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  1. #1
    Join Date
    Aug 2011
    Posts
    2

    Default IRS Wants Back Taxes from Years I Was Destitute

    In 2002, I lost a good job, and subsequently my home. I tried freelancing in the same field, but was not successful and my financial situation continued to worsen - various other poor choices led to other problems. Between 2003 and the next few years, I was occasionally homeless and did whatever odd jobs I could to make a living. I made very little during this time (12K, 14K, 12K and 6K, finally to 0 in 2007 before moving to another state and getting my life back in order). By 2009, I was making a living and filed taxes normally (which has continued through present).

    A couple weeks ago I received 3 letters from the IRS looking for back taxes for 2003, 2004 and 2005. With penalties and interest, they want just over 16K, and when I spoke with them, they said 2006 through 2008 needed to be filed as well.

    As I mentioned, I was transient for large chunks of time during those years, and don't have any paperwork or record of any possible deductions - the only records I have is the 1099 transcripts IRS sent after I requested them after receiving the notices. I still do the same kind of work, and can get a general idea of what costs I incur as related to my gross (by using 2009, 2010 and 2011 information), but IRS says that I have to have supporting documentation for any deductions I claim.

    I guess my question is just - with the above in mind - is there anything I can do? From my conversations with IRS, it doesn't look like they're willing to work with me at all, even though I'd expect had I filed normally, I wouldn't owe much (if anything).

    TYIA for any advice.

  2. #2
    Join Date
    Sep 2010
    Posts
    19,600

    Default Re: IRS Wants Back Taxes from Years I Was Destitute

    You won't get any break on not filing. Even if you can't pay you're expected to file. You're going to have to do the best you can. You may wish to consult a tax advisor (one who is in business year round, not one who only shows up in the spring to handle the April 15 rush). They're usually pretty good at helping you "recollect" what are expenses out of the 1099 reported amounts.

    In your current situation, you're not getting any break on the debt either. Your best position is to work out a payment plan.

  3. #3
    Join Date
    Jul 2007
    Location
    Florida
    Posts
    2,344

    Default Re: IRS Wants Back Taxes from Years I Was Destitute

    File the returns with the best information you can put together, even if from memory. The IRS wants the returns filed and you have a legal obligation to file them. Not having records doesn't excuse you from the legal obligation to file.

    Having said that, the IRS has to allow you "reasonable" expenses against your 1099 self-employment income. For example, if you were delivering pizzas they would have to allow some amount of vehicle mileage, whether you had perfect mileage logs or not. Do the best you can. You may be able to lower the total amount you owe with reasonably reconstructed expenses. Consult a professional for help if you can afford it.

  4. #4
    Join Date
    Aug 2011
    Posts
    2

    Default Re: IRS Wants Back Taxes from Years I Was Destitute

    Thanks both for the replies. I'm of course going to file - I wanted to know if it was reasonable to make a "best effort" at estimating what expenses I might have had, and from what I gather from your replies that is acceptable.

    flyingiron said "you're not getting any break on the debt either" - from the information on irs.gov, I knew that an OIC was unlikely (since I am able to make monthly payments), but I wonder if I'd be able to get the penalties waived (the IRS employee I spoke with said that penalties, but not interest, could be abated). Do I need to request an abatement for each year, or can I cover all years with one request? What kind of situations are they looking for when making that determination (whether or not to waive penalties), and does my situation as presented fit?

    Thanks again.

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