ammended 2006 tax form, and you may well owe the $11,000. Whatever you owe, they've probably added penalties and interest on the penalties.

If you did your own taxes, you should have used tax filing software as you are now in trouble with the IRS.

You CAN request a review and tell them the 1099 was lost when you filed your taxes, and you accidentally forgot about it. If they believe you, you're lucky. The $11,000 is probably including the penalties and interest on the penalties.

You can make payment arrangements and sometimes you can get them to excuse some of the penalties and interest IF you can convince them that you truly live paycheck to paycheck.

I suggest you call Legal Aide and see if they have any attorneys who deal with tax issues. They charge according to your ability to pay.

But you MUST repair your error in leaving a 2006 form 1099 OFF your 2006 taxes. You just do NOT get to pick and choose when you'll file it. The person who sent you the 1099 was required to send a copy to the IRS.

Answer 4

Get off of your duff and file an amended return PRONTO. You can take your business expenses against the income on the 1099s. The CP2000 letter from the IRS does NOT account for those so the amended return with the Schedule(s) C or C-EZ attached should lower your tax bill. Depending upon how much you have in legitimate business expenses to claim against the business income it could reduce the taxes, penalties, and interest significantly.

Once you have the correct amount of your debt worked out with the IRS, get on board for a payment plan and stay current with it.

I'm not sure who told you you had 3 years to claim that income but PLEASE do not take tax advice from that idiot ever again! All income is always claimed in the year that it is earned.

Answer 5

You do not state what the 1099s were for. If they were for payments for contract labor, you can deduct ordinary and necessary business expenses from the gross income. You, or a tax professional, should prepare Form 1040, Schedule C to calculate your profit.

If you are unable to pay in full now, IRS will set up an installment agreement with little fuss if you can pay the liability in full within five years. This would require a payment of about $250 per month plus paying your current taxes.

You will also owe state income tax on this income.