Posted on 04/18/2014 6:39:07 PM PDT by elahtap
Hi Fellow Freepers,
I am conservative to the core, and have been a long time lurker (8 years +) here, but I was finally spurred to set up an account. I wanted to get some advice. The potential stakes are high and I wanted to post this here because, as a group, you are the smartest people I know. I know my FRiends here will tell me what I need to know
I am a 58 y/o professional with a good job, and my wife had been a stay-at-home mom since our children were born. In mid 2010 we purchased a small business for 80K. She had done some fill-in work there and it looked like a good opportunity, and with both our kids soon to be in college, it would give her a shot a a career.
Here is what happened in the intervening years...
1) The business has tanked and we are coming around to making the decision to sell it and salvage whatever possible of our investment. My wife is a good worker-bee but absolutely lousy at running a business. Plus, after being in "remission" and well-controlled by medication, her bipolar illness has reared its ugly head again. We have lost tens of thousands of dollars, with most of this paid for by 3 withdrawals from IRA accounts.
2) State and Federal income taxes for the business have not been filed other than the first part-year (2010). So we have not even filed for 2011, 2012, and now, 2013. This is primarily due to not being able to afford an accountant to clean up the big mess and file the returns. Sometimes a mess gets so big you just don't know where to start.
3) Our personal income taxes have also not been filed for these same years (2011, 2012, and now 2013). Without the complicating factors (i.e. penalties) we probably didn't owe much (if any) because my deductions were always set up where I got a $500-$1000 refund every year. The primary reason I initially postponed filing was because we didn't have the business returns, and I didn't want to lose the deductions that would come about as a result of the big business losses.
But now we are living in fear that the IRS will come in and seize everything (including a big chunk of my wages, or our home, or retirement funds, etc.) and the snowball (crapball?) will just get larger.
We have always paid our bills and lived financially responsible lives, which means that, emotionally and logistically, we are in uncharted territory without any idea how to find our way out.
We SO want to get this all straightened out, and I had considered visiting the local IRS office and trying to get a friendly agent for a 45 minute sitdown and just throwing myself at their mercy, but I don't want to make it worse by doing this (like my friend who, years ago, accidently crossed into Canada with a handgun in his car and went back to the border to inquire about what he should do).
Quite honestly (and it is very humbling to admit this) we are overwhelmed to the point where we are paralyzed by fear and uncertainty, and we are unable to decide how to fix this.
I am open to criticism, but please understand that beating myself . Believe me when I say we already know we are woefully stupid for ever letting the situation get to this point.
My wife and I really need some educated and helpful advice on how best to begin the process of straightening this out while minimizing any additional damage. I'm counting on my FRiends here for some good solid guidance.
WELCOME TO FR!
The Obama Federal Government loves to hate, so do not hate them back: be a bottom-line financial professional, honest and tough, through and through.
Use whatever extensions are available to you and yours, based on the best professional advice available to you.
Sometimes a case may capture the interest of a professional who will take your case to make a name for him/herself, often at a reduced cost to you.
Use the Federal Laws against the IRS, once again according to the advice of your professional.
Seize this as an opportunity to make the rest of your life better, every day.
BTW, a friend of mine once told me that he doesn’t have bad days, but, he said, “some days are better than others.”
How do you have “friends” and “fellow Freepers” here since you signed up 04/18/2014? You cannot even reply without a screen name.
That aside, I believe that most lawyers will give you a free introductory meeting. I would suggest a lawyer specializing in bankruptcy, because it sounds like you are beyond help from accountants/ CPA’s.
Here's the rub…. If you had employees and you withheld their FICA and their Income taxes and have not yet sent that in, you are in big trouble. For that, you absolutely must have professional help.
But if the only problem is that there are 3 or 4 years that you have not filed and you won't owe in those years, relax and just do the returns and send them in.
Based on the size of the business, are you an LLC? Your personal taxes and the business taxes will probably roll into a single return. If the business wasn't profitable your personal excess withholding may have you covered.
As others have suggested, hire a competent professional and take it one step at a time.
I have been where you are at - paralyzed by fear that my return wouldnt be perfect.
The thing I have learned is that tax returns aren’t as perfect ae e would like them to be. Just organize your records the best you can, and wtart working on the return for the earliest year. Write down notes of what you do and decisions you make. Make a decision and move on...there is no way your return will be perfect....just do the best you can and file.
As he said that he was a long-time lurker and just now signing up for advice, I’d say that he gave full disclosure.
KEEP YOUR MOUTH SHUT? Every question is yes or no or, “I don’t know.” Know the IRS only wants their money. Silence can never be challenged. NEVER state anything they do not ask.
Besides us peons, you and I have some very high profile company in our fear and view of the IRS:
Read the letter, it's hilarious, but alas, the way it is.
Loved it and miss the man. LOL!!
yes, this is the route to go.
You need professional advice from a trusted tax professional. He/She is going to have to burrow through a lot of paperwork to straighten out your finances. Internet advice is patently worthless to you. Good luck
There is something called an “offer of compromise” that can significantly mitigate any amounts due. This is usually accomplished through extenuating circumstances and a whole lot of negotiating and substantial paperwork.
The rules are somewhat complicated.
NO, NO, NO! I AM a lawyer specializing in bankruptcy. If the returns were not filed and there is a liability, the tax debt is non-dischargeable!
My advice: Don’t go to a lawyer, FRiend. Start with getting your documentation and numbers in the best order possible, and then find a Certified Public Accountant whom you like. If you need to “hire,” a bookkeeper to help first, then make sure she’s a 1099 independent contractor (not an “employee”). Then get the returns filed ASAP.
There is A LOT of very good advice on this thread. Matthew Fuller’s advice, though, is what we call “malpractice.”
“Plus, after being in ‘remission’ and well-controlled by medication, her bipolar illness has reared its ugly head again. We have lost tens of thousands of dollars, with most of this paid for by 3 withdrawals from IRA accounts.”
Your wife’s illness might be considered a permanent disability preventing her from working. You will need to document this with her doctor according to IRS guidelines, but this should allow you do get back most or all of any income tax penalties for early withdrawal of your IRA’s. But, as with the rest of my “advice”, please see an expert.
Avoid the attorneys if possible. A good accountant may help. If you cannot afford an accountant, even using TurboTax for small business may walk you through everything you need. It will even allow you to pay the $100 or so fee with money you expect to get back from the IRS.
If your wife lost money at the business, you should actually be in BETTER shape with the IRS. You can take the business loss as a reduction to your overall tax liability I believe, which means the IRS may owe you money back from your job’s withholdings. I do not know all of the rules, but I think you can take business losses for a few years as long as you have supporting documentation and can prove it was a business trying to make money and not a charity or hobby. You can also file late and amended returns for previous years. I have never had this happen, but I think you only have penalties and interest if you owe money. I don’t think you have penalties if you are owed money. So don’t assume that you have underpaid. You may actually have money coming to you.
Gather all of your financial records for the years you need to file. This includes bank statements, receipts, logs and journals. (Diaries, letters and other records may sometimes help recreate missing information.) You may need to pay your bank to print duplicate copies of monthly statements, but most keep statements online for a year or so which you can download. Go over bank and credit card statements and sort out any receipts that are for business and put the information about business expenses into a file on your computer. A spreadsheet is a good way to do it, but a text file would make do. From there you can add up all business expenses and income and make profit and loss statements. The more you do, the less you will need help from an accountant.
Don’t forget business mileage. If you do not have detailed mileage records you may be allowed to create records from memory if you can support it with receipts, journals, etc. In other words, if you have a receipt for a meal for business purposes, you can calculate mileage to and from the location assuming you have all of the information to do so. Mileage is a fifty something cents per mile deduction. Don’t overlook it.
I am by no means a tax expert, but I thought I would add my two cents worth.
Bipolar problems are becoming more common. I am not sure why. But try to determine if the cause is physiological, spiritual or both. Even if it is 90% physiological, do not neglect the other 10%. And don’t be afraid to question the medical advice you get. Do some research to see what has helped other people.
Physiological causes might be something simple like a reaction to birth control pills (if she is using these, there are many reasons to consider getting rid of them) or allergies of some sort. If she is older, the change could be related to menopause or some other source of hormonal imbalance.
Spiritual causes may be traced to roots of bitterness or lust. Lust manifests itself in anger and depression (inwardly directed anger) because it focuses our mental energy toward unobtainable goals which leads to frustration. Bitterness and cursing are like poisonous venom. These can be counteracted in ourselves and those around us by words of thanksgiving, praise and blessing. The goal is to take the anger and depression, which destroys our own life and the lives of those we love, and replace them with words and attitudes that build ourselves and those around us spiritually.
Contact any person you respect as being a model Christian and ask for them to pray for you and your situation, and to pass along your request to their church or prayer group. You may be amazed at what happens.
I do not know if your wife is cooperative with finding help, but if she is then there is a lot of hope for getting better. If she is uncooperative, you can start by doing all of the thanksgiving and praise. If she is cooperative, encourage her to make a list of people who have helped her over the years and write letters or notes of appreciation and mail them.
Hope these help. Prayers for you and your family.
The good news: The IRS probably knows you didn’t file, they probably know you’re “judgement proof” (even they can’t get blood from a stone), and they probably aren’t going to treat this like a major crime such as failure to pay grazing fees. You’ve got time for a professional to fix things for you.
The bad news: There are going to be some pretty big penalties.
It will be painful, but settling this honestly will be a whole lot less painful than letting it slide another year. I’d suggest that you pay what it takes, so you can move on with your life.
First you need to find out exactly what you owe...
You are scared, understandable, but until you know exactly what and how big the problem is, you can’t remotely begin resolve it.
My first step would find a good accountant/accounting firm and have them do your back and current taxes... Yes, this will cost you some $$, but once they are done you will know what you owe.
Then, if it turns out you owe the IRS a lot of money, go get a Tax Attorney and have them deal with the IRS for you.
If you owe the IRS modest amounts you can pay them over time, interest rates are high, but they will take monthly payments etc.
I would probably talk to a tax attorney either way once you know exactly how big the hole is you are in, but that’s my advice. You have to just take control and deal with it, attack it like any other problem, stop being paralyzed by fear and attack it head on.
Agreed, IRS for all their faults, usually isn’t out there attacking folks, they are fairly easy to deal with.... States can be absolute bastards, California as you mentioned are damn near mafia inspired in their tactics and behaviors.
In all things never forget that if you hire a lawyer, they are not your friend and he will not represent you as they are supposed to, he works for the state PERIOD.
the 1st question that has to be asked in the proper setting is “who is the injured party” they will refer back to “the United States" is the injured party, just so you know that is a lie. If there was an actual injured party they would have a name, and an address.
In all things, you have to do the research, and if you take this the court there are several things that you have to do, the 1st thing is going into court you have to "enter your appearance" now there's a strict form, but you have to follow when doing this.
Case law proves the broad “IRS fraud”
“For a crime to exist, there must be an injured party (Corpus Delicti) There can be no sanction or penalty imposed on one because of this Constitutional right.” Sherer v. Cullen 481 F. 945:
“With no injured party, a complaint is invalid on its face”. Gibson v. Boyle, 139 Ariz. 512
Supreme courts ruled “Without Corpus delicti there can be no crime”“In every prosecution for crime it is necessary to establish the “corpus delecti”, i.e., the body or elements of the crime.” People v. Lopez, 62 Ca.Rptr. 47, 254 C.A.2d 185.
“In every criminal trial, the prosecution must prove the corpus delecti, or the body of the crime itself-i.e., the fact of injury, loss or harm, and the existence of a criminal agency as its cause. ” People v. Sapp, 73 P.3d 433, 467 (Cal. 2003) [quoting People v. Alvarez, (2002) 27 Cal.4th 1161, 1168-1169, 119 Cal.Rptr.2d 903, 46 P.3d 372.].
the body of the crime has to be a living person somebody has to have been injured the state cannot be an injured party.
now for my disclaimer, I am not a lawyer, and this is not legal advice.
But I did stay in a Holiday Inn in Dubai UAE.
You lost me right there. Best of luck!!!
“If you cannot afford a tax-accountant, you can do it yourself.”
I’m not only a CPA but also a therapist. Degrees in both fields.... Most people develop a mental block in doing it themselves and it never gets done. The relief of sharing your situation with a competent professional is well worth it.
Ask people in business in your area who they would recommend based upon who they use.
Only select someone based upon qualified referral from someone who has utilized their services. Do not blindly select someone based upon their degree or credential.
Time is of the essence. Correct this ASAP as your wife is also harming her mental condition just by worrying about this and feeling that she let you down.
I’m not sure what state you are in, but you can scan your state’s CPA licensing lists online to find who is in your area.
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