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Have you looked into the Streamlined Domestic Offshore Procedures? If this was non-willful (meaning you didn't know about the requirement), this program might help reduce the penalties significantly. I made a similar mistake with not reporting my foreign pension from when I worked in Singapore. The standard penalty would have been about $45k, but through the streamlined program I ended up paying just under $10k. The key is documenting that you genuinely didn't understand the requirement. The fact that you took action immediately after discovering the requirement will work in your favor. Make sure your attorney is specifically experienced with the Streamlined program.
Thanks for this suggestion! I just looked into the Streamlined Procedures and it seems like I might qualify. My attorney mentioned something similar but called it by a different name and was talking about a much smaller reduction. Do you know if I need a specialized attorney for this or if it's something I can handle myself? The legal fees are adding up fast.
You don't absolutely need an attorney to apply for the Streamlined program, but I'd recommend at least a consultation with someone who specializes in international tax issues. The program requires a detailed narrative explaining why your failure to report was non-willful, and that narrative is critical to acceptance. If your current attorney isn't giving you clear information about the Streamlined program (it's very well-established), you might want to get a second opinion. Many tax attorneys offer free initial consultations, so you could shop around. The penalties at stake are significant enough that good representation is worth it, but you shouldn't be paying for an attorney who isn't experienced with exactly this type of situation.
whatever u do, don't ignore this!!! i made that mistake when i got hit with a 18k penalty for not reporting my overseas rental income. thought it would go away if i just didn't respond. BIG MISTAKE. they started garnishing my wages and put a lien on my property which destroyed my credit score. took 3 yrs to finally resolve and ended up paying way more in the end. at minimum set up a payment plan asap even while ur contesting the penalty. u can always get refunded later if u win the abatement but it shows good faith effort.
Just to add another perspective - I've been a delivery subcontractor for 5 years now. You definitely want to track EVERYTHING. Beyond just gas, make sure you're deducting: 1. Any portion of insurance you pay 2. Parking and tolls (like mentioned above) 3. Car washes (if you pay for them) 4. Any required safety equipment or uniforms 5. Your cell phone percentage used for work 6. Meals during long shifts (50% deductible) My accountant catches stuff I would never think about. The actual expense method can actually work out better than mileage sometimes depending on your situation.
Isn't there a risk of getting audited if you claim too many expenses? I'm a new subcontractor and nervous about deducting too much.
There's always a small audit risk with any business deductions, but it's not about claiming "too many" expenses - it's about claiming legitimate business expenses and having proper documentation. Keep good records of everything - receipts, logs, payment statements. The IRS understands that businesses have expenses. As long as they're legitimate and you can back them up if questioned, you shouldn't be worried. It's your right to take all legal deductions you're entitled to! Just don't make things up or inflate numbers, and you'll be fine.
Quick question - does anyone use any specific apps to track their expenses as a subcontractor? I'm doing delivery work too and trying to stay organized for next year's taxes.
I've been using Stride for the past couple years. It's free and lets you track mileage with GPS plus all your other expenses. You can take photos of receipts right in the app. Really helpful at tax time because you can categorize everything properly for Schedule C.
To add some clarification to what's been said - willful failure to pay taxes is a misdemeanor under 26 USC ยง 7203. The key element is "willfulness" which means voluntarily and intentionally violating a known legal duty. If you're making a good faith effort through an installment agreement, you're demonstrating that you're not willfully avoiding payment.
What if you start an installment agreement but then stop making payments? Is that considered willful at that point? Asking because I missed 2 payments during COVID and am worried.
Temporarily missing payments due to financial hardship, especially during extraordinary circumstances like COVID, generally wouldn't rise to the level of criminal willfulness. The IRS recognizes that financial situations change. If you missed payments due to genuine inability to pay, you should contact the IRS to explain your situation and potentially modify your installment agreement. Willfulness typically requires a pattern of deliberate avoidance despite having the ability to pay. The fact that you're concerned and wanting to get back on track shows good faith, which is the opposite of the willful intent required for criminal charges.
Anyone know if the IRS is more aggressive with certain types of income? Like if you're self-employed vs. W-2? I've heard they audit self-employed people way more often.
Self-employed people do get audited more often because there's more opportunity for under-reporting income or claiming inappropriate deductions. W-2 income is automatically reported to the IRS by employers, but self-employment income has fewer automatic verification systems. That said, the audit rate for everyone has dropped significantly in recent years due to IRS budget constraints.
Just to add some additional info here - if you have ANY earned income from early 2023 before your disability prevented you from working, that counts toward the $2,500 threshold. Some people forget about jobs they had just for a month or two at the beginning of the year. Also, if your disability is approved retroactively and you get a lump sum payment later, that won't help for the earned income requirement, but you'll want to file Form 915 to potentially exclude some of that lump sum from taxation in the year you receive it.
Thanks for mentioning this! I actually did work in January 2023 very briefly before my condition worsened, but it was only about $1,200 in earnings. Is there any way that partial amount would help me qualify even though it's below the $2,500 threshold?
That $1,200 in earnings would count toward the $2,500 threshold, but unfortunately you'd still be short of the minimum needed to qualify for the refundable portion of the Child Tax Credit. You'd need to reach at least $2,500 in earned income to start qualifying. However, it's still important to file a tax return showing this income, especially if you had any withholdings that might be refundable. Plus, having filed returns consistently will help when your disability is approved, as it creates a clearer picture of your work history and the onset of your inability to work.
Also consider looking into whether you might qualify for the Credit for Other Dependents, which is a non-refundable credit of up to $500 per dependent who doesn't qualify for the Child Tax Credit. Even without income, establishing a filing history can be important for future benefits.
Dominic Green
This is slightly off topic but dont forget that your sister is probably eligible for a Social Security lump sum death benefit of $255. Its not much but its something. She should contact Social Security right away as there are time limits. Also if they were married for at least 9 months she might be eligible for monthly survivor benefits depending on her age.
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Hannah Flores
โขThe 9 month marriage requirement isn't always needed. If the death was accidental or occurred in the line of duty as an active member of the armed forces, the 9-month requirement is waived. Also, if they have a child together, that can change the requirements too.
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Kayla Jacobson
One more thing to consider - if your sister and her husband had any joint accounts, the basis (original cost) of investments might get a "step up" as of the date of death. This can be SUPER important if they owned stocks or property together. Basically, the deceased's portion gets revalued to what it was worth on the day they died, which can save a ton in capital gains taxes later. Might want to look into this if they had any investments.
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