Forestall State and Federal Wage Garnishment

[arrabiata]

California --

Have received some excellent and helpful advice from this forum. Circumstances have slightly changed. Here's the situation:

I have been out of the local workforce for a few years. I owe about 90 grand in state and federal back taxes. Both have filed liens. I am looking to clean up my act, but am virtually penniless. However, I anticipate making a 6-8 grand a month within the next couple of months. I was hoping to be a 1099 contractor with my new employer, but that is not possible and I'm afraid virtually every dime I make will get taken. Looking for the best strategy to buy myself some time from the State and IRS before any wage garnishment begins. I have zero records. As I have been overseas, I can't document my expenses. i am not even sure what they will be as I'm living with friends for a few weeks until paychecks begin.

I realize that to enter into a successful installment agreement or offer in compromise I may need to have far more substantiation than is possible and I very well may simply not qualify. Since liens have already gone into effect, if I get up to date with my past tax returns, and can salvage a few dollars for professional guidance in the next six weeks, is there a possibility that while my advisor is filing for an installment or offer in compromise that there will be no wage garnishments even though we both know I won't get approved?

In other words, is there a strategic way to stall for some time while I figure out how to simply pay off the taxes or find another 1099 job? 6 months would do it...

Thanks!

 

[davew128]

An OIC is not in your best interests UNLESS you think it will be approved. Using it to forestall collection efforts isn't wise because a) Any pending offer tolls the statute of limitations for collection. b) Unlike wages, 1099 payments can be levied at 100% after it gets rejected and c) You have to qualify for no user fee and the non-refundable down payment (20% I think) with the OIC.

There are better ways to handle this is what I'm saying.

 

[LdiJ]

California --

Have received some excellent and helpful advice from this forum. Circumstances have slightly changed. Here's the situation:

I have been out of the local workforce for a few years. I owe about 90 grand in state and federal back taxes. Both have filed liens. I am looking to clean up my act, but am virtually penniless. However, I anticipate making a 6-8 grand a month within the next couple of months. I was hoping to be a 1099 contractor with my new employer, but that is not possible and I'm afraid virtually every dime I make will get taken. Looking for the best strategy to buy myself some time from the State and IRS before any wage garnishment begins. I have zero records. As I have been overseas, I can't document my expenses. i am not even sure what they will be as I'm living with friends for a few weeks until paychecks begin.

The IRS will not deny you an installment plan if approached properly. I won't kid you, you will have to agree to make substantial installments, but the IRS won't deny you an intallment plan...and they won't be unreasonable. They WILL lift the levy if you agree to an installment plan. Why? because they can easily reinstate the levy if you do not live up to the agreement...and because they know that they have a better chance of recouping the tax if you are working and able to support yourself.

CA may or may not be as reasonable. States tend to not be as reasonable as the feds.

I realize that to enter into a successful installment agreement or offer in compromise I may need to have far more substantiation than is possible and I very well may simply not qualify. Since liens have already gone into effect, if I get up to date with my past tax returns, and can salvage a few dollars for professional guidance in the next six weeks, is there a possibility that while my advisor is filing for an installment or offer in compromise that there will be no wage garnishments even though we both know I won't get approved?

Again, the IRS will NOT deny you an installment plan. Forget the whole idea of an Offer in Compromise, because you are penniless and have nothing to offer.

In other words, is there a strategic way to stall for some time while I figure out how to simply pay off the taxes or find another 1099 job? 6 months would do it...

Thanks!

No, there is no "strategic" way to avoid/delay things. Your best bet to end up with enough money to live on, modestly, is to fess up, admit your sins, and enter into installment agreements.

Stop asking for advice on the internet and find yourself a local tax professional who is experienced with collections. DO NOT hire a firm that advertises on TV.

 

[arrabiata]

Appreciate all the advice. Just trying to get myself into a financial position where i can even approach a professional for much needed advice.

Looks like with a regular job the IRS will be onto me fast, so I'm going to hunt for a different 1099 position, because even though they can attach all the wages, i'm assuming I'll be notified of that first (I hope), and it has been said that they are not likely to discover that fact for some time.

As a 1099 employee, anyone have experience with how quickly the State (California) would be aware of my employment? Do employers file papers with the state right away or only when it comes time to pay taxes?

There's a possibility I could make some substantial income over the next few months and just would like to sock a little away before getting whacked hard and starting on any installment plan and paying for professional help.

 

[arrabiata]

If I am a 1099 in the state of California, anybody know if the new employee registry (which according to the EDD website is supposed to be solely for locating child support debtors) will share this information with the State Franchise tax board to help them locate tax delinquents, or will this information be kept apart until it is time for the employer to file taxes?

 

[LdiJ]

Appreciate all the advice. Just trying to get myself into a financial position where i can even approach a professional for much needed advice.

Looks like with a regular job the IRS will be onto me fast, so I'm going to hunt for a different 1099 position, because even though they can attach all the wages, i'm assuming I'll be notified of that first (I hope), and it has been said that they are not likely to discover that fact for some time.

As a 1099 employee, anyone have experience with how quickly the State (California) would be aware of my employment? Do employers file papers with the state right away or only when it comes time to pay taxes?

There's a possibility I could make some substantial income over the next few months and just would like to sock a little away before getting whacked hard and starting on any installment plan and paying for professional help.

Normally I am not this blunt, but you are nuts. Any kind of 1099 employment is just going to dig you a deeper hole with the IRS and the state, and make both of them less inclined to work with you. Regular W2 employment is what you want, (claiming the correct amount of exemptions on your W4, so that you have enough withholding to cover current tax). Its not going to cost you big bucks to get professional help with an installment agreement and that is what will get the levy lifted immediately.

 

[arrabiata]

I'm going to follow your advice and do everything the right way. Just looking to to SURVIVE and put a few dollars away over the next few months before I entrust the IRS with helping to determine what a livable allowance is.

Right now, I don't have a car, apartment, medical insurance, proper wardrobe -- starting from scratch. I want to establish myself and some reasonable expenses before any negotiations begin and the IRS says I only need $600 for an apartment in L.A. or a few thousand for a car. I'd rather have the car and already be committed to the modest $400 a month payment, have the first/last/security invested in the modest apartment, new work clothes, etc, before stepping to the table.

Not sure why they wouldn't work with a 1099 contractor. They can take it all, if i don't live up to my end of the deal.

Truly appreciate the advice. Really not that nuts, just more down on my luck than you probably realize. Sometimes survival is the first priority. Have $100 to my name. I truly agree with most everything that's been said and will definitely get pro help in the next 60 days.

Thanks!