Thank you so much for sharing your experience. That makes me feel a lot better. Did you use a tax preparer or did you do it yourself? And about how much were the penalties as a percentage of what you owed?

I used a local tax preparer who advertised help with unfiled returns. Cost me about $175 per year to prepare, but it was worth every penny for the peace of mind. The penalties ended up being roughly 25% of what I owed, plus interest that had accumulated. So for example, one year I owed about $2,200 in actual taxes, and the penalties/interest added about $800. Not fun to pay, but definitely not the financial apocalypse I had built up in my head. The payment plan let me spread it out over 36 months too.

Yes! This tripped me up too. If you're using software like TurboTax or H&R Block, make sure you buy the specific year versions for each past year. Current year software won't work for prior years.

Do you have a template for that written plan? Or did you have your accountant create it? I'm trying to figure out if this is something we can do ourselves or if we need professional help with it.

I created it myself based on some research, then had my accountant review it. It doesn't need to be super complex - mine is about 2 pages. It basically states that the corporation will reimburse employees (including shareholder-employees) for health insurance premiums up to a certain amount annually. Key elements to include: effective date, eligible employees, what expenses are covered, maximum reimbursement amounts, how/when reimbursements will be processed, and documentation requirements (employees need to submit proof of premium payments). You should also state that it's intended to comply with relevant tax regulations.

I did this with my S-corp and it works well, but make sure you understand the income reporting. The marketplace uses MAGI (modified adjusted gross income) to determine subsidies, which includes your W-2 wages plus business profits passed through to your personal return.

How hard was it to get approved for the Offer in Compromise? I've heard they reject most applications. Did you need to hire someone to help with that process?

It's definitely not automatic, but it's not as impossible as some people claim. The key is proving that you genuinely cannot pay the full amount without causing significant financial hardship. You need to document all your income, expenses, assets, and liabilities very thoroughly. I did it myself using the IRS's pre-qualifier tool first to see if I might qualify. The paperwork is extensive - Form 656 and Form 433-A mainly - and you need to include a lot of documentation. It took about 7 months from submission to acceptance. They did counter my initial offer with a slightly higher amount, which I accepted. You don't necessarily need to hire someone, but you do need to be very organized and thorough with your financial documentation.

But doesn't filing your own return reset that 10-year clock? I heard that submitting anything to the IRS about old tax years can restart the collection period.

This is a great point that I hadn't considered. We've been together for over 10 years and have the kids together, but you're right that it's always smart to think about all scenarios. Do you know if such an agreement would have any impact on how the IRS views the gift? I want to make sure anything we do on the relationship side doesn't create tax complications.

An agreement about what happens to the gift in different scenarios shouldn't change how the IRS views the gift, as long as the gift is complete and no strings are attached at the time it's made. The key from a tax perspective is that you're not expecting anything in return. However, if the agreement makes the transfer look more like a loan or conditional payment rather than a gift, that could potentially create issues. Make sure any agreement you create clearly states that the transfer is a completed gift for tax purposes, and any terms about future scenarios don't make it conditional in a way that would undermine the gift status.

Recipients generally don't report gifts as income or file any special forms. It's only the giver who has to file Form 709 if the gift exceeds the annual exclusion amount (currently $17,000 per person). The girlfriend would just receive the money tax-free. This is one of the nice things about gifts - the recipient has no tax consequences or reporting requirements.

12 How do you get a Verification of Non-filing Letter though? Doesn't that also require contacting the IRS?

3 You can request a Verification of Non-filing Letter by using IRS Form 4506-T. Mark box 7 on the form to request the verification of non-filing, and you can either mail it in or fax it to the IRS. Some schools will also accept a signed statement certifying that you didn't file and weren't required to file, especially if you had no income that year. Every financial aid office handles these situations a bit differently, which is why it's important to speak directly with your school's aid counselors. They deal with these situations regularly and often have school-specific procedures that can save you time.

23 I used FreeTaxUSA for a 2020 return I had to file late. It was only like $15 for the federal return (state was another fee). The interface is less polished than TurboTax but it gets the job done and asks all the same questions. They keep prior year returns available which is nice.