Taxpayer asks:
Kelly,
I hope you can help with this one…
I have been contacted by the IRS that I didn’t file one year and the another year I didn’t file at all. They have sent me copies of my income and other information; the problem is that I don’t have any of my own paper work and have found out it was all destroyed by water while in storage.
I know that I owe, but they haven’t said how much and I have no way of finding out. I even sold a home during one of the tax periods but don’t recall the Realtors name or any other facts.
Can’t the IRS just bill me and let me make payments? I am 65, retired and on a fixed income. What do I do to settle this problem?
Thanks for any help you can offer,
Taxgirl says:
What the IRS likely did is send you the equivalent of a tax transcript – a list of the income that was reported to them by your employers and other sources of income. If that’s not the case and you don’t have a complete list, you can obtain your tax transcript from the IRS. Check out my prior post on tax transcripts for information about how to order one.
If there is no information regarding the sale of your home on the transcript, I am going to assume that it was a personal residence and that you qualified for the home exclusion. You can exempt up to $250,000 in gain – or $500,000 if you are married – from the sale of your home if it was your primary residence for 2 of the last 5 years prior to sale. If you qualify under those rules, then you would not pay tax on the gain up to your exclusion amount
Assuming that you have the information and it is correct, you have the option of either preparing a return to submit to the IRS or letting the IRS figure the tax. It is almost always better to prepare your own return than to let the IRS prepare it.
If you prepare the return – you can use the information from the IRS – you can send in a check for the tax due when you file your return. The IRS will bill you for any interest and penalty.
If the IRS figures your tax, you will receive a notice of tax due. The notice will include interest and penalty.
If you can pay the tax all at once, I would recommend that you do so. But if you can’t, don’t worry. You have some options. One option is an installment plan where you work out a payment plan with IRS. Another option is an Offer in Compromise – there are a few variations on a theme with an OIC but more or less, you work out a deal with IRS wherein because of hardship or administrative burden, you pay a lesser gross amount over a shorter period of time (in other words, more per month). I would caution that there are new fees and rules in effect for an Offer in Compromise and despite television commercials touting that you’ll only have to pay “pennies on the dollar” to the IRS, this should really be something consider when your other options have been exhausted.
In your case, I can’t emphasize enough how important it is to find a good tax professional to help you if you feel overwhelmed. An accountant or attorney would be a good check as you resolve your issues.
Good luck!
Before you go: be sure to read my disclaimer. Remember, I’m a lawyer and we love disclaimers.
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