Back taxes = black cloud

What is the name of your state? New York

This is complicated, so I'll be as direct as possible.
I have been an independent contractor for many years in the commercial art field, and owe a lot of back taxes. I've filed, but have not paid. I am currently in an "non-collectible" category according to the IRS, due to my extremely low income. I have no savings, own no home, no car and my credit is horrible. In other words, I have spent most of my adult life being irresponsible, and now that I would like to make amends and repair my past mistakes, and build myself a new life, I'm not able to do so for the following reasons...
I have multiple health issues (HIV+, heart attack, etc.) and my ability to work has decreased almost to a complete halt. I have been on a fixed income for a few years, paid for by an HIV program here in NYC. I am now in the process of applying for disability, which I am confident I will receive.
If I am approved for disability, I will probably receive a retroactive lump-sum payment which could amount to several thousand dollars.
Is that money subject to attachment by the IRS? If I put it into a bank account specifically earmarked for disability money, can the IRS go in and take it because of my back taxes if I can prove I have absolutely no other assets or income? Thanks for the help.

inthehole said:

What is the name of your state? New York

This is complicated, so I'll be as direct as possible.
I have been an independent contractor for many years in the commercial art field, and owe a lot of back taxes. I've filed, but have not paid. I am currently in an "non-collectible" category according to the IRS, due to my extremely low income. I have no savings, own no home, no car and my credit is horrible. In other words, I have spent most of my adult life being irresponsible, and now that I would like to make amends and repair my past mistakes, and build myself a new life, I'm not able to do so for the following reasons...
I have multiple health issues (HIV+, heart attack, etc.) and my ability to work has decreased almost to a complete halt. I have been on a fixed income for a few years, paid for by an HIV program here in NYC. I am now in the process of applying for disability, which I am confident I will receive.
If I am approved for disability, I will probably receive a retroactive lump-sum payment which could amount to several thousand dollars.
Is that money subject to attachment by the IRS? If I put it into a bank account specifically earmarked for disability money, can the IRS go in and take it because of my back taxes if I can prove I have absolutely no other assets or income? Thanks for the help.

Click to expand...

If its SSDI they can garnish your monthly payments. If its SSI they cannot.

Do you have a bank account now? Is your current income going into that bank account? Have they levied or attempted to levy that bank account? Have you received an "intent to levy" letter at any point? Have they officially declared you uncollectable?

The IRS is not supposed to garnish SSDI or levy a bank account if it can be proven that you only have subsistance level income...that you are barely above the poverty line. However, they have to know this, and officially acknowledge that they know this in order for you to feel relatively safe from collection efforts. In addition, it may be necessary for you to periodically prove to them that your income is still only at subsistance level. They could levy the bank account and force you to prove it after the fact, if you have not taken care of things in advance.

One way to make that happen is to do an OIC (Offer in Compromise). However, its very expensive to get help from a tax professional to do that, and it would be difficult and time consuming to do it on your own. You have to be basically able to give them a lump sum of money, (however small) and demonstrate that they would have no ability to collect any more than that from you within the statute of limitations for the debt.

Another way to do it, if the debt is old enough, is to discharge it through bankruptcy. Since you state that you have been on a fixed income for several years, the debt may be old enough to be discharged through bankruptcy. That also would cost you some money, but it may be your best solution.

Another way, to do it is to respond to every letter from the IRS by sending them a net worth statement clearly showing that you have no real assets, and that your income is at subsistance level. However, that can be cumbersome and somewhat time consuming, and you have to be on top of it with every letter.

If you don't already have a clear record from the IRS regarding exactly how much you owe, and from what years, get one. Then, go get a consult with a bankruptcy attorney to see whether or not the debt is dischargeable, and also get a consult with a local tax professional (NOT one of those firms who advertises that they can settle your account with the IRS for pennies on the dollar) as well. See what both of them have to say based on being able to review everything. Then decide what to do.

From what little you have given us here, I am leaning towards you attempting to discharge the debt (or as much of the debt as possible) in bankruptcy. However, only a bankruptcy attorney, who can fully review your paperwork, and a local tax professional, can tell you for sure.

Previous strategies

Thanks SO much for your input and advice. For the sake of brevity, I left out the facts that I had gone to a tax-law clinic about five years ago when I was still in the position to work off my debt, in order to present an offer in compromise Also, I used another law clinic to start the ball rolling with bankruptcy.
The offer in compromise clinic was helpful only to a point because while I brought myself up to date on my past tax filing, the advisor there told me if I didn't start to actually pay the taxes and be totally compliant, the IRS wouldn't take the offer in compromise seriously, especially if I didn't offer them something substantial. I wasn't able to be compliant, because by that time my income was already very low and getting worse, and during that period I had the heart attack. So while my intentions were good, I was told after about a year of preparations that the offer in compromise wouldn't work. I wasn't sure whether he was completely accurate, but by that time, I had been going at it for so long, I felt defeated and at a dead end. So that's when I tried bankruptcy. I went to a law school bankruptcy clinic, but it seemed nothing ever progressed and the semesters kept ending, with new student interns constantly coming on and familiarizing themselves with my case. I followed that for three semesters and gave up there, too. Most of my tax debt is probably dischargeable through bankruptcy, but I can't afford a lawyer and these clinics haven't helped me. Should I try the bankruptcy route again and try to work out an arrangement to pay the lawyer? Did I give up too easily? Will beginning the bankruptcy procedure stop attachment by the IRS even though the bankruptcy process may not be done by the time I'm approved for disability? FYI, the IRS rarely if ever contacts me about my debt. I know they're out there looming, but I'm not being hounded, so I don't really have any correspondence to which I can respond. I really have wanted to fix this in other ways, as I explained, but I seem to keep hitting dead ends. The time and effort takes a lot out of me, and if it seems that my efforts are going to be fruitless, I'm hesitant to start yet another round. I literally have no cash and am completely discouraged about the prospects for rebuilding myself out of this hole with the IRS waiting out there ready to potentially snatch up any bits of progress I might make, which is why the idea of losing this future disability money has me in such a knot. My financial future seems so bleak and I don't know how to fix it.

uncollectible satus...

one more thing I forgot to mention. The IRS representative I last spoke to (about a year ago) told me I was presently "uncollectible" but I never received any official notice stating that. But since they haven't been contacting me, I assumed it was true.

one more thing

I don't have a bank account.

I think that you should try again to go the bankruptcy route....but with a bankruptcy attorney if at all possible. Perhaps you could work out a payment arrangement.

thanks

I realized after all my writing, but especially after reading your reply, that bankruptcy IS the best route and I should try, try again. I've already contacted a lawyer in my area and will have an appointment scheduled soon. Thanks.

I think you are trying to solve a problem you do not have. If the IRS is not bothering you then you have no need to do anything. Bankruptcy is going to have an adverse affect on you for some time. Whereas, you may be able to ride out the collection statute and the tax will go away without the need to destroy your credit even further. Sometimes doing nothing is the best decison you can make.

irsos said:

I think you are trying to solve a problem you do not have. If the IRS is not bothering you then you have no need to do anything. Bankruptcy is going to have an adverse affect on you for some time. Whereas, you may be able to ride out the collection statute and the tax will go away without the need to destroy your credit even further. Sometimes doing nothing is the best decison you can make.

Click to expand...

You missed that sometime in the relatively near future that he is going to get a lump sum disability payment. He needs a bank account for that and the IRS could levy a bank account. In addition, if he is receiving SSDI the IRS could garnish that as well. He could fight both of those things but the money would/could be tied up in the meantime.

The bankruptcy is safer.