Posts Tagged ‘back taxes’

Owe back taxes, but have no money to pay them? Suggestion:

Sunday, April 10th, 2011

Many years ago I found myself in a tough situation.  I owed the IRS for 2 years of unpaidself-employment income taxes.  I had some medical problems and was unemployed part of the time.  The rest of the time I just wasn’t making much money at all.  The IRS was hounding me all the time for the money, but I just didn’t have it.

Sometimes, we just have to do what we have to do to get by.  I am sure a lot of you can relate to that.  So I wanted to share some information with you that I learned while going through that time.

If you are in a situation like I was… no money and you owe taxes… the IRS does have options.  The IRS can work out a payment plan for you if you request it.  If you absolutely cannot make payments (like me at that time), they have something called a “currently non-collectible status” or “currently uncollectible status”.  This puts your tax accounts into a hold status.  It stops all collection processes until you get back on your feet.  However, it does have some down sides that you should be aware of.  While in that status, the statute of limitations for collection of taxes is also put on hold.  But the most important thing (and they failed to tell me this at the time) is that they might place a lien against you for that tax amount.  They did not tell me that would happen until after I had agreed to being put in that status over the phone.  So I ended up with two federal tax liens. 

That was the beginning of my tax problems for, which ultimately led to me filing for and receiving the IRS Offer In Compromise (explained in other bogs).  My OIC caused those tax liens to be released, but they are still on my credit.  If you can avoid the tax liens… do so.  It’s extremely difficult, if not almost impossible, to tax liens removed.  And they make your credit look pretty bad.

I thought I would share this information in case someone else out there is struggling too and feels like there is no hope.  You might have to take some hits in some areas, but sometimes you just have to take a few steps back to go forward again.

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Posted in Taxes | 5 Comments »

How the IRS Offer In Compromise effects the First Time Home Buyer Tax Credit

Wednesday, March 10th, 2010

I have run into quite the dilemma!  If you have been following my blog, then you know that I had my IRS Offer In Compromise accepted in 2009.  When you have an OIC accepted, you must agree to let the IRS take any tax refund you are entitled to for the year the OIC is accepted.  So for me, any refund I am owed for 2009 will be kept by the IRS. 

 The tax debt I owed on was acquired prior to myself being married and was a very long time ago.  So my husband is considered an “injured spouse” in IRS terms and none of his refund is ever taken to pay my tax debts.  So we know with certainty that his income tax refund will go to him and not be used to pay my old tax debts even though we file jointly (we did this last year too).

My issue here is that my husband is buying our first house this year.  It’s going to be in his name only, not mine.  So he will be be getting the first time home buyer tax credit.  If he files taxes separate, he only gets $4k for the credit.  If he files jointly with me, then he gets the full $8k credit.  Which makes it seem like me being added to the taxes involves doubling the credit… which would make it seem like 50% of the credit is considered mine.  My concern is that the IRS will take that additional $4k (50%) as if it were my half and apply it to my old tax debt. 

Now I have looked all over the Internet for information on how the two work together, but there is NOTHING that I could find.  So I called the OIC department and asked the lady who accepted my OIC.  She told me she “believes” that the IRS will not take any of the first time home buyer tax credit to pay my back taxes per my OIC agreement.  She was not 100% sure of that though.  I told her I wanted a firm answer and something in writing.  She refered me to the IRS Tax Law department.  The woman there said the same thing… that she was pretty sure they wouldn’t take that money from us… but she wasn’t 100% sure.  She refered me to the Injured Spouse department.  The guy there explained that the there is no set rule designating where those funds must be allocated in any certain situation.  That the IRS will apply them however we say to on the Injured Spouse form we must fill out.  So basicly, my husband has to put that the whole $8k is supposed to go to him.  This IRS guy could not give me any documentation to support this and I didn’t feel very confident about what he was saying.  I can just see them saying that, we fill out the form saying the money goes to my husband, and then they say “no… it doesn’t work that way”… and they take the $4k from us.

We really need the money now.  Being that we have to borrow against it in order to get our house.  But at this point feel like if we file for it on our 2009 taxes that we are taking a huge risk of losing 50% of the credit to the IRS.  We can always wait until 2010 tax filing to claim the credit in full, but that will make things hard on us as we would have to come up with the money to pay back the loans for our purchase expenses. 

Does anyone out there have any firm information on this situation?  It would be greatly appreciated.

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Posted in Housing, Taxes | 11 Comments »