I’m Darrin T. Mish, and I help people find the light of day when they’re experiencing tax problems. I’ve been at this a long time and found my niche helping people based on my own IRS challenges. I can help individuals who have missed the tax deadline. Click here to read or watch more IRS Help resources.
Over the years, I’ve amassed an entire economy of tips that have helped people from all walks of life. People miss the tax deadline each year for a lot of reasons. If you didn’t make the tax filing deadline for April 18, 2016, or you didn’t at least file an extension, you may be collecting penalties and interest. Your penalties could end up being one-half of one percent each month. Click here to watch or read more information on IRS Back Taxes.
Are Larger Tax Liabilities Beneficial?
They can be, and here’s why. It might sound a bit wacky, but larger tax balances tend to be easier to compromise with the IRS. We’re referring to an Offer in Compromise when amounts are owed the IRS. I know this because my typical client is someone who hasn’t filed their taxes for quite some time.
When we finally sit down to figure out their taxes, it can end up being a large amount. I help clients decide if they want to do an Offer in Compromise, or wait a few years and do a bankruptcy.
Or, perhaps an installment agreement is in order. Some choose to get an equity line of credit on their home and just pay off what they owe the IRS. Depending on the individual’s unique circumstances and facts, there are many options.
The client and I will review each option. The IRS has up to two years to accept or reject your Offer in Compromise. They have to reject it within the two-year period, or it means they will have to accept it without question.
Inaction Due to Fear
Some people, having missed the deadline or not having paid their taxes for years, freak out at the thought of clearing up the matter. They fear going to prison, and succumb to stress and all kinds of anxieties. Their mental state is in shambles.
I’ve worked with people who thought the IRS was even lurking outside their door. These people generally fit into two categories: those who allow their fears to subside and those who remain freaked out. It’s those who still fear that sometimes fail to communicate well. Often, they’re under the impression that writing me a check will make the problem disappear.
Challenges with Bank Statements
We live in a paperless world, and things can get complicated when the IRS requires bank statements that go back over a period of years. One of the faults that many people have in common is that they fail to prioritize and think logically. Many of the behaviors that got people into trouble with the IRS show when they try to find a solution to their tax problem.
They procrastinate and fail to put in place a plan. It’s like everything in life. You must have a plan and a path to execution. One of my biggest challenges with clients is that not all clients cooperate. Even though they feel the weight of the IRS bearing down on their shoulders.
Back to Bank Statements
Generally, people will need about three months of bank statements for their presentation with the IRS if it comes down to this. Three months isn’t much to ask for. People can just log into their bank accounts and print out three months of bank statements.
I try to make this easier by providing software that can be used to answer a questionnaire about their finances. They can then mail the questionnaire to me. It allows me to gain insights about their financial life and to brainstorm solutions. They’ll answer some questions wrong, but that’s okay. It all comes out in the wash, as they say.
When Mental Disorders Affect Decision Making
I’ve also realized over time that there are conditions, some mental and some physical, that may be why they missed the tax deadline. Such conditions can affect people on an emotional level. If people have problems dealing with small things, then there’s a chance they’ll have the same issue with the big things in life.
I also used to do criminal defense work, and I know firsthand how those with mental disorders tend to make irrational decisions. Sometimes over and over again. Not departing from tax issues, but it illustrates there can be emotional problems that make it harder for people do deal with tax issues.
My task is to help get people mentally clear and to help set them on the right path with their taxes. Things usually go well after that.
1099s for Credit Card Transactions
The question is often asked by small business owners if a 1099-MISC form must be sent to the contractor. Not all the time. The general rule is that it’s not required if the recipient is paid less than $600 for the previous year.
A combined payment of $600 or more thrusts the 1099 into action. If the payments were electronic, payment and credit card companies will handle any required reporting. The payer doesn’t have the obligation of reporting, but the bank or entity that processed the payments takes on the responsibility.
E-filing and October 17
I also inform clients that they can e-file up until October 17, which is the extensions filing deadline for any year. Of course, e-filing may seem a bit freaky for those who’ve never attempted it or had it done by their tax preparer. Since so many things are done on the internet these days, it’s a viable way of handling things.
Overcoming One’s Fear of Paying Taxes
The fear of filing a tax return can affect people who function well in almost every facet of life. This fear can cause people to miss filing for years on end. They’ll even find ways not to open letters with a return address to the IRS.
The typical individual may have a good job, and have money withheld on a regular basis from their paycheck. Their children may be completely grown. Some of my clients fit this description and have not paid taxes in 30 years.
So, why do people fail to file taxes? Some people just freeze. Others fail to file because they’re perfectionists. Rather than get their filing wrong, they would avoid paying taxes.
And others are worried they won’t have enough money to pay what they think they might owe. Their thinking is that they won’t be missed among the 1.4 million people or so who fail to file their taxes each year.
Note, there’s a three-year deadline to recover a tax refund owed to you. That deadline is April 15; three years later from when a person should have filed.
Consider that there are people with more than enough to pay for what they might owe the IRS. Millions of people would actually receive refunds if they filed. Those refunds can total close to $1.2 billion for any given year.
America Is a Nation of Procrastinators – Our Tax Returns Prove It
During any given year, one in seven people will wait until the last minute to file their tax return. On average, 13 million people may request an extension each year. Of those, the majority will wait until the last minute on October 17 to file.
Why Fear the Tax Man?
There’s really no reason to be afraid of the tax man. If you’re experiencing a tax problem, cooperate with what the IRS asks and meet the deadlines. The IRS is helpful with keeping copies of third-party documents, like W-2s 1099s, 1098s and K-1s. You can always get these records and fill in the blanks from other records on hand.
You might even say that avoiding paying taxes is like placing your head in the sand and hoping the situation will get better. But the last thing in the world you would want is to try and take money out of the bank; only to realize that your balance has been seized by the government. That would be the time to consult with a tax attorney, or at least to call the IRS and let them know what you’d like to do to resolve the matter.
It’s a possibility that you can fit into an “uncollectible” category. Such a move by the IRS might buy you an extra year to better your financial situation and devise some type of acceptable payment plan.
This is another instance where an Offer in Compromise (OIC) might work for you. The IRS may even be willing to set up a payment plan for you as well.
Just keep in mind that when you finally get around to paying taxes, there are options. You don’t have to be afraid of the IRS.
You can learn more from my podcast episode titled Tips to Follow if you Missed the Tax Deadline.