Can you claim reasonable cause to avoid penalties? My mom got really sick last year and I completely forgot to file my 2022 taxes until recently.

Yes, the IRS does accept reasonable cause explanations for waiving penalties in certain circumstances, and a serious illness in the family can definitely qualify. You'll need to attach a signed statement explaining the situation when you file your late return. Be specific about the timeline of your mother's illness and how it prevented you from filing on time. Make sure to gather any supporting documentation you can, like medical records or doctor's notes. The more documentation you have, the stronger your case will be. Just be aware that the IRS reviews these on a case-by-case basis, so there's no guarantee, but they do often show leniency in genuine hardship situations.

Paper filing is STILL a nightmare. Sent my 2022 return by mail in January and it took almost 4 months to process. Definitely e-file if you possibly can. The IRS backlog for paper returns is insane.

Thanks for sharing this. Did your mom have to pay the amount while disputing it? I'm tempted to just pay the $97 to make this go away, but I'm also upset about potentially taking a credit hit for something I never knew about.

Yes, she did pay it while disputing. The IRS representative told her that paying it wouldn't be seen as admitting fault, but would stop additional interest and penalties from accruing while the dispute was being processed. She still fought to have the collection mark removed from her credit report though, which was the more important part. The Taxpayer Advocate helped her file the right paperwork to show she never received proper notice. If you can prove you updated your address and the IRS still sent notices to the old one, you have a strong case to get the collection removed from your credit report even if you pay the bill.

True! My cousin ignored a small IRS debt and ended up with a tax lien that showed up when he tried to refinance his house. Cost him thousands in higher interest rates. Even small amounts matter to the IRS!

Would an email work instead of certified mail? I have all their texts demanding payment for the shirts, but I'm not sure I want to spend money on certified mail to these jerks.

Email isn't ideal because it's easier for them to claim they never received it. The certified mail creates an official record that they received your communication, which is important if this escalates further. The $4-5 for certified mail is worth it for the paper trail it creates. That said, if you do use email, make sure to request a read receipt and save all correspondence. The texts demanding payment are good evidence already, so keep those too. The key is documenting everything in case you need to prove harassment later or defend yourself if they try to send this to collections.

That's a good point - OP should look up the IRS Whistleblower Program. If the employer is systematically underreporting wages, the IRS takes that very seriously and you could potentially get a reward if your information leads to the recovery of unpaid taxes. The reward can be 15-30% of what the IRS collects!

Oh that's really helpful to know about Etsy! So for my own website sales, do I need separate sales tax permits for each state once I hit their thresholds? And how exactly do I remit the taxes I collect?

Yes, you'll need to register for sales tax permits in each state once you meet their economic nexus thresholds. For your own website sales, you'll be responsible for calculating the correct rate (which can vary by city/county within states), collecting it from customers, and then filing returns and submitting payment to each state. Filing frequencies vary by state and sometimes depend on your sales volume - some might require monthly filing while others are quarterly or annual. Most states now have online filing systems, but each works differently. Some states also require prepayment or bonding for new registrants, so plan ahead before you hit thresholds.

Yikes, what triggered the audit? Was it just random or did something specific catch their attention? I'm wondering what red flags to avoid.

I actually called my old bank and they only keep records for 7 years so that only helps with the most recent missing returns. Did you have any luck explaining your situation to the IRS? Were they understanding about the estimation approach?

In my experience, the IRS was surprisingly reasonable once I explained my situation clearly. The key was documenting my estimation methods and being consistent. For the years where you have absolutely no documentation, focus on being realistic rather than punitive to yourself. I included a detailed cover letter with each return explaining exactly why I had no records and the methodology I used to create my estimates. The agent I eventually worked with appreciated the transparency and it made the negotiation process much easier. Remember that they deal with record loss situations frequently - you're not the first person to go through this.

This is a great tip! I had a similar issue and the SSA earnings record was super helpful in establishing baseline income amounts. Much of my self-employment income hadn't been reported properly, but it still gave me a starting point.