Single Mother of 2 Owes $11K in Taxes, What Now?

[amastewa93]

A friend of mine refused to file taxes for years and has been self-employed for much of that time (and not saving the 20% needed to pay taxes). Now, she's finally decided to file and believed being a single mom of 2 would save her from her $11K in tax debt.

No doubt, it saved her from owing much, much more... It is still not really doable for her though. Outside of filing an extension and trying to figure out a payment plan, are there any other options for her?

[james.hendrickson]

No. She has to pay the IRS.

[msomnipotent]

I just found this while I was looking up tax info for another thread. The IRS offers a Fresh Start program that might help her.

https://www.irs.gov/newsroom/irs-fresh-start-program-helps-taxpayers-who-owe-the-irs

[Gailete]

A friend of mine refused to file taxes for years and has been self-employed for much of that time (and not saving the 20% needed to pay taxes). Now, she's finally decided to file and believed being a single mom of 2 would save her from her $11K in tax debt.

No doubt, it saved her from owing much, much more... It is still not really doable for her though. Outside of filing an extension and trying to figure out a payment plan, are there any other options for her?

I would think that she must pay the piper. We set aside 30% of 'income' money which is hard at the time, but not nearly as hard as trying to come up with $11K!

I'm curious enough to wonder why she did something so dumb as to not file her taxes each year? It isn't like taxes have ever been considered an optional activity and whether you owe money, you still need to do your paper work. Especially if she was self-employed which would have given her a better chance of saving on taxes than being the mother of two. At this point she may have forgotten or gotten rid of receipts that could help her establish her business expenses.

[AJSimon]

Not paying your taxes is bad. Not filing at all can get you thrown in jail.

[amastewa93]

I'm curious enough to wonder why she did something so dumb as to not file her taxes each year?

Me. Too. When she told me I was FLOORED. I am also paid on a 1099 and technically self-employed, so I knew what a world of hurt she was going to be in...

She has moved forward with a payment plan with the IRS. Apparently, they'll take what she can pay per month in payments, which is great for her. It sounds like she will probably be looking for a PT job and her mom will watch the kids so she can get it paid off quickly.

[bjl584]

A friend of mine works for the IRS.
They are actually willing to work with people a lot easier than most people believe. Your friend will be subject to some penalties, but she can get on a repayment plan and get caught up with them as long as she calls and opens up dialogue and is willing to make payments. No one is going to haul her off to prison unless she keeps trying to avoid them.

[GrimJack]

A friend of mine works for the IRS.
They are actually willing to work with people a lot easier than most people believe. Your friend will be subject to some penalties, but she can get on a repayment plan and get caught up with them as long as she calls and opens up dialogue and is willing to make payments. No one is going to haul her off to prison unless she keeps trying to avoid them.

Yes, the IRS will work with you. The minimum payment (before complicated tiered agreements) requires that the debt be paid within 6 years so divide your assessed balance by 72 to get what your minimum payment will be. If you talk to someone on the phone there is a $225 set up fee that can be reduced if you agree to Direct Debit from your checking; set up the same agreement online the fee can be reduced to under $40.

Assessed balance is just the tax owed not any of the penalties and interest that have accrued.

General hint - ask for a ''first time abatement'' of penalties. (I don't think I am supposed to tell anyone about the FTA thing).

[GoodSteward]

I know someone who did a similar thing. Self-employed, decent income, family, never filed taxes for like 3 years. When they finally did, they owed similar high figures to state and federal. This was several years ago, and to this day they are still paying.

As a side effect, they were not allowed to receive tax credits since they waited. Meaning, they owed the taxes but lost the refundable tax credits. IRS can get out of paying you what they owe you according to the law, but you can't get out of paying them what they say you owe them. This is one of the biggest reasons they owed so much, they didn't get any refundable credits to help cut it down like they would have if they filed each year.

They also make poor financial choices in general, so, there's that too.

[Gailete]

I knew a guy that had his own indoor pool directly connected to his house in MN. Walk out of the living room into the pool room. It wasn't an itty bitty tiny pool either. Big enough for a fun pool party. He was self employed and he got caught when his business crumbled and he hadn't been paying into Unemployment Insurance for his employees. I don't know the whole story, but their is a major gap from having an inside pool and not having enough to pay your proper business taxes and bills. He was married to the sister of 'Mr. Big Bucks', so I no longer have contact, just remember him as a very arrogant guy that seemed to have some real entitlement attitudes about life.

We had a customer that told my hubby that he hadn't paid taxes for years either personally or as a business. When he canceled his contract and wanted all his money back, hubby called the irs tip line.

We are self-employed and it would be so easy to skip doing taxes, but I don't think I could go to bed and even sleep if I don't have the taxes paid by the April due date. Some just don't have those qualms at all. I can't even comprehend it.

[~bs]

contact the irs and work out a payment plan