Didn't pay her taxes

[skipper]

I have a friend who is considered self-employed. She hasn't paid any state or
federal taxes for 4 or 5 years. Reason: "I haven't gotten around to it and I
figured I needed the money more than the govt." The state put a summons on
her door and now she is paying $1500 a month. The federal govt. hasn't caught
up with her, yet. Wouldn't it be better for her to contact the IRS before they
find her? I'm wondering if her next christmas card will be from jail. The interest
and penalties must be very high.
Anyone know what happens to these tax evaders?

 

[runchman]

No answer for you, but this reminds me of back when Harold Washington was mayor of chicago and it came out that he hadn't filed in several years.

His excuse was "Well, you know you get busy around that time of year and I just forgot".

Good luck to your friend, I don't think the IRS is a group you want to mess with !

- John

 

[macdaddy]

She may want to read the threads about retiring overseas...

 

[cube_rat]

The IRS can be somewhat easy to deal with if you're forthright and PROACTIVE about your circumstances. The key word is: Proactive. "Forgetting to file" or "I was too busy" are the most lamest excuses I've ever heard.

Filing on time and owing a balance that you can't pay is one thing but not filing is bad, bad, bad. From how describe her situation I wouldn't be surprised if they haven't liened her property, attached wages and swiped money from her bank account. You can only run for so long and the IRS and local government entities will eventually catch up with you.

 

[Empty Pockets]

If she owes you any money, get cash from her as soon as possible. I'd predict her bank accounts will be frozen once our friends in the suits & ties find out about this.

 

[TromboneAl]

Perhaps she should get a lawyer and have him contact the IRS for her.

 

[FinanceDude]

Is it "worse" to file, but not PAY your taxes, or to do neither?

Just wondering, I know someone who owes a BIG tax to the IRS, but can't afford to pay it.................he is willing to FILE his taxes, but how does he get around not being able to PAY his taxes??

 

[Khan]

Is it "worse" to file, but not PAY your taxes, or to do neither?

Just wondering, I know someone who owes a BIG tax to the IRS, but can't afford to pay it.................he is willing to FILE his taxes, but how does he get around not being able to PAY his taxes??

You can negotiate payment terms or ask for relief.

 

[FinanceDude]

You can negotiate payment terms or ask for relief.

If you do that, aren' t you setting yourself up as a future "IRA audit magnet"

 

[OAG]

She NEEDS to get with someone that is knowledgeable about filling taxes for PAST years (may want to stay away from the Sears and other large tax preparers). She will have to gather her data by year for the preparer. I used to do it several years ago and at one time had a person come to me that, like this lady, had not filed for several years. After doing each year it was found that the person did not owe taxes for any of the prior years and all that was needed was to file the returns (both Fed and State). Remember penalties are calculated on a percentage of taxes owed and the failure to file penalty is only assessed if you made enough to be required to file. If you do now owe there is no penalty, in fact this particular person, I remember, actually got refunds since he had been over withheld for the prior years. This is probably not the case here since she was a self-employed person that may not have made any payments. However, depending on the business expenses and/or depreciation she may not have had any taxes due. It is a bit of a chore to go back and do this but I would recommend she needs to do so quickly. The communication with the IRS (other than mailing in the missing returns) IMO is not really recommended since, until the missing returns are prepared she does not know if she owes or not and how much. If she does contact them, without knowing the necessary information, she may be faced with a very quick tax lien from them on anything they can lien. Besides it may be mute as the state may already have notified the IRS. Good Luck.

 

[skipper]

The only thing she "owns" is her car. She is a travel nurse and takes home
4-5K per month and no taxes are deducted. Just spends it all and has a good
old time. I could never live like that and thank God she doesn't owe me any
money!
I thinks she needs a lawyer, too.

 

[skipper]

She could arrange for the agency she works for to deduct taxes (like most
people do). She obviously needs to do that since she doesn't have the
self discipline to send in her quarterly taxes.

 

[Texas Proud]

Is it "worse" to file, but not PAY your taxes, or to do neither?

Just wondering, I know someone who owes a BIG tax to the IRS, but can't afford to pay it.................he is willing to FILE his taxes, but how does he get around not being able to PAY his taxes??

Failure to file is worse... the time limit for audit starts when you file... if you don't file, you are open for ALL years...

Also, (and this is from a LONG time ago)... the penalty CAN be calculated on the tax amount, not just the taxes owed... so if they wanted to screw you, even if you overpaid they could penalize you on the full tax liability...

And from what I understand.. the states talk to the IRS... so she should be caught soon...

 

[cube_rat]

Just spends it all and has a good
old time.

Therein lies the real problem. I'm willing to bet your friend has/had credit card debt too. As others stated in this thread, she'll need to consult with an attorney. After all years are filed and up to date, she may be able to declare BK and have some prior years released. The BK laws changed recently and I don't know if one could get releases from a Chap 7 these days. Martha would know. Your friend could get square and clean up her act if, and only if, she's proactive about her situation (there's goes that word, proactive again!).

 

[mja]

Failure to file is worse... the time limit for audit starts when you file... if you don't file, you are open for ALL years...

I have an admission, and some questions...

Several years ago, when "younger and dumber", I failed to file for about 3 years. I recieved a couple notices (about 6 years ago) from the irs that I needed to get my ass in gear. Never received anything further once I started filing again. But those 3 years are "unfiled".

I've filed the last several years, and received refunds from both state and fed, with no mention about the missing years. I am absolutely certain that I was due for refunds in the missing years, and I'm aware that it's past the time that I can collect them. I don't have a problem with that (it's my "stupid-tax").

Should I see about getting this straight with the feds/state? The lack of contact, and subsequent successfully filed returns lead me to believe that they're not coming for me. Will this bite me in the butt at some point?

I have some recollection of reading that they effectively 'do your return for you' based on the amounts reported to them by employers/brokers/etc, after a certain amount of time has passed. Since no additional tax would have been due....

So how screwed am I? Are there negative consequences to "catching up" the old stuff? More negative than doing nothing?

 

[MasterBlaster]

mja:

While I am certainly not an expert here, I will offer up my opinion as to what will happen.

What you have done is not strictly within the law, however since they owe you money you aren't going to do any prison time.

I suspect that there is no real penalty (other than lost money that you should have received) to not acting now. They'll let you know if they want a check !

 

[lazygood4nothinbum]

wasn't tax evasion how they got al capone?

 

[newyorklady]

yes it was. irs is scarier than god. if you don't pay they can freeze your assets. best to be proactive.

 

[bssc]

I forgot to report the basis for my wife's stock options in 2004. I get a very nice letter from the IRS stating that they were treating the basis as zero and that I owed them some $40,000 in taxes and $15,000 in penalties. I justed filed an amended 1040 and all was forgiven. However, they do treat this as the worse case scenario.

That being said, your friend is probably getting 1099s so no tax is withheld on them. She needs to find them.

 

[Texas Proud]

MJA....

I am with Masterblaster.... if you were due a refund who cares if they go back... there is nothing you would owe... and if they have not made a claim against you, and given you refunds... well, seems you are safe...

And remember, they only would look if you were audited... and most agents would not go back more than three years anyhow... now, if you owed money... I would file..

BSSC... the way the IRS thinks... any cash received is income unless you show them otherwise it is not... and no deduction is taken unless you claim it... so, yes they take the worst case and make you prove up the difference.. when you do, no problem like you found out..

IN TRUTH (I and I know I will get flammed for this...) of all the audits I have done for people and organizations, the IRS has been reasonable all the time... they have waived penalties for late filing when someone died, for a charity that was small and had not filed for 3 years... for someone like BSSC who proved up something was not income and BTW we have more deduction (got a refund on that one)...

Yes, they can be the worst to deal with if you don't do what you should... and can do it without going to court.. that is why you stay away from getting there...

 

[Gumby]

Another problem for Skipper's friend would be the Social Security taxes for the period. If she was self-employed receiving 1099's in the monthly range Skipper described, she will be on the hook for 15% of all the money received during those years, regardless of what her income tax may work out to be for those years.

I agree that she needs a lawyer.

 

[cute fuzzy bunny]

The good news is that she'll be able to learn some LBYM methods during her jail time.

Chalk up another one to add to the file on how it is that I have so much trouble with such simple things some times, yet others just sail through life doing whatever they damn well please and years go by without anything bad happening to them.

 

[Outtahere]

My BIL did the same thing, as a sales person he was paid like the nurse is, he sailed through life for a while not paying taxes either. It all caught up with him and he was hit pretty hard, hid that from my sister until after they were married. She ended up bailing him out and then taking control of the finances.

 

[perinova]

They should modify the system so that most people wouldn't have to file anything.
Think about it the govt receives all the data and can put it all together. They also know the tax laws a lot more than the people filing. They should send you the form filled out with a check or a bill.

The tax laws can easily be modified for that.

 

[soupcxan]

They should modify the system so that most people wouldn't have to file anything.
Think about it the govt receives all the data and can put it all together. They also know the tax laws a lot more than the people filing. They should send you the form filled out with a check or a bill.

The tax laws can easily be modified for that.

Yeah but then they will start charging for this service that they are providing, and so I'll end up paying to have my taxes prepared twice. Once by the IRS, and again by someone competent to do them correctly.