Posted on 04/18/2014 6:39:07 PM PDT by elahtap
I wouldn’t panic. The IRS isn’t going to suddenly show up and seize your house. your bank accounts, etc. You’re a long way from that. Start getting all the paperwork together obviously for the earliest year first. The easier you make it for the accountant, the less it should cost. Once you have the returns ready to go, you’ll know where you stand.
It’s after April 15th which helps some. Look around for a good accountant. A bookkeeper is out. I wouldn’t deal with any of the national firms. Once the accountant is finished, that will tell you if you need a tax attorney.
Again don’t panic. Be methodical. Chances are with the losses you’ve sustained, you don’t owe anything. My guess is you may have money coming back.
BTW, BTDT.
“Welcome to FR.”
Agree. I remember there was one time that a fed had set-up here trying to draw us into giving advice that is illegal. Thankfully we smoked him out.
Not audited yet. But I can’t “not do nothing” forever. That day WILL come.
Papers and records which you can assemble on your own mean that a $45/hour para-accountant will not be toiling over them.
The way to organize such things is to organize things WITH A VIEW to how you will need and summarize them for the process of filling out a tax return. I don't know how skilled or experienced you are working through a tax return. But get a copy of Turbo Tax AND HAVE IT INTERVIEW YOU as to what records you need to get. TTax does this, and has, for at least the last 3-5 years, maybe more.
Most very small businesses operate out of their checkbook(s). That's the central repository of transaction information. Additionally, you should be able to go to your bank and get a readout of every check and every deposit you've made to/from your biz ckg account.....assuming you made that move to create such an account. If you didn't you didn't and you will still need your bank statements and checkbook(s).
EVERY HOUR you avoid of "professional help" is probably $45 in your pocket, if not much more. "Professional help" is not an office worker asking you "OK, is this your 2012 checkbook"? Did you write business-related checks out of your personal account?" "OK, do you think you can find your 2011 checkbook?" Would you pay someone $150 an hour to ask you dumb question like whether you spent this check on a ream of paper for your personal life or for your business. You will pay thousands of dollars to arrange and organize such things and ANY POSSIBLE RESOLUTION will require you to organize them, whether it is the IRS, an accountant, or yourself so GET ON IT and DO IT.
It is also entirely possible that the exercise of commencing the filing of a Schedule "C" (even in arrears as you are contemplating) and the payment of SE Self Employment taxes, both of which are or will be triggers for certain lines of inquiry (where is your biz account? Is there a deduction for home office expense (don't even think about taking such a deduction) MAY NOT EVEN BE WORTH IT. You can't know without going through the exercise of filling out the tax forms, and you do that, and find out what forms you might need, by going through the Turbo Tax interview process. Don't concern yourself with whether the TTax is for whatever year. What has changed are the tax tables, which you can download from irs.gov for prior years. The flow of numbers through the forms hasn't really changed much.
Now, imagine two scenarios: In one, you are "I am an idiot and I did this and I can't remember whether this checkbook is for 2011 or 2012" In two, you walk into a CPA office with 3 years of draft tax returns on IRS-forms, together with organized supporting records gathered together and ask to be represented.
There's probably $5K in fee difference. If it was an attorney, it would be $50K.
I doubt it's as bad as you think, the business I assume will count as losses to help offset the taxes on the IRA withdrawals.
The sooner you deal with it the less it'll cost you... so get on it ASAP.
Never ever talk to the IRS directly... that's like a person charged with a crime trying to talk to the prosecutor directly.
I concur with your advice. I would also recommend getting your records as organized as possible, by year.
Then collect all documentation you can having to do with the business and personal finance and contact a tax accountant. Spending now on an accountant and attorney may sound expensive, but the alternative could cost a lot more. Many people don't want to bring up a spouse with bipolar, but many times it explains a lot of why things went the way they did. Don't be angry with your wife about her illness, but be straight with her and her doctor going forward. If she's really not doing well you may need to get power of attorney to move forward before she is ready to be a part of the process.
Generally this is good advice, but I’ve NEVER had anything like this over my head (never been in debt, never been arrested, etc.).
I try to take and enjoy life as it comes, but this is what they call a major bummer.
I listen to Rush (and Mark Levin) almost daily. My initial impression of those tax firms that advertise on their shows it that these firms are there to take advantage of people in desperation.
I might be wrong, but I have imagined they are one tier above title pawn operations.
I have not received ANY letters yet. Yet is probably the operative word.
I'm thinking they are going to rip into me because I haven't filed, either business or personal, in 3 years now. Are they going to let that go on forever?
Relax. A good accountant might be able to save you from having to pay the IRS anything. You don’t need an attorney, yet. You only need one if the IRS starts demanding money from you....
Do this for each year. Your bank can help you get these figures. Subtract your expenses from income and this will give you at least some rough idea of your tax liability.
Once you know this, you will better be able to decide what your next step should be and etc. (e.g., hire accountant to get your books in order, hire a tax attorney to represent you - if needed).
Timeliness is important, getting this right - more important.
Best wishes for a suitable outcome,
Thanks for the welcome. And I don’t want any illegal advice.
As I said in my original post, I’ve always paid my bills (including taxes) and don’t like trouble in my life. I want to do the right thing. Just not sure where to start.
And by the way, folks, I appreciate the counsel. I already see some solid suggestions and from lurking here so long, I know this is a caring community. And it wasn’t just flattery when I said this group was smart.
Call Dave Ramsey.
Get a cpa, you dont need an attorney until the irs gets nasty.
Depending on the structure of the business there are penalties for not filing. For an s corp, line mine, the penalty was 175 per month per owner. I could be high on that but its expensive. They can waive the first time but wont the second.
Most likely the business profit or loss feeds through to your personal income. So you wont owe “tax” but will have the penalty. Youll also have penalties for the personal taxes. The bigger issue is there are limits to how long you have to claim a refund. I think its 3 years. So you can file your taxes and deserve a refund but they wont pay because its too late.
The issue im currently dealing with is my old payroll company created a second tax id for my business. So my quarterly and annnual reports were all filed wrong. With the feds and about 6 states. So youre not alone.
You’re getting a lot of good advice here. But I’ll add my 2 cents.
Put the numbers together as best as you can before you take them to an accountant. As one poster says, that will save you money.
If you don’t know where to start, try doing a cash flow analysis - what came in, when? And what was spent, when? Work at categorizing income (sales of books, plumbing income, whatever your business was) and categorizing money outgo (gas for the car, product purchased for resale, wages paid, office rent, etc.).
When you have your finances organized, then find a small CPA firm to help you put your books into proper order and create tax returns. The CPA firm will understand things like accrual based accounting and tax vs. book depreciation, etc.
Talk to local small business owners and see if they can recommend a local CPA or small CPA firm.
I don’t think you have to worry about the lawyer yet. That may be necessary, but first you have to identify how big or how small your problem truly is. The CPA firm can help you with that.
I have a similar story, without the investing in a business and losing 80k. I didn't file for about 5 years after 4 years of losing at least a day of work a year visiting my CPA to find the mistake that the IRS made. Their mistake in every case.
I just made sure that in those missing years I paid more than the estimated tax.
Long story short. Find yourself an "enrolled agent." They pay for themselves, plus, with a shortage of records due to the elapsed time. I had retired in the meantime, and ended up getting around 20K back.
Enrolled agent offices are not that numerous. I was lucky to find one about two miles from home.
I just googled "IRS Enrolled Agents," for my city, read the requirements to become one and to maintain the title, and it was not a disappointment.
The best of luck to you.
I hope you find as good a one as I did.
The IRS will not do anything without sending notices first. They will send a ridiculous number of warning letters. You might be completely off their radar. Do not volunteer for trouble by contacting them.
If you have the money for a Tax Accountant, then you can organize your info and get their opinion. I would absolutely avoid Tax Attorneys: you are not a tax cheat; you are a bad book-keeper.
Did your employer or anyone else report your info to the IRS?
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