How to correct old non-payments of tax/SS

State of Florida.
A relative of mine makes all their income from cleaning homes. They get paid completely "under the table" and has not files taxes for several years. This person would like to begin paying taxes and Social Security (as a self-employed person) so that later in life they can claim Social Security.

This person greatly fears being hunted down by the IRS and penalized into poverty.
What is the best way to get "back in the system" without sending up a lot of red flags?

There is no truly safe way to do this:

The IRS has a publication devoted to your problem, Publication 1715 (7-93) IT'S NEVER TOO LATE, , which you can download for free at the IRS site at: [url]http://www.irs.ustreas.gov/forms_pubs/index.html[/url] . I suggest you read the publication then decide whether your friend can handle this alone. In most cases, it is probably much safer to hire a CPA to handle such a situation, and that is what I would recommend.

Thanks for the info. I've searched the IRS web site till my fingers are bleeding and can't find that publication.
Do you know if there's another way to get to it?

Thanks

Here is a copy of the Publication (it is the exact pub except for the format). As I said above, I still recommend you hire a professional who can decide the best way to handle this in your specific case.



Publication 1715 (7-93)
IT'S NEVER TOO LATE

IT'S NEVER TOO LATE!
If you haven't filed a Federal tax return for a couple of years, you probably think the IRS is the last place you want to go, right?
WRONG!
As many as ten million people who should have filed tax returns in recent years failed to do so. If you are one of these people, the Internal Revenue Service wants to help you make a fresh start.
We are making a special effort, including assistance and education programs, to help you get right with the government.
This program is designed to help you get back into the tax system, but it is not a tax amnesty.
There is no time limit on this program, but the time to file is now, We want to help you put this problem behind you. The sooner you file, the sooner you can get on with your life.
WHY SHOULD I DO IT NOW?
There are three major reasons to come in an file as soon as possible.
Although there is no time limit on this initiative, not filing a return is costing more than you think. If you owe tax, interest and penalties are adding up more quickly than you may realize.
Generally, if you are due a refund for withholding or estimated taxes paid, you must claim it within 3 years or your lose your right to it. The same rule applies to your right to claim a tax credit such as the Earned Income Credit.
Also, if you are self employed and do not file a return, you may lose credits toward Social Security retirement or disability benefits. If you do not file, we cannot report your self-employment income to the Social Security Administration.
WILL I PAY INTEREST AND PENALTIES?
Interest and penalties do not apply to years in which you are entitled to a refund. About a third of those who file returns for past years discover they have a refund coming.
Interest and penalties do apply to years in which you owe money. The interest charged on late payments changes quarterly. During the last several years the interest rate has ranged from a high of 12 percent to a low of 7 percent.
The penalty for filing late is generally not more than 25 percent of the amount owed. The penalty for paying late is 1/2 of 1 percent per month, up to 25 percent of the amount due.
We recognize many people drop out of the system because of personal problems, including serious illness, a death in the family, or loss of financial records in a natural disaster. Tell us why you haven't filed. Depending on your situation, we may waive some of the penalties.
WHAT IF I OWE MORE THAN I CAN PAY?
Even if you don't have enough money to pay, you should file your return to avoid further penalties for failure to file. The IRS will work with you to find a solution to your problem.
The IRS has streamlined its policies for various collection procedures. Two of these procedures offer alternatives to resolve your account if you cannot pay in full with your return.
The IRS will work with you to set up an installment payment agreement when the situation warrants. Installment payments allow you to pay your debt over time.
Another way in which we will work with you is in considering an offer in compromise. In making such an offer, you propose to settle your debt for less than the full amount owed. An offer in compromise is appropriate if your debt is large compared to your assets.
WILL I GO TO JAIL?
Our long-standing practice has been not to recommend criminal prosecution of individuals for failure to file tax returns -- provided they voluntarily file, or make arrangements to file, before being notified they are under criminal investigation. The taxpayer must make an honest effort to file a correct return and have income from legal sources. A letter from your IRS Service Center concerning your taxes is not a notice that you are under criminal investigation.
Our effort to get people back into the system is part of a long- term plan to improve tax compliance. We want to get people back into the system, not prosecute ordinary people who made a mistake. However, we will continue to investigate flagrant cases involving criminal violations of tax laws.
CAN I GET FREE HEL FILING LATE RETURNS?
We have arranged special assistance and education programs to help you get back into the system. We will provide prior year tax forms and information concerning income you received. We also will help you complete the tax return if you need assistance. In addition, we will work with you in setting up payment arrangements if you are unable to pay in full at the time you file your return.
There are free assistance sites in many communities to help people get right with the government. Volunteers at these sites include tax return preparers and other tax practitioners. They will help complete your returns and requests for installment agreements, if needed.
To find out where help is available near you, call our tax information line at 1-800-829-1040.
WHAT INFORMATION DO I NEED?
You should bring any information relating to your income and deductions for the years you need to file. Some of the documents to bring include
--FORMS W-2. These are the forms you receive each year from your employers showing your wages.
--FORMS 1099. These are the forms you receive from banks and other financial institutions showing your interest and dividends.
--information on expenses you want to claim on your return, such as itemized deductions, child care expenses or business expenses.
--social security numbers for your children age one or older and any other person whom you claim as a dependent.
--a copy of the last tax return you filed.
If you do not have any or all of this information, come in anyway. IRS employees can help you reconstruct old records, such as income statements, that you need to prepare your old returns.
WHAT IF I DON'T FILE VOLUNTARILY?
We are taking enforcement steps for those who choose repeatedly not to comply with the law. Nationwide, 2,000 IRS agents are contacting people who our records show have not been filing returns.
Agents will prepare returns when taxpayers still do not file. We will send bills to those taxpayers for the tax due, plus interest and penalties.
People who repeatedly don't comply with the law are subject to additional enforcement measures.
STAYING IN THE SYSTEM
Many people don't file tax returns because they don't have enough money to pay the tax they owe. They find out on tax day that their withholding or estimated payments do not equal their tax bill.
We can help you avoid this situation by telling you how to ask your employer to withhold enough tax from your pay. If you have income that is not subject to withholding, we can give you the information you need to make quarterly payments to cover the amount you will owe.
Changes in your financial circumstances may have an impact on your taxes. For example, if your income goes up, you get divorced, or you sell an asset, you may need to adjust your withholding or estimated payments.
If you take these steps, you will be better able to meet your tax obligations and avoid tax day surprises.