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Huge tax bill -- I think I'm screwed
Old 03-30-2010, 07:43 PM   #1
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Huge tax bill -- I think I'm screwed

2009 was a difficult year. I lost my job in April, 2009 -- still unemployed, but waiting for an offer from HR.

Anyway, I lost my job -- wife's cancer is now stage 4 and she is no longer a candidate for surgery or radiation therapy. In September, 09 decided to sell our primary residence. Had a signed contract and I purchased a villa down the street that was going through foreclosure. Borrowed the funds from my retirement account with the plan to repay after our home we were selling closed. Buyers with signed contract walked away from purchasing our home. Tried to find other seller, but that didn't happen. Ended up renting, instead of selling the home. Tried getting a mortgage, even a second mortgage, but due to my unemployment that didn't happen. I was willing to put 5 years P&I, taxes into escrow -- banks acted as if I had the H1N1.

You know the rest, I'm getting hit with a huge tax bill to the tune of $80,000. Due to my wife disability -- I don't have to pay the 10% penalty. The rental income is covering the previous home.

We are trying to sell our condo in Florida -- I know, bad time to be doing this, but the HOA fees have more than doubled since Charlie. We bought this condo 6 years ago as an investment -- and it hasn't. I don't see real estate in SW Florida having a significant recovery for 5-10 years. So, I'll cut my losses.

I've already recovered a large chunk of the $80K in the foreclosed property. Since I've been out of work most of the reserves are dwindling -- so I don't have the funds to write Uncle Sam a check for the entire amount.

Once I get a job, I plan to get a HELOC and pay the tax bill -- It's the penalties I'm worried about. What the truth about these companies that work with the government to pay a overdue tax bill for a significantly reduced amount.

Thanks!!!

Dan
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Old 03-30-2010, 08:05 PM   #2
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Stay far far away from "debt reconciliation companies." They are borderline illegal outfits, similar to payday loan centers. If you need tax advice, ask a CPA or a tax lawyer.
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Old 03-30-2010, 08:11 PM   #3
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I'm so sorry that your wife is so sick.

I thought I had heard on the radio a few weeks ago that the IRS was going to be more lenient on unemployed taxpayers this year and I found this article from the IRS.gov website: IRS Outlines Additional Steps to Assist Unemployed Taxpayers and Others

I don't know if there's anything in that article that will help you, but I hope so!
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Old 03-30-2010, 08:44 PM   #4
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I knew someone who got into a similar tax situation and they got a lawyer and ended settling for a lot less than the orginal amount .Good luck !
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Old 03-30-2010, 10:40 PM   #5
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Quote:
Originally Posted by Bestwifeever View Post
I'm so sorry that your wife is so sick.

I thought I had heard on the radio a few weeks ago that the IRS was going to be more lenient on unemployed taxpayers this year and I found this article from the IRS.gov website: IRS Outlines Additional Steps to Assist Unemployed Taxpayers and Others

I don't know if there's anything in that article that will help you, but I hope so!
The offer in compromise is one solution, but you will have to cough up 20% of the offered amount when you make the offer, and only about 25% of offers are accepted. Here is a recent article that seems to offer advice for people in very similar situations: File your return, even if you can't pay your taxes - USATODAY.com

You're in a tight spot, but it's not hopeless by any stretch.

I strongly recommend that you don't go dealing with those folks down at the IRS all by yourself. Hire a tax attorney or Enrolled Agent - and not one of those gimmicky "pennies on the dollar" guys. You want someone to help you craft your approach to this situation who understands how the IRS works. It may be the kinder gentler IRS, but how much gentling can a shark undergo? It's like working out a plea bargain in a criminal trial, you need a sharp person to tell if you're getting the best deal you can expect or not before you go signing next to the "X".

Good luck.
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Old 04-01-2010, 07:58 AM   #6
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Yeah, being forced to sell into a weak market is not good.

How about a PT (i.e. under employment) job just until you get approved for the HELOC. Shouldn't take too much income to get approved (provided the rentals are positive cash flow).

I wouldn't be filing my own taxes ... not this year! $300 on a CPA would be well spent.
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