So I'm 23 Years Old and Owe the IRS $81,000

[JMStyles]

Greetings All,

I decided to join the forum this afternoon in order to get some advice from others.

It's a bit of a long story, so I will do my best to simplify it…

I inherited a large sum of money through the accidental death of a relative. The funds originated sometime in 2000 and increased on a yearly basis with high interest rates. The funds were dispersed to 10 different financial institutions all within reasonable distance from my previous residence. Throughout this process, my funds were overseen by a particular department in a local Courthouse nearby my home. For example, at 14 years old, I couldn't walk into one of my banks [for this example, lets say Bank of America] and pull out any funds from my Guardianship/CD account. My guardian [Mother] and I had to walk into the Court building, go to a particular section of the building, and submit a request through a desk clerk to a judge for a fund withdrawal. Generally, unless the request was tuition/school/education related, they would deny my request. So if I asked for $1k for a new cell phone, digital camera, xbox, sneakers, and other non-essentials, they would deny it right on the spot. However, something like a Dell desktop computer was approved due to it being for an educational purpose.

Anyway, neither the Courts nor my mother reported my earnings to the IRS from 2001-2007. It was when I turned 18 that we were then informed by my mothers tax consultant that those funds should have been reported. The IRS held me responsible, and since, have asked that I pay the taxes I owe, failure to pay fees, and interest charges that were assessed during that time frame. I decided to simply ignore their requests for such an extensive amount and continue to "live my life". NY State then contacted me and informed me that I owed them as well, something along the lines of $30k. I decided to shell out the funds for them, but still opted to avoid the IRS. Now keep in mind, my family didn't grow up "financially inclined", so I didn't exactly understand the future repercussions for my current actions.

A majority of the funds were used for a home I purchased in 2009. The rest, for miscellaneous other items.

In 2010, one of my primary bank accounts were frozen. My mother and I decided to seek "Tax Relief Support" with one of those annoying commercials in order to restore myself in good financial standing. Two years and approx $8k later, we realized that the company, Power Tax Relief, was nothing but a major scam.

Back in April of this year, I contacted the IRS and removed Power Tax Relief as a representative on my behalf. I have since then agreed to a monthly installment agreement of $200 as it is all I can afford. None of my accounts are levied or frozen at this point.

I'm now 23 years old, making just under $50k/yr working for a financial institution [go figure, right?], and judging from the numbers, I won't be done paying the IRS until I'm approximately 57-58 years old.

My employer offers (partial) legal assistance, but because I've just recently started with the company, that assistance won't be effective until January 1st 2014.


Can anyone offer any advice that may help in my current situation? I truly don't feel responsible for this ridiculous payoff as I was merely a child when all of this occurred, and I feel it should've been properly handled through the courts during that time period… Yes, I could have also paid it during my 2008-2010 timeframe, but even so, should i REALLY be responsible? Should they REALLY attempt to collect such a ridiculous amount from a minor who had NO immediate access to his funds up until he reached 18 years old? [other than the educational requests that i previously mentioned] My mother has even opted to take full responsibility for the situation, but I feel even if it is somehow possible to forward the debt to her name/SSN/etc, it really isn't fair….


Any advice/help you guys may offer is greatly appreciated.

Much thanks,
J

 

[justalayman]

Any advice/help you guys may offer is greatly appreciated.

Much thanks,
J

any advice?


take the money out of one of your many accounts and pay the entire amount at once. It will save you interest and it will allow you to stop worrying about having that outstanding debt

 

[tranquility]

Before you start blaming everyone else, do note the fact you decided to ignore the tax and buy a house. Years ago you would have had a cause of action against someone for the penalties on the failure to pay the tax. It is years after that point now and I don't think you would have a cause of action within the statute of limitations. There are some statutes of limitation for the IRS to collect so I am uncertain how long they can continue to attempt collection. My guess is you extended the statute when you agreed to a payment plan. Especially when the amount demanded was $200 on such a large debt on a person who seems to have some assets and income, I don't see how you are going to get a much better deal with re-negotiations at this point.

The first step is to see a good tax professional. Not the ones on TV, just a CPA or enrolled agent with experience in dealing with IRS collections. Let them look at the facts and see what can be done at this point and what you can expect. I'd get your file from the other firm first to bring it with you to your first appointment. Frankly, $200 seems a good deal. If the firm you paid money to negotiated that, they may have earned their pay. The IRS can take much of your stuff if they feel the debt will be paid and stopping that may have been because of your agreement. But, you're in a place where the specific facts like the time of assessments and if you filed returns might make a big difference on how long the IRS can collect. You can also see an attorney if you'd like to see if anyone is within the statute of limitations for whatever violations that may have occurred against you, but I bet they have run and you are the one left holding the bag.

 

[davew128]

Something doesn't smell right. If the money was held in a trust then OP was never responsible for the tax as the income looks like it remained in trust. If it was just an UTMA account (and thats not sounding right either based on the language used on the need to justify the expense), then yes OP you are responsible.

The blame can be shifted to your mom, but the tax burden cannot. It was never HER money. Quite honestly buying a home with a huge tax bill sitting out there was one of the dumbest things you could have done.

 

[LdiJ]

There is also the chance that he doesn't actually owe that much tax. If we are talking about tax on investment income a lot of what the IRS is viewing as income might have been the proceeds from the buying and selling of stocks. If so, up until 2011 the IRS never received any information about basis, and therefore treated the entire proceeds as taxable until told otherwise. Some of that 81k could go away if that is the case.

 

[FlyingRon]

There is also the chance that he doesn't actually owe that much tax. If we are talking about tax on investment income a lot of what the IRS is viewing as income might have been the proceeds from the buying and selling of stocks. If so, up until 2011 the IRS never received any information about basis, and therefore treated the entire proceeds as taxable until told otherwise. Some of that 81k could go away if that is the case.

Boy don't I know about that one. When I transferred my accounts from one firm to another (my broker moved and I followed him), the dunderheads at Ameriprise reported all my stocks as being sold. I got a tax notice that they wanted a quarter of a million dollars when I hand't sold anything!

 

[Mass_Shyster]

It doesn't seem very credible that you earn almost $50K per year, have plenty of equity in your home, but can only afford to pay $200 per month.

Nevertheless, it's possible the debt can be discharged through bankruptcy. This would require (among other factors) that your tax returns have been filed for the years when you received the distributions.

 

[LdiJ]

It doesn't seem very credible that you earn almost $50K per year, have plenty of equity in your home, but can only afford to pay $200 per month.

Nevertheless, it's possible the debt can be discharged through bankruptcy. This would require (among other factors) that your tax returns have been filed for the years when you received the distributions.

50k does not go as far as it used to go...sadly...particularly if you are a single person who cannot itemize.

 

[OHRoadwarrior]

50k does not go as far as it used to go...sadly...particularly if you are a single person who cannot itemize.

Yet others live on $16k jobs.

 

[cbg]

I decided to simply ignore their requests for such an extensive amount and continue to "live my life".

This is the point at which you screwed yourself, to put it bluntly. Up to that point you had a prayer of getting some relief based on the fact that you were a minor who should not be held responsible for the non-payment of taxes on funds you did not control, but when as a legal adult you made the decision to ignore them, it became your problem and your bill to pay.

You may be able to get the amount adjusted but you will NOT do so successfully without a very experienced tax attorney.

 

[LdiJ]

Yet others live on $16k jobs.

The IRS agreed to 200.00 a month. The IRS doesn't agree to that kind of figure unless the IRS believes its reasonable based on the OP's situation.

If I was at work rather than at home, I would pull together figures to demonstrate what I meant, but I am not, and I am not in the mood to do it all by hand. However, I will tell you that someone making 16k, with three children, could almost, between food stamps, Medicaid, daycare assistance, Section 8 housing, earned income credit and additional child tax credit be almost better off than a single person making 50k, in some parts of the country.

And I bet that there are not many 16k single earners, without children who don't live with their parents.

Anyway, I still have serious doubts that this OP really owes as much tax as the IRS thinks they owe, because I don't believe that this OP has received advice from a real tax professional yet.

I also am beginning to have some doubts that the OP's situation is a real one, because if it was, it would have reared its ugly head far sooner than it did.

 

[davew128]

Nevertheless, it's possible the debt can be discharged through bankruptcy. This would require (among other factors) that your tax returns have been filed for the years when you received the distributions.

I'm under the impression that they were not since the OP seemed completely oblivious to the obligation.

 

[davew128]

The IRS agreed to 200.00 a month. The IRS doesn't agree to that kind of figure unless the IRS believes its reasonable based on the OP's situation.

Thats an installment agreement amount which is solely based on available income, not equity or available funds.

 

[OHRoadwarrior]

The amount appears to be a "target" amount. It almost maximizes the amount of interest the IRS collects, before OP gets into a potential position to retire. About 50% of what he pays goes to interest. OP could certainly have filed returns, however, on the surface it appears the IRS determined their numbers based on the original amounts and OP was claimed as a dependent for those years. Honestly I do not have the knowledge on IRS regs to determine the potential effects of this on OP or mom who used him on her return it appears.

The IRS agreed to 200.00 a month. The IRS doesn't agree to that kind of figure unless the IRS believes its reasonable based on the OP's situation.

If I was at work rather than at home, I would pull together figures to demonstrate what I meant, but I am not, and I am not in the mood to do it all by hand. However, I will tell you that someone making 16k, with three children, could almost, between food stamps, Medicaid, daycare assistance, Section 8 housing, earned income credit and additional child tax credit be almost better off than a single person making 50k, in some parts of the country.

And I bet that there are not many 16k single earners, without children who don't live with their parents.

Anyway, I still have serious doubts that this OP really owes as much tax as the IRS thinks they owe, because I don't believe that this OP has received advice from a real tax professional yet.

I also am beginning to have some doubts that the OP's situation is a real one, because if it was, it would have reared its ugly head far sooner than it did.

 

[davew128]

The amount appears to be a "target" amount. It almost maximizes the amount of interest the IRS collects, before OP gets into a potential position to retire.

WHich is an impossibility under the law.

About 50% of what he pays goes to interest.

IRS interest rates have averaged 4% over the last decade. Another incorrect statement from you.

OP could certainly have filed returns, however, on the surface it appears the IRS determined their numbers based on the original amounts and OP was claimed as a dependent for those years.

This I WILL agree with you about. It also doesn't preclude OP from FILING those returns and reducing the tax.

Honestly I do not have the knowledge on IRS regs to determine the potential effects of this on OP or mom who used him on her return it appears.

Which is why you should not be responding.