I am a long-time reader, but this is my first post.
I have an issue that I would like some advice on.
I have not filed taxes in three years (long story, and nothing more dubious than the fact I have not filed them).
I am now receiving snail mail from the IRS and the state of California asking me to get my rear-end in gear.
So, what do I do? My best guess is that I owe about $20K (before penalties) , and I am unemployed.
I know that I should call them ASAP. What I do not know is, should I contact an attorney first? If so, what if I cannot afford to pay one? Also, should I close my bank account and maintain what cash I have left?
The combined brainpower out there is incredible, as evidenced by what I have read on these boards for the last year. Please, someone, give me advice, or at least an opinion.
I’d talk to a lawyer first, so you have an idea of your legal situation.
Contact your local bar association. They can give you names of lawyers who deal with tax matters. Raise the issue of your financial status when you make the inquiry. There may be some lawyers who will do simple matters pro bono, or at reduced rates, or on a payment plan.
I used to be a Revenue Officer, but it’s a number of years ago, so this advice may not be current. When I went out on a case where there was a “taxpayer delinquent inquiry” e.g. you filed before why haven’t we gotten any returns from you for these past years?, once I determined the TP needed to file and secured the returns, that was the end of it for me. The returns were filed, the interest and penalty and tax were assessed, the TP was sent a bill; if they didn’t pay, then it went into the mill again e.g. 4 letters, lien (this is a general lien that covers any assets you own now and forever more until it’s paid); and then out to the field again if no payment or agreement. This used to take about 2 years, but is probably sooner now. Once this happened, the TP, if they couldn’t get a loan to pay, or had no assets to sell, they were given the opportunity to make installment payments or even to have collection suspended (like a deferred student loan). But now, the TP themselves can request an installment agreement the instructions for which should be with the bill. If there are limits on this (other than I think you only have 2-3 years to pay) you need to review the form, which is on the IRS web site, to see what they are. Until it is actually determined that you should have filed and do file, and the tax is assessed, no worries. I don’t think you need an attorney. I would be more worried about CA because they are AH’s when it comes to taxes; but, on the other hand they usually go along with whatever you do with the IRS e.g. installments. And their return is based on the federal return. I’m not familiar with their requirements for an installment agreement. Basically, IRS is interested in your cooperation; it’s like running when a cop stops you… MUCH MUCH worse if you don’t respond to their inquiries. Not answering the letters just calls for more drastic action on their part, which is pretty automatic. Lien, levy, seize any assets. So call asap; tell them you are preparing the returns and give them a date. They can’t levy your bank account without a tax assessment. They haven’t even determined if you must file returns yet. They are just asking at this point. I do have to say though, if you don’t respond, they can prepare returns for you based on the income information they have, with no itemized deductions, and any other income offsets, etc. And once assessed it causes a mess to get these corrected. Meanwhile, get out the TurboTax, or contact a tax preparer and get them done. If you returns are complicated, use an accountant to hopefully reduce your tax liability. No one goes to jail for your situation. Good luck.
Per suziek see a good accountant. You will have to pay some sort of penalty but you should be able to work out a deal that makes sense. As to the unemployed scenario it’s really not important at this point as the IRS will know they cannot collect until you are making money and will put you on an installment plan which you can possibly negotiate the terms of to some degree.