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

[OHRoadwarrior]

WHich is an impossibility under the law.

So with all your supposedly great information (which I proved you to be incorrect in our last disagreement BTW), how does the IRS select the payback period for these agreements if you know better?

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

For supposedly being intelligent and an accountant, you do not seem to understand amortization schedules. Perhaps the fact you make tax law errors and you are a tax preparer is why you do not understand regular finance?

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

I never said it did.

Which is why you should not be responding.

At least I am smart enough to admit when I have a weakness. You like to pretend you are an authority and routinely provide incorrect information.

 

[LdiJ]

So with all your supposedly great information (which I proved you to be incorrect in our last disagreement BTW), how does the IRS select the payback period for these agreements if you know better?

There is not set payback period. They prefer to collect the debt within 4-5 years, but if that is not possible then they set a payment that they think that the taxpayer can reasonably pay, and then keep any refunds the taxpayer might normally receive, on top of that. They hope for an eventual improvement in the taxpayers financial situation so that the payments can eventually be increased.

For supposedly being intelligent and an accountant, you do not seem to understand amortization schedules. Perhaps the fact you make tax law errors and you are a tax preparer is why you do not understand regular finance?

Amortization schedules are not really used per se.

I never said it did.

No, but you did not acknowledge that either.

At least I am smart enough to admit when I have a weakness. You like to pretend you are an authority and routinely provide incorrect information.

I have to differ with that statement.

 

[OHRoadwarrior]

There is not set payback period. They prefer to collect the debt within 4-5 years, but if that is not possible then they set a payment that they think that the taxpayer can reasonably pay, and then keep any refunds the taxpayer might normally receive, on top of that. They hope for an eventual improvement in the taxpayers financial situation so that the payments can eventually be increased.

Informative, thank you. It coincides with my opinion the debt should be paid off as quickly as feasible in correlation to other loans OP might have. You generally start maxing payments on loans having the highest rates, unless you are trying to lower your overall monthly nut by paying off lower amounts of indebtedness.

Amortization schedules are not really used per se.

If you are talking about the foolishness of OP continuing on the payment plan he agreed to at that rate, it is very relevant as I proved. I prefer the accountants "quick method". Take the principal multiply by 1.XX (the interest rate) then subtract the principal and divide by 12. Compare that to the payment. You can see just how bad a payment schedule is in a few seconds.

No, but you did not acknowledge that either.

if you refer back to my statement, I did not think it necessary the IRS should have obtained their numbers from the same source.

I have to differ with that statement.

I try to get at the truth. I am not here to try and glorify myself or my opinion. Somewhere between everyone's opinions it usually can be found. I notice that neither you or dave jumped in to provide the matrix they will use since OP was likely used as dependent on mom's returns during this period. I think it foolish to kick up potential tax problems for mom and creating a bigger mess. Though you and Dave specialize in tax, I have been an accountant and run various profitability segments in different corporate areas. I may not be specifically a tax expert, I am however a very experienced generalist in several disciplines and industries. That means I am an expert in sales, marketing, finance and human resources. I specialize in making the money. You specialize in reporting it.

 

[LdiJ]

if you refer back to my statement, I did not think it necessary the IRS should have obtained their numbers from the same source.

Its been explained multiple times in this thread that until 2011 the IRS had no access to basis information regarding investment income...only proceeds. That is a critically important thing to acknowledge as it can make the difference between owing 10s of thousands of dollars in a given tax year, to getting back a refund due to a capital loss.

Example: Someone sells a stock worth 100k and they paid 110k for that stock. They did not remove any funds from their brokerage account so they were unaware that it was a taxable event. The IRS (prior to 2011) would receive a 1099-B showing the 100k. If no tax return was filed or a return was filed showing everything but that income, they would receive a letter from the IRS asking for taxes to be paid or for additional taxes to be paid. Assuming for the sake of the example a 25% marginal tax rate they would be asking for 25k plus interest and penalties. If the taxpayer did not know any better or did not get competent advice from a tax professional they would pay or set up a payment plan. In reality however, if the tax were properly reconfigured, the taxpayer had a capital loss of 10k, and would therefore owe no tax, or would be due an additional refund from their original return...while having a 7k loss carryforward to carry forward to the following tax year.

Whether or not someone was their parent's dependent for tax purposes would be irrelevant to that calculation.

In reality, because brokers buy and sell stocks within an account many times within a calendar year, the IRS could have received information showing 500k of stock sale proceeds, when in reality the taxpayer only had 100k in the account. Therefore the IRS could be asking for an amount of tax that is greater than their total asset.

I try to get at the truth. I am not here to try and glorify myself or my opinion. Somewhere between everyone's opinions it usually can be found. I notice that neither you or dave jumped in to provide the matrix they will use since OP was likely used as dependent on mom's returns during this period. I think it foolish to kick up potential tax problems for mom and creating a bigger mess. Though you and Dave specialize in tax, I have been an accountant and run various profitability segments in different corporate areas. I may not be specifically a tax expert, I am however a very experienced generalist in several disciplines and industries. That means I am an expert in sales, marketing, finance and human resources. I specialize in making the money. You specialize in reporting it.

You often make pronouncements that are entirely incorrect, and its only very rarely that you acknowledge that your pronouncements were incorrect no matter how much information is provided to you by those who do know the correct information.

 

[LdiJ]

Bottom line, this taxpayer needs a tax professional who can prepare actual returns for the years in question, to determine his ACTUAL tax liability.

 

[OHRoadwarrior]

You often make pronouncements that are entirely incorrect, and its only very rarely that you acknowledge that your pronouncements were incorrect no matter how much information is provided to you by those who do know the correct information.

Assuming for arguments sake you were correct, your claim is that I am no different than you or Dave. I aspire to be better. I will settle for being comparable at my worst, if that makes you feel better.

 

[anteater]

Its been explained multiple times in this thread that until 2011 the IRS had no access to basis information regarding investment income...only proceeds. That is a critically important thing to acknowledge as it can make the difference between owing 10s of thousands of dollars in a given tax year, to getting back a refund due to a capital loss.

Just a comment...

While the recommendations to try to determine the actual tax liability are spot on, I would point out that the OP gave no indication that the funds were invested in securities. The OP seems to indicate that the funds were held very conservatively - in CD's:

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.

Which would make sense if the funds and their use were court-supervised.

 

[LdiJ]

Just a comment...

While the recommendations to try to determine the actual tax liability are spot on, I would point out that the OP gave no indication that the funds were invested in securities. The OP seems to indicate that the funds were held very conservatively - in CD's:


Which would make sense if the funds and their use were court-supervised.

It would have to have been a seriously huge inheritance to generate enough interest income to result in him owing 81k in taxes, even with penalties. Interest rates were better in the earlier part of the last decade, but not that much better. Even 30k annually in interest income isn't going to translate into 81k in tax over 8 years, even with interest and penalties. Roughly that would come out to about 4k a year in tax, and even if you added another 2k to that for interest and penalties you still would only hit about 48k.

 

[anteater]

It would have to have been a seriously huge inheritance to generate enough interest income to result in him owing 81k in taxes, even with penalties.

As a sanity check, it would have helped if the OP had provided some rough numbers about the size of the inheritance.

The other item I meant to mention, but forgot, is that spreading the funds across 10 institutions sounds a lot like an attempt to maximize FDIC coverage.

 

[davew128]

So with all your supposedly great information (which I proved you to be incorrect in our last disagreement BTW), how does the IRS select the payback period for these agreements if you know better?

Saying you're right doesn't MAKE you right.

For supposedly being intelligent and an accountant, you do not seem to understand amortization schedules. Perhaps the fact you make tax law errors and you are a tax preparer is why you do not understand regular finance?

HAHAHAHAHA Amortization schedules. HAHAHAHAHA

At least I am smart enough to admit when I have a weakness. You like to pretend you are an authority and routinely provide incorrect information.

You don't, I am, and I don't in that order.

 

[davew128]

Informative, thank you. It coincides with my opinion the debt should be paid off as quickly as feasible in correlation to other loans OP might have. You generally start maxing payments on loans having the highest rates, unless you are trying to lower your overall monthly nut by paying off lower amounts of indebtedness.

Despite the fact that the IRS almost assuredly has the LOWEST interest rate of any debt the OP has INCLUDING his mortgage.

If you are talking about the foolishness of OP continuing on the payment plan he agreed to at that rate, it is very relevant as I proved. I prefer the accountants "quick method". Take the principal multiply by 1.XX (the interest rate) then subtract the principal and divide by 12. Compare that to the payment. You can see just how bad a payment schedule is in a few seconds.

Wholly irrelevant. The collection statute of limitations has already begun and will expire DECADES before your hypothetical last payment.

try to get at the truth. I am not here to try and glorify myself or my opinion. Somewhere between everyone's opinions it usually can be found. I notice that neither you or dave jumped in to provide the matrix they will use since OP was likely used as dependent on mom's returns during this period. I think it foolish to kick up potential tax problems for mom and creating a bigger mess. Though you and Dave specialize in tax, I have been an accountant and run various profitability segments in different corporate areas. I may not be specifically a tax expert, I am however a very experienced generalist in several disciplines and industries. That means I am an expert in sales, marketing, finance and human resources. I specialize in making the money. You specialize in reporting it.

One of the most if not THE most asinine comments I've ever seen. You truly know nothing about being a tax practitioner, let alone how to deal with IRS collections. There is no Matrix (although I suspect you've watched the trilogy one too many times). An installment agreement is based on ability to pay. PERIOD. Oh and FYI, Mom isn't exposed to any tax liability here.

 

[davew128]

While the recommendations to try to determine the actual tax liability are spot on, I would point out that the OP gave no indication that the funds were invested in securities. The OP seems to indicate that the funds were held very conservatively - in CD's:

I still see the maturity of CDs occasionally pop up on a 1099-B (and always remain curious as to WHY), and usually when there is a bank that has a financial services division. But yes, in a collections case involving someone for whom I did not prepare the tax return in question, verifying that the tax is correct is the FIRST thing I always do.

 

[OHRoadwarrior]

Despite the fact that the IRS almost assuredly has the LOWEST interest rate of any debt the OP has INCLUDING his mortgage.

So now you are going arbitrarily invent debts for OP to make yourself sound correct? Where do the aliens that have landed in the world live?

Wholly irrelevant. The collection statute of limitations has already begun and will expire DECADES before your hypothetical last payment.

Which is irrelevant to the fact OP has a repayment contract. Again you are going to arbitrarily invent a new scenario whereby your incorrect comments fit!!!

One of the most if not THE most asinine comments I've ever seen.

You should start reading your own. You say some amazing ones. You misinterpret tax law, when you are supposed to be a tax professional and manipulate information to try and fit the incorrect answers you have given when you are called on it. Two examples for which I just provided.

 

[LdiJ]

For the love of all things good you are getting absolutely ridiculous now.

So now you are going arbitrarily invent debts for OP to make yourself sound correct? Where do the aliens that have landed in the world live?

Yes, IRS interest rates are lower than any other form of debt. That is an absolute fact.

Which is irrelevant to the fact OP has a repayment contract. Again you are going to arbitrarily invent a new scenario whereby your incorrect comments fit!!!

No, the OP DOES NOT have a repayment contract. In the first place, IRS debt isn't "repayment" of anything. Nothing was "advanced" to the OP that now has to be repaid. An IRS installment agreement is completely different than a repayment contract. When someone has a repayment contract the terms of that contract cannot change without the agreement of all involved parties. Nor can "extra" payments be taken nor can payments be reduced when financial circumstances change, nor can someone be placed in uncollectable status when financial circumstances change. Its a totally different type of financial issue.

You should start reading your own. You say some amazing ones. You misinterpret tax law, when you are supposed to be a tax professional and manipulate information to try and fit the incorrect answers you have given when you are called on it. Two examples for which I just provided.

Dave was spot on...Dave in no way even remotely misinterpreted tax law. You have not said one single thing in this thread that was accurate as far as tax law is concerned, and certainly nothing that proved Dave wrong.

 

[OHRoadwarrior]

I think it so hilarious the both of keep supporting each others spouting of ludicrous garbage and massaging the incorrect info you each provide. If I was not here to correct both of you, everyone would think you both actually know what you are talking about. OP has in fact entered into a payment agreement. I never disputed IRS interest rates. Please show me one place I said anything about them being high!!! OK I agree it is a payment agreement not a repayment agreement, I misspoke. Regardless of which he has affirmed the commitment to pay. He can make additional payments. The two of you just keep massaging each others backs, misrepresenting the facts given by the posters and trying to pretend everything can fixed with the IRS by filing another form, when if you have half the experience you claim to, you know it is not that simple with them. It is a shame I am the only one with enough tax and finance knowledge to dispute the partially correct info you and Dave provide. It should not take twenty lines of arguing to get to the correct answers. That said, if you and Dave either insist posters get partially correct and misguided information, electing instead to support each others misapplications of specific tax regulations and neither of you have ever learned sound financial planning activities, we can continue to do this in thread after thread instead of working together as learned adults getting to the facts of each situation in a polite cooperative manner as everyone does in other threads.

We reached the facts of OP's situation several posts ago. All the latest ones have been you and Dave trying to misrepresent, alter and obfuscate the facts and surrounding information. OP can surely read through all the drivel to reach the facts he needs now, so I will let you both continue to self proclaim your supposed expertise and massage your own egos without further comment.

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.