JK Harris is a tax representation firm and our only task is to help you through your tax difficulties. This is the page where you can ask general — not personal — tax questions. We will answer your questions as thoroughly as possible.
Please review the Guidelines Page for further information. If your question is personal or too detailed to answer in this forum, you can contact us and one our of consultants will contact you directly.
Thank you for participating in this Tax Q & A; your questions will help others as well.
my student loan defaulted i need help, collection agengy is about to do a wage garnishment i can’t even dream to pay for
I am currently unemployeed and need to close out my roth 401K retirement plan in order to make ends meet, but I am afraid that the penalties and taxes are not worth it. My account is currently valued at about $4,962 which is not a lot of money but it will help pay some outstanding bills. Is there a way to figure what the total penalties and taxes will be if I decide to close my roth 401K?
If I settle my back taxes, will I be able to pay off the settlement in payments, or does it all have to be paid in full? Also, does settling with the IRS affect my future tax returns?
are you allowed to claim medical supplies that you have purchased not through insurance if you have the receipts?
My wife owes back taxes with interest and penalties from 1996 to 2002. Does the Statute of Limitation apply to taxes in the 1996 to 1999 time frame?
I am about to loose my home due to forclosure. I understand that I may be liable for “income tax” on the unpaid loan. I am unemployed and without funds other than Social Security soon. This seems to be a hopless situation as I would not be able to pay taxes on my defaulted home loan as income.
Thank you
yes my question is my husband and i were married in 2000 and he had his own company well after we were married he wanted me to put the company in my name because of some issues he was going through with his ex. well i did so and he and the crew worked all the jobs the problem is we are now seperated have been since 2007 and im stuck with all the taxes what can i do he says they are all on me that he has nothing to do with it anymore.but before we seperated he had told the contractors to put everything back into his name.now this has completely messed up my credit are filing taxes.they take all my refund and he gets to keep his thats messed up.please help i have been laid off and this would really come in handle for me and my kids.
UNMARRIED COUPLE LIVING TOGETHER. MALE ONLY ONE WORK OUTSIDE OF HOME PAYS 75% OF BILLS. CAN HE CLAIM FEMALE AND HER CHILD AND/OR HEAD OF HOUSEHOLD.
STEPHANIE
i have set up a payment plan with irs and have been paying for the past 2 years. They have applied any refunds and stimulas money i was to recieve also. this has gotten my debt down from 15000 to 10000 but because of the penalties and interest i cant see a end in sight anytime soon. Is there something you can do about the interest and penalties. I own investment property so does this disqualify me?
Do i have to file income taxes if I made $700. in the year 2008.
I am 41 years old.
I had an scholarship then lost it because my grades fell to low. They allowed me to pay it back to my school and paid the tuition expenses without interest the year after I graduated. Can I claim a lifetime or hope credit or something since it is tuition cost?
Hi. If a rental property is foreclosed on, does the owner have to pay taxes on the difference between what was owed and the value? How would the IRS expect the person to be able to pay that sum if they couldn’t afford the property to begin with? Also, shouldn’t this information have been disclosed to the property owner prior to the foreclosure?
lived in Nevada for 14 years where there was no state or local taxes was transfered to Carlisle Pa and now live in Mechanicsburg where we rent a apartment. We moved here Jan 1 2007 I have always done my taxes with turbo tax with no problems paying now PA state and federal. On my w2 there is no local withheld. As none was with held in Reno nv. My wife got a part time job working 3 hours a day in 2008 and when she got her w2 I noticed there is local withheld and now I suspect I owe a whole lot for two years and penalties. I donot who to go to and am in Bankruptcy where 600.00 a month is garnished and I have 3 years 6 month left to go on it. It is just me and my wife here we have no family here. I know I will need some help. Is this my employers fault I work for a trucking Co. and I am the only person here from the company the rest are over the road drivers based or living in other states. Note My state and Federal are ok. Its the Local Can you help
Mr. Jackson,
Thank you for your question. Unfortunately, loan holders of defaulted student loans have the authorization from the Department of Education to process an Administrative Wage Garnishment up to 15 percent. Prior to the garnishment taking place, you can set up an approved payment arrangement. Also, an attempt to lift an established garnishment can be requested by filling out a “Request for Hearing” application and submitting the completed form to the loan holder.
Carla,
Thank you for your question. Not everyone was eligible to receive last year’s stimulus rebate. In order to be eligible, you or your family had to have at least $3,000 of qualifying income. To learn more about the eligibility requirements, you can visit http://www.irs.gov/newsroom/article/0,,id=177937,00.html.
Shebie,
Thank you for your question. The basic rule(s) of thumb is as follows: the taxable amount is going to be the difference between the total distributions (this year and all prior years) minus all Roth contributions made. That taxable portion is the amount that may be subject to penalties.
You can contact the IRS and set up an Installment Agreement to make set monthly payments on your balance owed. As for your future tax returns, if you are talking about receiving refunds, the IRS will keep your refund and put it towards your balance owed until that balance is paid in full.
After careful considerations I left my state job of 13 years and cashed in my retirement to pay off some debts and work part time so I could help care for my 2 grandsons while my daughter finished getting her teaching degree.I had federal taxes taken out along with the penalties.Now I’m being told I’m being penalized again,resulting in owing 8,630.00 along with almost 6,000.00 to state.I just finished paying back 13,000.00 in back taxes last year due to a mistake made by personel at my employers and my own negligience to check on my deductions.I have not contacted anyone as of yet to see if there is anything I can do to help reduce any of this amount.Any info would be appreciated.I reside in Ohio.Thanks, Debra Marsee
I just found out that my checking account is levy by the IRS.Can they garnish my pay checks too? Or can they take all of my income?
If I had 10% additional held back on top of the 20%penalty fee from an early withdraw of my traditional retirement plan to avoid owing the IRS this year why am I being taxed again?
My husband and I are currently seperated. My husband has to file married filing seperatly because we are not legally seperated. He is itemizing deductions on his tax return.
I would like to file seperatly as well, Can I claim head of houshold, I do have a qualifying child.
I made the mistake of withdrawling 115K from my 401K plan…now i owe the feds 20K and the state 9K…which i dont have…what are my options?
If my tax preparer fraudently filed my taxes as if I had a dependent, and kept the refund what can I do? IRS now wants money plus penalty and I never got any. The police won’t do anything. Can I get any help for dealing with IRS in this case?
My husband owes back child support (which he is slowly paying back with his present child support payment)….we are buying a house (it will be in my name only_…will they garnish the first time homebuyer credit that we hope to get? I called the IRS and they were not sure/
Mr. or Ms. Greenwell,
Thank you for your question. Depending on the type of supplies you are referring to, you can in fact claim many medical supplies you pay for out of pocket. To do this, you will have to itemize on your tax return using the Schedule A. And you can only deduct the amount by which your total medical care expenses for the year exceed 7.5 percent of your Adjusted Gross Income. For additional information on this topic, you can visit http://www.irs.gov.
Mr. Siebers,
Thank you for your question. The Statute for a tax liability is 10 from the last time tax was assessed on each individual year. For instance, if the tax return was filed and processed by the IRS in March of 1996 but additional tax was assessed on that return in June of 2000, the Statute would run out in June of 2010. If no additional tax was assessed on the 1996 return, the Statute would have run out in March of 2006. I hope this answers your question.
W. Kondik,
Thank you for your question. There really is no simple answer to your question as there are many factors to consider, including the date the foreclosure actually occurred or is going to occur. The Mortgage Forgiveness Debt Relief Act of 2007 applies to debt forgiven in calendar years 2007 through 2012. I would suggest seeking guidance from a professional who can give you guidance in accordance with your specific circumstances.
Ms. Sills,
Thank you for your question. There are several issues we may be dealing with here. The first is whether the tax liabilities are for income tax or payroll taxes? Second, how old are the tax liabilities? If these are income tax liabilities, one option may be an Offer in Compromise on the basis of Doubt as to Liability. If the liabilities are due to payroll taxes, it can be a bit more cumbersome. I would strongly advise you seek the guidance of a tax professional who can help you with your specific situation.
Good Morning:
My husband moved to Canada in 2000 and has been up here since that time. We have just found out that even though he owns nothing in the US anymore, he works and pays taxes in Canada, he is obligated to file income tax returns each year in the US. If this is the case and that is part one of my question, can we do that from up here having to go back so many years? Do you have staff to assist us from up here to do this? Any comment would be appreciated. Thank you.
Dawn,
Thank you for your question. If you are self-employed, you need to file a return. If you are not self-employed, it is not required having only made $700.
Stephanie,
Thank you for your question. If the female does not have reportable income, the male can claim the female and child if he can prove the female and child lived with him for at least half of the year and he can file Head of Household if he can prove he paid more than half the cost of keeping up the home for the year.
Reggie,
Thank you for your question. There are two possible options you have with the IRS. The first is to request an Abatement of Penalties from the IRS. However, there are only six reasons under which the IRS will abate penalties:
1. Death or serious illness of the taxpayer or a death or serious illness in his/her immediate family. In the case of a corporation, estate, trust, etc., the death or serious illness must have been of an individual having sole authority to execute the return or make the deposit or payment or a member of such individual’s immediate family.
2. In the case of the unavoidable absence of the taxpayer, a corporation, estate, trust, etc., the absence must have been of an individual having sole authority to execute the return or make the deposit or payment.
3. Destruction by fire or other casualty of the taxpayer’s place of business or business records.
4. Taxpayer was unable to determine amount of deposit or tax due for reasons beyond the taxpayer’s control. However, this cause will be acceptable for taxpayer’s required to make deposits or payments of trust fund taxes only when the taxpayer was unable to have access to his/her own records.
5. The facts indicate that the taxpayer’s ability to make deposits or payments has been materially impaired by civil disturbances.
6. Lack of funds is an acceptable reasonable cause for failure to pay any tax or make a deposit under the Federal Tax Deposit System only when a taxpayer can demonstrate the lack of funds occurred despite the exercise of ordinary business care and prudence.
The other option you may have would be an Offer in Compromise to negotiate your IRS debt to something you can actually afford.
I MADE 3600.00 IN YARDSALES DO I NEED TO FILE. IF SO WOULD I QUALIFY FOR THE STIMULUS CHECK? WHAT FORM WOULD I USE IF I DO HAVE TO FILE? WHAT WOULD I NEED TO SEND IN FOR FOR THE AMOUNT OF MONEY I MADE?
My husband and his ex-wife owe back taxes for 2003 after being audited. This is a result of some very fraudulant things that she included on the return. We filed for Innocent Spouse relief and included many instances of proof of fraud commited by his ex-wife. The Innocent Spouse relief was denied and we then filed an Offer in Compromise, which was also denied. The problem is that we are making monthly payments and my husband’s refunds are withheld, and she hasn’t paid a dime during this whole thing, which has been going on for about 4 years now. The IRS says that we would have to default in order for them to go after her and then they would garnish both their wages. We obviously don’t want to do that. Is there any way to encourage the IRS to go after her, too? We don’t know if she is filing taxes or if she received a stimulus payment, because, of course, we can’t access her account. Thank you.
R. Malatt,
Thank you for your question. The Hope Credit applies for the first two year of post-secondary education and is credited for tuition and fees paid during the tax year your are filing. The Lifetime Learning Credit also applies to tuition and fees paid during the year you are claiming. If you did not pay tuition or fees in 2008, you cannot claim either credit on your 2008 Tax Return.
We owed the IRS over 20,000.00 for the tax year of 2005. (My father passed and left me some money) We have made payments to them, they have kept refunds for 06, 07. We HAVE NOT filed for this year due to the fact I think we owe more money!!! They have took money out of my checking account and my son’s account that my name was on. Now they are wage garnishment my husband check for 100% until the last 4,000.00 dollars are paid. (He is a contract employee) Is there anything that can be done about the wage garnishment? We are just about at the end of the rope with them.
If I live in one state and work in another where should I file my state taxes
Susan,
Thank you for your question. Because this is a rental property, you may be responsible for Capital Gains, depending on your adjusted basis in the property. You may not be responsible for the debt if 1) you filed bankruptcy and included this debt and was discharged; or 2) you are insolvent at the time the cancellation was incurred. If you abandoned the property, the lender is required to send you Form 1099-A (abandonment). Form 1099-C (cancellation of debt) is issued after property is sold (or not). The report should list the amount of the debt cancelled and the fair market value. For more detailed information, you can refer to Publication 4681 on the IRS website, http://www.irs.gov.
Mr. Leonard,
Thank you for your question. The local tax liability is not dischargeable in bankruptcy. You might want to consult your bankruptcy attorney to see if the petition can be modified to include the local tax liability. You may also want to make voluntary payments towards the local liability, as interest will continue to accrue. In many cases enforced collection on debt does not occur while in bankruptcy, but once outside the court’s jurisdiction, accommodations can be made with creditors.
Bill,
Thank you for your question. The IRS can garnish your pay check as well as levy your bank account. The wage garnishment would be a percentage, not the entire check, based on your W-4 withholdings.
Art,
Thank you for your question. Depending on your financial situation, you may qualify for an Offer in Compromise, but the IRS will want to know exactly what you did with the funds you withdrew from your 401k. The other option would be a monthly Installment Agreement. With the federal liability under $25,000, you would likely not have to provide the IRS with financials, but that is for them to decide.
Melissa,
Thank you for your question. Unfortunately, you can only file Head of Household if your are unmarried or considered unmarried by the IRS on the last day of the tax year you are filing. You would have to file Married Filing Separate.
In 2006 I move to take a job. THe company paid the company as I didn’t have the money to cover it and then added it to line 1 and 3 on my W2. They did not put anything on line 12.
Now the IRS is questioning the charge and is wanting to charge me for the move. If I get an amended return from the employer, will that help?
Debra,
Thank you for your questions. Assuming the traditional retirement plan is the Ohio Public Employee Retirement System (OPERS) and not the State Teach Retirement program, generally there is a 10 percent penalty for early distribution of funds if you are not at least 59 1/2 years old at the time of the distribution. OPERS requires that 20 percent of funds be withheld from a distribution to pay penalties and income tax. However, depending on the amount of money distributed and whether a penalty applies or not, 20 percent withholding may not have been enough to cover all penalties and taxes.
Ms. Krech,
Thank you for your question. Yes, your husband, being a U.S. citizen means that worldwide income generally is subject tp U.S. income tax, regardless of where he is living. As such, he is subject to the same income tax filing requirements. If your husband qualifies, he can file his returns electronically with e-file. Or, being that he is living in Canada, he can file all of his paper returns with the following:
Department of the Treasury
Internal Revenue Service Center
Austin, TX 73301-0215
Carol,
Thank you for your question. Unfortunately, when the IRS detects a false return, the taxpayer, not the tax preparer, must pay the additional taxes and interest and may also be subject to penalties. The IRS Return Preparer Program focuses on enhancing compliance in the return preparer community by investigating and referring criminal activity by return preparers to the Department of Justice for prosecution and/or asserting appropriate civil penalties against unscrupulous return preparers.
If you suspect tax fraud or know of an abusive return preparer, you can report this activity using IRS Form 3949-A, Information Referral. You can download Form 3949-A from the Web site at http://www.irs.gov or call 1-800-829-3676 to order by mail. Send the completed form, or a letter detailing the alleged fraudulent activity, to Internal Revenue Service, Fresno, CA 93888. You should include specific information about who you are reporting, the activity you are reporting and how you became aware of it, when the alleged violation took place, the amount of money involved and any other information that might be helpful to an investigation. Although you are not required to identify yourself, it is helpful to do so. Your identity can be kept confidential. You may also be entitled to a reward.
An attorney can help by filing a separate civil suit against the preparer for damages incurred as a result of the activity. The result, however, will only be beneficial if properly proven or settled and the defendant is actually able to render a payment for any judgment awarded by a court.
Lori,
Thank you for your question. The First-time Homebuyers Credit is treated as a normal refund. What that means is if you file Married Filing Jointly, the credit will be applied against any outstanding balances for any back taxes and/or child support that is due. If you file Married Filing Separate, you would receive half of the credit ($4,000) and your husband’s half would be applied to his child support balance.
THIS IS A GENERAL QUESTION, NOT A COMMENT (I COULDN’T FIND WHERE TO SUBMIT A QUESTION)
Levies, Liens and Garnishments: Can you provide an idea of sequence/order or time line for these actions–and to the whole negotiation process? Does the signing of a repayment agreement come first, and then, if defaulted on, there come levies, liens, and garnishments? Which of these is the most serious? If you get as far as a levy on a bank account, can you regress to a repayment agreement or is this stage (levy) nonnegotiable? Is a garnishment a percentage of wages or benefits (such as SocSec) and what is the upper limit–15% Do you get a warning before a levy or lien is imposed? Thank you.
Todd,
Thank you for your question. There are no specific rules or laws that may help you, that I am aware of. However, if you are unable to pay these taxes, you may qualify for a Currently Not Collectible status or even an Offer in Compromise, depending on your financial situation.
Dan,
Thank you for your question. You will need to file in both the state you live in and the state you work in, unless one or both of those states do not have income taxes. The states with no income taxes are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, adn Wyoming.
Angela,
Thank you for your questions. Whether you would file or not depends on the “intent” of your yard sales. If you are buying items to sell at a yard sale in an anticipation of a profit, then you have a business and if you have net income of $400 or more, you would be required to file a return whether you owe any tax or not. If you are only selling personal items that have been bought over the years, you most likely are selling them at less than you purchased them for. This would result in a loss on the sale of personal property, which is not required to be reported on a tax return. If you were holding “on-going” yard sales as a hobby, you would be required to report the hobby income. Any expenses you incurred in generating this income could be deducted but only on Schedule A, Miscellaneous Deductions subject to two-percent of your Adjusted Gross Income.
You would use Form 1040 with a Schedule C if you were claiming Self Employment Income. If you were declaring the income as gain on the sale of personal property, you would still use Form 1040 but show each transaction on Schedule D under either short-term capital gains or long-term capital gains. Your holding period would determine which section your report each item under. If this income was merely cash flow from the sale of personal items at a loss, you would not file a return.
If you were declaring this income as Self Employment Income, you would need to send in an Estimated Tax Payment of $508, if you had no deductions to offset the $3,600 income. Or, you could pay this amount with your tax return when you file.
As for the Stimulus check, there is no check being issued this year. Instead the Stimulus is being given as a credit which is allowing taxpayers to take home larger paychecks throughout the year.
Carrie,
Thank you for your question. If your husband has the following information (where his ex-wife banks, works, gets sources of income, or has changed her name) available to him, he can provide it to the IRS and petition the IRS to also go after his former spouse. Because the liability is joint and several, the IRS has no mandatory duty that can be enforced. And, your husband always has the option of personally file a lawsuit against his ex-wife to try to collect the pro-rated share amount. For more information, you can check out Publication 971 on http://www.irs.gov for more options that may apply to your specific situation.
Janna,
Thank you for your question. Since you owe just $4,000, you can set up a guaranteed payment plan for $125 per month for 36 months, or if necessary, you can set up a streamline payment plan at $85 per month for 60 months. This may release the wage garnishment and prevent further enforcement actions as long as the payments are made on time.
The IRS is saying I owe $35k in back taxes for 2003. The mistaken came from my form employer submitting two W-2s. The former employer problem was corrected in 2005. Yet, the IRS says I owe $35K in back taxes for 2003. I submitted Form 4506 and $57 requesting copy of my tax return for 2003 (it was lost during move). The IRS sends me a blank Form 4506 and letter stating that “they were unable to provide any of the items requested” and “some are all of the products you requested were unavailable”. I received a check for the $57 today. What am I to do in this situation?
tax forms as I do not have I
If you can get a letter from the employer indicating there were duplicate W-2s filed, the options would be to either request an audit reconsideration or submit a Doubt as to Liability Offer in Compromise. Without the tax return or any of the documents showing the calculation of the liability, the process will not be an easy one. Bank statements from 2003 could also help to prove to the IRS you did not have the extra income in your bank accounts.
I have a friend who is offering the IRS 75,000 I am not really sure how much he owes, they are not excepting it and he is going through an accountant. The interest is killing him and now he fears they are going to start garnishing his wages. I guess my question is should he be going through the accountant or hire a firm like yours? I believe this is payroll tax related.
Ben,
Thank you for your question. It sounds like your new employer did not agree to pay your moving expenses as a fringe benefit to signing on with them. Thus, it would be considered more like a signing bonus because you did not have the money to pay for your move. This being the case, the new employer was correct in including the moving expense costs they paid on your behalf in your W-2. However, the new employer should have also included this same amount in box 5, as the payment is subject o Medicare Taxes as well as Income Taxes and Social Security Taxes.
And if you qualified to deduction them, you should have declared your moving expenses as a deduction on your tax return, which should have offset the income you had to report.
If you believe your employer agreed to pay for your move as a fringe benefit, you should contact your employer and ask for a corrected W-2 to remove the amount from boxes 1 and 3.
In 2008, my husband and I followed some advice from other co-workers to set our Federal w-4 witholdings to non-exempt during bonus time to receive a larger cash in hand bonus check. Well, we both forgot to change our status back for our Federal taxes to be withheld from our paychecks for the rest of the year, resulting in us now owing 15,000.00 (which we do not have, and yes, we have learned our lesson!). Our tax preparer told us to add additional $$ to be withheld via our w-4 which we did (me 30.00 a pay, my husband 50.00 a pay), and told us to also send a check to the IRS and ask for us to be set up on a payment plan. We wrote a check for 500.00 and sent a letter asking for a payment plan without offering an amount, and the IRS must have took the 500.00 payment we made as our agreed amount to pay monthly. We are struggling as it is, can we call and ask the IRS if we can reduce the montly payment to 300.00 or 400.00?
Lucinda,
Thank you for your question. The general rule for enforcement action normally depends on two things: 1) the amount of time since the tax was assessed, and 2) the dollar amount owed. Enforcement action will almost always take place when the amount owed is more than $5,000, as this is the threshold amount for filing liens. If a taxpayer contacts the IRS in a timely manner and arranges for the liability to be paid within six months, there is a good chance a lien or other enforcement won’t take place even when the amount is more than $5,000. For repayments that go beyond six months, the IRS may file a lien but no other enforcement action will take place as long as there is a valid Installment Agreement in place.
Bank levies can sometimes be negotiated when an Installment Agreement is immediately set up and the first payment is withheld. Wage levies or Social Security benefit levies may also be released with an Installment Agreement, Offer in Compromise or Currently Not Collectible status. Both 90 and 30-day letters are issued as a warning before a lien or levy action takes place, unless the government feels there is the jeopardy of assets being put out of its reach.
Can an IRS bank levy hold direct deposit social security checks if Iam a representative payee for a minor child?
during the 21 day hold of a checking account, can I do anything to get my money back. Can I contact the IRS or do I need to have someone else, or what can be done?
Samantha,
Thank you for your question. The best advice I can give is for your friend to seek the guidance of a tax expert, whether that be your friend’s accountant or a tax representation firm. But it should be someone who knows the processes and procedures of the IRS. I hope this helps.
Jackie,
Thank you for your question. You can always request a lower amount to be paid to the IRS, however, remember the IRS will have the final say. Since you owe less than $15,000 you should be able to set up a streamlined Installment Agreement to be paid over 60 months.
Do you handle those who owe back City taxes?
Kathy,
Thank you for your question. While the IRS may hold all funds in the account, the Social Security checks for a minor may be released under certain grounds. First, the Social Security payments for a minor child may be considered exempt property under IRC Section 6334. Second, the levy may be deemed as a “wrongful levy” whereby it improperly attaches to property belonging to a third party in which the taxpayer has no rights. In this instance, the IRC specifically authorizes release of wrongful levies. And finally, the levy may be deemed to create a hardship, and the IRS representative may release the funds. Please keep in mind, however, bank levies are extremely difficult to release, even with proper documentation. I hope this helps.
Brandi,
Thank you for your question. When the IRS levies a bank account, the bank is required to hold these funds for 21 days. At the end of the 21 days, the bank must remit the funds to the IRS. During those 21 days, however, an individual can work with the IRS to have funds in the account released from the levy before they are sent to the IRS. If a bank levy is issued, the individual needs to respond quickly. A bank levy often means there are underlying tax issues that need to be handled, and many people choose to seek professional guidance.
Dawn,
Thank you for your question. Unfortunately, we handle tax matters with the IRS and states only.
Thanks for this. Bookmarked.
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Thanks for this. Bookmarking your blog.
I Love the way you write…thanks for posting
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I was employed by s – corp, no income was reported during 06-08, now s- corp is issuing 1099-misc for 06-08, how do i refile and the amounts are large. what is the best way to handle this?
I have been living in mexico for the last three years, being payed by an american with deposits into a US bank account. my employer filed me as self employed and now i owe major in back taxes with penalties and interest. i have read from your web page about the offer in compromise. is there any way to get out of paying anything because of my living out of the states? can any accountant work on this or i need to get a specialist?
AH! This is the sort of thing I have been looking for. Great article. Doing some research for an article. You should add buttons to the bottom of your posts to social bookmarking sitest.
I am currently being audited for 2005 & 2006. I expect there will be a very large tax liability with penalties and interest. I also had purchased a investment property a couple of years ago that is upside down (worth less than 50% of what my mortgage on it is). I am thinking about bankruptcy with all the things going on. Someone told me that there is an IRS loophole that if I HAVE FILED my taxes for 2005 & 2006 (though under scrutiny)I could file banckruptcy and not have to pay the tax burden. Please comment.
Thanks for sharing this information – I found it very appealing to me
I have an extension on my taxes that will be due in Oct. 2009…I have my taxes figured, I will owe the IRS 8000.00. There is no way I can pay that up front! I will owe the state a little over 1,000.00. I receive SS (widows benefits)and I receive monies from the Osage Indians every three months. This was my husband’s and with him being Osage, he did not have to pay taxes, but….I have to pay taxes on this. I feel I can pay the IRS around 3000.00 in Sept. I won’t have enough money anywhere until Dec. when I will receive another Osage check…will the IRS work with me on these basis instead of demanding monthly payments and/or puting a levy on my back account or my paycheck? Except for the indian payments, I have a hard time keeping up with my bills.
Deb,
Thank you for your question. If you were an employee, you may want to challenge the issuing of the 1099-Misc instead of a W-2. This would save you part of the tax (the employer portion of the Social Security tax) that will be due. Unfortunately, you are still responsible for reporting all income on your tax return, even if the company paying you did not send you the 1099-Misc or W-2.
Once the S-Corp sends the information to the IRS, they will review your returns for those years. When they do not see the income included, they will add it in for you and send you a bill.
You should be on the offense and either file the original return or an amended return. If you file using the 1099-Misc, you may be able to deduct some of your expenses and lower the tax liability.
Victoria,
Thank you for your question. Unfortunately, where you live does not eliminate the requirements for filing a tax return. You will need to file those returns and include the amounts deposited. Since the payor is treating you as an independent contractor, you may be entitled to some expenses to lower your net business income.
Once the correct tax has been assessed, you will need to look at your monthly disposable income and any equity you may have in your assets. That will help determine if you qualify for an Offer in Compromise or if you will need to set up a payment plan with the IRS. I would advise contacting a tax professional who is familiar with both processes.
Paul,
Thank you for your question. Taxes have to be incurred within three years of the bankruptcy, filed within two years of the bankruptcy and assessed with 240 days before they can be written off in bankruptcy.
Diane,
Thank you for your question. If you are receiving a $3,000 payment quarterly, you might want to consider paying the state in full and setting up an Installment Agreement with the IRS for $8,000. If you put the IA in your regular monthly budget, you will be in compliance with the payments and not have to worry about receiving a levy. Since the balance is for $8,000, an IA could easily be set up to be paid over 36 to 60 months. Monthly payments would likely range from $150 to $250.
Dear Mr. Harris:
Is there any likelihood whatsover of having the IRS reduce the penalty owed for failing to properly file a Form 1065 when the only thing wrong was forgetting to sign the return?
I learned by way of a QAB-019 form in late June that I must have forgetten to sign my Form 1065 partnership return. I had filed it with the Service on April 6th and immediately signed and returned it once I received the QAB-019.
Today I received a notice of penalities and they are substantial (because the partnership has lots of partners and the Service claims I filed a late return).
It gets much worse for me because I have seven entities for which this identical mistake occurred.
Would appreciate any thoughts…
Dear Reader:
Thanks for contacting me. You can request an abatement of penalties. Form 843 is used to make this request. You will need to include the reason for the request and that you used exercised due diligence. If this is the only time this has happened your chances are better. If the IRS abates the penalty, any associated interest should be removed too.
Best wishes to you.
I have my taxes prepared but haven’t filed yet, I have an extension…my question is, I just realized how much I pay out every month in prescription drugs that are not on insurance….are these deductable? I pay 400.00 every month and I could get an itemized statement from my drugist, would that be possible to turn that in this year, or at all for a deduction? Thanking you in advance.
Thanks for your question. Yes, your out-of-pocket prescription costs actually paid in 2008 do qualify as a deduction on your Schedule A. You still have time to include them on your Form 1040. The only ‘catch’ is the amount of medical expenses you can actually deduct is the amount that exceeds 7.5 % of your Adjusted Gross Income.
So…about how much am I looking at if I spent 4800.00 for the year, at 7.5 percent of my adjusted gross income….how much are we talking about? Is it worth it?
I like your blog
Diane,
To figure out how much you may deduct on your return: say for example your Adjusted Gross Income is $30,000. 7.5% of that is $2,250. Taking your expenses of $4,800 and subtracting the $2,250 leaves you with $2,550 in medical expenses you may deduct. I hope that this helps.
I had a business that went bankrupt in 1998. Has the statute of limitations run its course.
Tim,
You did not give any indication of what taxes your business might have owed. Was it employment taxes, excise taxes, highway use, or income tax for the business? What type of entity was the business? Was it a sole prietorship, LLC, S-Corp, C-Corp?
The statute is normally 10 years from the date of assessment of the tax. Certain business taxes can change type and be assessed as a Trust Fund Recovery Penalty which would have a different character and assessment date then the original assessment. Additionally, bankruptcies, filing Offers in Compromise, Collection Due Process Hearings, etc. can extend the collection statute.
I would suggest you hire a tax professional to pull your individual and business records to see what occurred in your situation and to see what resolution you may need.
Does my family have to pay the back taxes to the IRS if I am dead?
Gwenn,
I do hope that you are okay. While your question was a bit unnerving, it is one that many people may wonder what the answer is. If you should die with any past due or current taxes left, these taxes will be paid out of your estate. If you are married and your taxes were filed jointly, the surviving spouse will still be responsible for the entire tax amount due. However, if you are not married at the time of death, the tax debt will not be transferred to any other family members. The taxes will still be paid out of the deceased’s estate before any (monetary) distributions are made to the beneficiaries.
John,
I made a big (huge) mistake.
My company changed 401k plans on me…they sent me a roll-over check for $45k to re-deposit with the new insvestment firm. That was around the time that the market crashed. I ended up spending that money to save my house and pay medical expenses for my disabled son born during the same time…I have been livng with the stress of an upcoming tax bill for 2009.
I am not sure I will have the 15k+ to pay this interest/penalty amount to IRS…what options do I have? I am quite nervous of losing everything I tried to save but I could have used better judgement, now I dont know what to do or what to expect when they (IRS) come calling for what is owed.
Please advise, if possible, and do I need a tax lawyer for this?
James,
First of all, you do not need a tax attorney to resolve this issue.
If the distribution was made in 2009, make sure your 2009 tax return is filed correctly (to minimize the liability) and on-time, even if you cannot pay. Depending on the total amount due, you should be able to set up payment arrangements with the IRS.
Should you need assistance, we can help with both of these.
Hi John,
Thank you for this website! My situation is this: Married filing separately because my husband is a builder…we don’t want to go there…he has his own problem, but me, I am in turmoil on what to do with my problem. I owe a total of 90K back taxes, we almost lost our home two years ago. I made money in real estate, but we were always behind b/c of his business situation. So from 2002-2005 I accumulated this massive debt of 70K….couldn’t begin to pay it as the market turned and i found myself making 25k at a local dr’s office. So they put me in uncollectable for the last two years. Over $20k interst has accumulated and my father recently passed away and left me enough life insurance to pay off the 90k and I have enough to and put myself through nursing school (barely) as much as it will hurt, should I just pay it and be done with it finally, or try to negotiate a payment plan or try to negotiate a lower amount? The IRS will be aware of the disbursement, I am sure in the near future, and I’d rather go to them than have them chase me…so what is the best way to do this. Two years ago I tried to do an offer in comp, but couldn’t come up with $2,500 to become current. I wish I had the money at the time, but we had nothing, and aside from what my father has given me, we currently barely make ends meet. I MUST have enough money to go back to school so I will make sure I never am this poor ever again. Please help!
Thank you,
Catherine
Dear Catherine,
Thanks for contacting us!
Here is what I can tell you based on the information you have given me. I would stipulate from the very beginning – I highly recommend you sit down with a tax professional, whether it is JK Harris, an Enrolled Agent or tax attorney to let them look over your information in detail to give you a better answer than what I can right now. They can also look at your records with the IRS to determine what you owe for each tax year. That being said, I can tell you if the insurance distribution was more than your taX liability, the IRS would not accept an Offer In Compromise at this point. Once they know it exists, they will want full payment.
You could make a lump-sum payment towards the debt and set up an Installment Agreement for the remainder, but penalties and interest will still accrue. And,the IRS may still not accept this resolution. If you let them know how much you need to go to school, it is possible they may accept an initial partial down payment and an Installment agreement, but again, this is up to the IRS entirely.
Nothing however is definitive once they know about the distribution. It might be in your best interest to hire someone to represent you before the IRS, if you do not feel comfortable negotiating these things with them on your own.
Best wishes,
John Harris
My husband passed away in 2006…My place of work has me as single…what is the difference in filing single or head of household? Aren’t I eligeble to file head of houshold? Which would be best? Also, my 24 yr old son is living with me, and is out of a job right now…is it okay for me to claim him? Thank you for your time.
Dear Reader:
Thank you for your question.
For withholding purposes, only Married Filing Jointly or Single are the choices. When you fill out your W-4 and answer the questions, it will tell you how you should withhold.
When you actually file your tax return, your withholding status and actual filing status may not match up. You may be able to claim your son on your 2009 tax return if he meets all of the dependency tests. He may also qualify you for head of household. When filing your return, consult your preparer or vist IRS.gov to see all the rules for dependents and filing statuses.
Hope this helps!
John Harris
Hi John,
My question to you is I have done my own taxes for the past 2 years due to a divorce. I have found out recently that I can right my office space off in my house. There was also some changes that I noticed when I went to redo my 2008 tax return . Could I amend my tax return & do I have to do one for the state & federal seperately. There is a big differnce on the state tax return. Thank You..
Kim
Kim,
Thanks for contacting JK Harris.
Yes, you will have to amend your state tax forms separately from your federal. You have until April 15, 2010 to amend your 2006 federal and state returns and to request a refund, April 15, 2011 for the 2007 returns, and April 15, 2012 for the 2008 returns.
I inherited #30,000 from an Aunt’s death in 2009 – some from IRA’s and some from her portfolio financial account. How much tax do I owe, since I took it all as a lump sum (from 3 different companies).
Chele,
Thank you for your question. Without more specific information, I can only tell you the following:
You should receive a K-1(1041) early in 2010 showing how much of the $30,000 you will have to include in your income. The IRA money will definitely be taxable to you. The remaining portfolio income may or may not be taxable.
The amount of tax you will owe is based on the above information along with your other income, age and filing status. All of that information is needed to accurately determine your tax liability.
If you are in doubt, you may want to consult a tax professional come tax filing season so you do not underpay on your taxes and end up owing down the line.
Hope this helps answer your question.
Chris,
Thanks so much for contacting JK Harris. Based on the information you have given, I do not believe you need to go to the expense of a tax attorney. If you have not already filed your 2008 tax return, that is the first thing you need to do.
After that, you can contact the IRS to set up a payment plan based on the amount of taxes, penalties and interest that you owe. If your current financial situation has changed (loss of income due to disability or job loss), you may want to consult a tax consultant or representation firm to see if you may qualify for any of the IRS’ other programs for tax resolution.
The IRS cannot take your house without going through the proper collection actions. If you are in a payment arrangement, then they will not levy or seize property.
I hope this helps.
John,
How does the IRS handle back taxes in regards to marriage? I filed for 2008 single, got married in 2009, but owe taxes still for 2008. I plan on filing jointly, but would that then put my wife on the ropes for my 2008 tax debt? The only reason we’d be getting a refund this year is because we got married. I’m sure the IRS would take any refund due since I owe, but my wife doesn’t owe. Would it be better to file separately?
Thanks
Paul
Dear Paul,
First, your wife will not be liable for the 2008 taxes. If you file jointly the IRS will take the entire refund and apply it to your 2008 debt. One option is to file jointly and have your wife claim injured spouse. That form will separate the refund amounts and apply your portion of the joint refund to the 2008 debt. Your wife’s portion of the joint refund will be sent to her. However, I must stipulate that this advice is based loosely on the information you have given me. Without completing your entire return and the injured spouse form, I could not advise you if the outcome would be better than filing separately. You might want to seek out professional assistance or fill out your returns both ways to see which way benefits you most.
You can always file Married filing separately.
Best,
JK Harris
I became disabled in 2006. Was denied disability from company in 2007 and appealed through attorney. Lived off credit cards for nine months until I received first check form SSD which I was granted. Settled with pvt insurance company since I was under extreme financial duress and needed money for following month’s mortgage. Paid legal fees and then was hit with huge tax bill of almost $50,000.
IRS told me this was income. I explained money was for disability settlement and needed to help support me till I was 65. Would have gotten 60% of salary until 65 if I had been financially able to wait and take them to court instead of settling. Have already paid them about 22,000. And have another 26,000 to go before additional penalties are added in. Used money to fix items in home (bought fixer upper in 2005 bofore disabled) and to pay monthly bills which my SSD and husband’s income does not cover. Also have daughter and her family living with us since she is chronically ill but can’t formally claim them. My monthly expenses are increasing the only thing we can think of is to close out my 401K. I have already withdrawn almost all money from the only CD I had. It does not seem fair or moral to tax a disability settlement as regular income for the year in question since this is a one time payment that is needed over a period of years. Is there anything that can be done? I am calling them to set up a payment plan. Will need to file bankruptcy but even with that will be unable to cover mortgages and necessary expenses without additional money to draw on.
Rena,
Without having the particulars about the lawsuit, I cannot answer to whether it was taxable or not.
If it was taxable, you should be able to enter into an installment agreement with the IRS to pay back what you owe over a period of time. You can find information about installment agreements on our blog, as well as on the IRS’ website at http://www.irs.gov.
Depending on the circumstances, you may also want to request an abatement of penalties.
Kind regards,
JK Harris
I got hit with a missed 401k roll-over from 2007. the interest the IRS is charging is way high…enough that I can’t pay this amount. The amount I am dinged with is over 15k + Interest…what are my options?
Hi Chris,
Thanks for contacting us. If the rollover did occur within the 60 day period, you should provide proof that the rollover did happen.
If the “missed rollover” means that you pulled the money out and never rolled it over or missed the 60 day period, then the tax, interest and any penalties are accurate. If this is the case, you can request an abatement of some penalties (if assessed), or establish a payment plan with the IRS. You can find information on Installment Agreements at http://www.irs.gov. If you don’t feel comfortable dealing with the IRS, JK Harris or other tax professionals are available to assist.
JK Harris
My fiance has filed an extension for his taxes the last 4 years, but has never finalized any of those returns. I have never had any tax or credit issues. If we marry this July, and he hasn’t resolved these prior year returns, will my 401K and savings be impacted to pay for his mistakes? Will the child support that I receive from my ex-spouse be considered as income that the IRS could garnish for his tax debt? I am trying to decide if we should delay our wedding until after his situation is resolved first.
Dear Lisa,
You can always file as Married Filing Separate to keep all of the tax issues separate. You do lose some credits and may be subject to a higher tax bracket so you would need to consider the impact of filing that way. (try filling out the tax form filing separe and filing jointly to see which is of the most benefit.)
If you get married and file Married Filing Jointly, you would need to also file the injured spouse form. That form will separate any refund you may get from being directed toward repaying his tax debt.
As long as you do not file a joint return for the prior years, the IRS cannot take your 401K or your child suppport for his tax debt.
Thanks, JK Harris
I want to marry my girlfriend. I owe back taxes. How do I protect her from being liable for my mistakes on my taxes. I do not want her to be effected by my debt.
Please,
Thanks
Hi Don,
Congratulations! Thank you for contacting us with your question. In order to protect your girlfriend from your back tax problems, she will need to file separately from you to keep things simple and to protect any refunds she may be owed from going toward your back tax debt. As for you, if you have not arranged an Installment agreement with the IRS, you can contact them to assist you in getting one set up to help get your back taxes cleared up.
I hope this helps! Best wishes, JK Harris
My husband and I are in quite a pickle and need your help.
1) Tax year 2007, tax debt of a little over $5,000 due because my husband’s ex allowed someone else to claim his children after she told him that he could claim them.
2) Tax year 2008, tax debt of a little over $7,000 due taking a payout from a retirement plan when I changed jobs to pay off credit card debt.
3) Tax year 2009, new tax debt of a little over $7,000 because payroll exemptions were too high.
We desparately need your help. We are willing to pay but feel it will be impossible to pay all of these. I set-up payment arrangements on the previous 2 years of $152/mo.
Is there a way to settle these debts for one lower amount that we can pay-off in a lifetime?
Thanks!
Jackie
Dear Jackie,
Thanks for writing. The offer in compromise program may be what you are speaking of, but without having all of your financial information I would not be able to make a recommendation. The program is designed for people who are experiencing financial hardship and to qualify, you must meet the IRS’ requirements.
I would suggest that you adjust your withholdings so you do not incur a new debt in 2010. If you self-prepared your returns, you may want to have a tax professional review them and see if there are any errors that could reduce what you owe.
With a new balance due in 2009, you will have to renegotiate your installment agreement. You should contact the IRS soon.
I hope this helps!
JK Harris
I owe back taxes for the years 2003,2004,2005, and I got married in 2009. I was trying to work out an OIC however, the IRS says that my wifes income must be factored in, even if we were not married during the periods of back taxes. Also, they are not fully accounting her debt. They have left out a protion of her monthly mortgage, all of her credit card debt, as well as her monthly expenses associated with the house. They have also ignored my upcoming student loans as well as a current student loan that I am paying on. Finally they they are saying we make a combined $85000 a year, however are only crediting us %15 for taxes (obviously this is not what we truly pay).
It seems like the IRS is basically saying my wife would need to ruin her credit, lose her house that is in her name in order to pay back my back taxes from before we even met.
I feel like it has gotten to the stage that I need professional help! Can they relly do this?
Hi Chris,
The amount you offer is based on a mathmatical formula of your current disposable income and value of current assets. In your situation, the calculation can be based on your income and assets only, but you get a percentage of expenses. The way the IRS has calculated it, includes your wife’s income and allows for all expenses.
In addition to the above, the IRS also applies local standards. The IRS may have not allowed all the mortgage because it is more than the local standards.
All of your expenses are not always allowed by the IRS. Some are considered non-essential.
As a taxpayer you are entitled to representation. Someone that works in this field and deals with the IRS on a regular basis would have more knowledge than the average taxpayer. Without having all of the facts and circumstances surrounding your particular situation, I could not tell you the final outcome.
Thank you, JK Harris
Hello,
The IRS said that we owe back taxes from 1988-1992 for business privilege and net profits tax. He swears that he paid them, but we have no records because it was over 15 years ago. My question is: Is there a statue of limitation on these taxes? or Do I have to pay them because I have no proof? I appreciate your help. Thank You,
Dear Diane,
These sound like state taxes and not federal taxes. The statute of limitations on these type of taxes is set at the state level and vary depending on your state. Some states do not have a collection statute limitation and can collect indefinitely. You may need to consult a tax professional for your individual situation.
JK Harris
I have a question. My husband filed back taxes from 2003 this year. He had some issues with getting out of the military and divorcing his ex wife and the taxes just slipped by him during the move and all of that jazz and the just told him a couple of months ago that he had to file for 2003 when we have been filing together for the last 4 years. Well he was due to have a $4000 refund and he just got told today after weeks of calling the IRS to find out where the refund is that it is too late and we will not be receiving the refund. Is there any way at all to still get the refund or part of the refund? We have never had to deal with this before but we were told by H&R block we would get a refund and we needed that refund to pay off bills and do some home repairs because I just got out of school and we have 2 kids. Any info would be greatly appreciated.
Dear Jenny,
No, unfortunately it is too late to claim any refund for 2003. In fact, the IRS give you three years to claim any refunds due. If you have not filed a return for 2007-2009, now is the time to do it and claim any refund due to you, however, anything prior to that is no longer refundable to you.
JK Harris
Hello, I received a Tax Amnesty from the City of Philadelphia stating that we owe Net Profits Tax and Business Privilege from 1986 through 1993. Is there a statue of limitations on these taxes? or should I take advantage of the Amnesty offer? Thank You
Hi Denine,
I could not find a statute of limitations regarding your liability – but that doesn’t mean there is or isn’t one. I do know that if you do not take advantage of these types of amnesty programs when they are offered, additional penalties continue to be assessed. The best thing to do would be to call the Department of Revenue to find out if there is a statute on your liability, but chances are – since this is like an excise tax, there probably is no statute of limitations.
Thanks, JK Harris
Hello,
I recently found out I owe a great deal of money to IRS from 04 and 05, and my 08 return was never recieved. I have until Oct 3 to come up with the missing return and monies, or they will levy my income and accounts. can I still put a stop on the processs if I can not afford a payment?
Christine,
Thanks for contacting JK Harris. If you filed the 2008 return, you should be able to send in your financial documents and arrange a payment plan based on what you can afford to pay. If they are stating they do not have the 2008 return, you will need to refile the 2008. I would suggest filing the return at a local IRS office and keep a copy of the date stamp the IRS puts on the return.
Kind regards, JK Harris
My husband has not filed his since 2002 he is self employed , we have just recently gotten married. what steps do we need to do to handle this situation. The IRS is wanting his taxes and he is scared to death they are going to lock him up. Work for him is very slow due to ecomony ( he is in construction work) Am I responable for these taxes since we where not married then. and when I file my taxes this year do I just file separt from him and not list him on them.
Donna,
The best solution would be for your husband to file the back years of taxes that he owes. For the current year, you can either file Married Filing Separately to keep any refunds owed to you from being taken and applied to his liability. If you file Married Filing Joint, you can submit the injured spouse form to separate your refund(if any) from his. However, if you file MFJ, you are still jointly and separately liable for any tax liability on any jointly filed returns.
Best, JK Harris
I made a mistake back in 2008 in keeping my 401k money and receiving a huge debt to IRS on my 2009 return. Based upon the return we took out a mortgage on our house to paid the debt. Through the transaction be even received money refunded through overpayment. We though this mess was behind us. We just received a notice from the irs that there was a mistake on our 1040 and we owe another additional 44k. We have already used our means to obtain a afforable loan for the original amount and may need to set up a payment plan. Is there anything we can do in this situation to show we have tried to paid with good intend over the amount we owed while they had the original form in there possession and negotiating terms for settlement. If not, we will be saleing our homes in 3 or 4 years, do you think they will accept low monthly payments until then and settle the dept at that time (we will have to sale due to stairs and our failing health, just waiting for the real estate market to bounce back)?
James,
Thanks for your question. The first thing I would recommend is for you to seek the advice of a professional tax advisor to review your original 1040, your payments to the IRS and the IRS notice of the error on the return. It is possible they made a mistake or that your missed tax benefits (credits or deductions) available to you on the tax return.
If in the end, you do indeed owe the $44,000, you can set up an installment agreement with the IRS to repay your back tax debt. The amount of the monthly payment will be based on your current financials and your ability to pay. This type of installment agreement is not hard to get, but you will have to submit many financial documents to the IRS to show what your ability or inability to pay the IRS may be. Without all of your financial documents it is impossible to say with any degree of certainty.
Best, JK Harris