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9 Just wanted to add that if you owe that much, definitely look into an Offer in Compromise. The IRS might settle for significantly less than you owe if you can prove you don't have the ability to pay the full amount. Had a friend who owed around $80k and ended up settling for about $25k. Not saying you'll get the same result, but definitely worth exploring with a tax pro.
1 Would I still qualify for an Offer in Compromise if I have decent income now? I'm making good money these days, but those back taxes are from when my business failed and I had almost no income for a while.
9 Current income is definitely a factor they consider, but it's not the only one. They look at your overall financial situation including assets, expenses, future earning potential, and ability to pay. Even with good current income, if the total debt is large enough compared to your projected ability to pay over the collection period, you might still qualify. The key is having a professional properly document your financial situation and submit the offer correctly. The forms and financial statements need to be accurate but presented in a way that shows why a settlement makes sense for both you and the IRS. The official term they use is "doubt as to collectibility" - they want to collect what's reasonable rather than an amount that would cause financial hardship.
4 Random question but does anyone know if TurboTax even allows you to file returns from 2021-2022 at this point? I thought they might remove access to previous tax years after a certain point.
13 They do allow back tax filing, but you have to buy the software for those specific years. You can still purchase previous year versions of TurboTax, but they're not always easy to find on their website. Search specifically for "TurboTax 2021" or "TurboTax 2022" and you'll find links to buy those versions.
If you don't want to use any services, here's what worked for me with my 2020 deferred payment. In EFTPS, after logging in: 1. Select Tax Form: Individual 2. Tax Type: 1040 Individual Income Tax 3. Tax Period: 2020 (SUPER important - don't select 2025!) 4. Payment Amount: (your deferred amount) I also called my tax accountant to confirm, and he said this was correct. My payment went through fine, and I received confirmation that it was applied to my 2020 liability. The system is actually designed to handle these deferred payments properly.
Did you need to include any special notes or memo with your payment? I've heard conflicting info about whether that's necessary.
I did include a note in the memo field saying "Schedule 3 Line 12e Deferred Payment" just to be extra careful, but my accountant said it wasn't strictly necessary as long as I selected the correct tax year (2020). The most important thing is selecting the right tax year since that's how the IRS computer systems match the payment to your account. The memo is more of a backup in case there's any confusion later and you need to prove your intent.
Just wanted to add that I've been in your shoes and the EFTPS system is confusing as heck when dealing with deferred taxes! One thing nobody mentioned - make sure you schedule your payment at least ONE BUSINESS DAY before the deadline. EFTPS isn't like paying a bill online where it processes immediately. I learned this the hard way and ended up with a late payment penalty even though I submitted the payment on the due date. Super frustrating!!
EFTPS has always been one day delayed for me too. Is there any tax software that lets you pay deferred taxes more easily? Trying to avoid using EFTPS altogether if possible.
Just to add something important no one mentioned yet - if you're not married, one of you can file as Head of Household (which gives a bigger standard deduction and better tax rates) while the other files as Single. To file as HOH, you generally need to: 1) Be unmarried 2) Pay more than half the cost of keeping up your home 3) Have a qualifying person (like your child) live with you for more than half the year So figure that into your calculations too! The person who claims the child as a dependent should probably be the one filing HOH if they qualify, which might be another reason why it worked out better when you claimed your son last year.
Oh man I didn't even think about the Head of Household thing! That might explain the big difference when I ran the numbers last year. So if I understand right, whoever claims our son can probably file as Head of Household, and the other person has to file as Single? Does this mean we should really be looking at our COMBINED tax situation rather than individual returns? Like figuring out which combination of her filing status + my filing status + who claims our son = the best overall result for our household?
Yes, you've got it right! Whoever claims your son would likely qualify for Head of Household (assuming they meet the other requirements like paying for more than half the household expenses), while the other person would file as Single. Absolutely, you should be looking at your combined tax situation. It's not just about who gets the dependent deduction - it's about the whole package: different filing statuses, child tax credit, earned income credit if your incomes qualify, and other credits/deductions that phase out at different income levels. That's why running the numbers both ways like you did last year is the smart approach. The goal is to minimize your household's total tax burden, not just one person's taxes.
I work at a tax prep office and see this situation all the time. Quick clarification on something important: the child tax credit and earned income credit can make a HUGE difference depending on which parent claims the child and what your income levels are. For example, if one of you makes too much money (over $200,000 filing single in 2024), the Child Tax Credit starts to phase out. Or if one of you makes very little income, the Earned Income Credit might be valuable but it phases out as you earn more. These credits often explain why one person claiming the child results in a much bigger refund overall than the other person claiming them, even if your incomes seem similar.
Just FYI - if you owed taxes for 2018, you're going to face some pretty significant penalties and interest by now. The failure-to-file penalty is usually 5% of unpaid taxes for each month your return is late, up to 25%. Plus there's failure-to-pay penalties and interest that's been compounding for years. You might want to look into the IRS Fresh Start program or see if you qualify for any penalty abatement. When I had to file several years late, I included a letter explaining my circumstances and requesting penalty relief, and they actually approved it.
Thanks, that's really good to know. Do you remember what you included in that letter? I'm worried the penalties are going to be more than what I would have owed originally.
I explained the specific circumstances that prevented me from filing on time (in my case, a serious medical condition and related financial hardship). I included whatever documentation I could to support my claim - medical records, hospital bills, etc. For your situation, you might want to explain the timing of your incarceration and why it prevented you from filing. Be specific about dates and why you couldn't arrange for filing while incarcerated. The IRS looks for what they call "reasonable cause" - basically showing that you couldn't comply with tax obligations despite using "ordinary business care and prudence.
I was in a similar boat but for 2017. You need the actual 2018 tax forms which you can only get from the IRS website now. Print them out and mail them in. Don't forget to sign the return! I forgot and they sent it back to me which delayed everything by like 2 months.
Also make sure you're using the right address to send it! Each state has different processing centers for paper returns. If you google "where to mail paper tax return 2018" plus your state name, you'll find the right address.
Ava Martinez
One thing nobody's mentioned yet - make sure you're tracking the dates and amounts of ALL money transfers both ways! I got audited last year because my uncle in Vietnam was sending me money from his business, and I couldn't properly document which portions were returns of my initial investment versus actual profit. The IRS assumed it was ALL taxable income because I couldn't prove otherwise. Cost me thousands in taxes plus penalties. Keep meticulous records of every transfer with notes about what each payment represents.
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Amara Okafor
β’That's really helpful advice - thank you! What kind of documentation would you recommend I keep? Right now I'm just planning to save the wire transfer receipts, but should I be doing something more formal like writing up agreements with my grandfather?
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Ava Martinez
β’Definitely save all wire transfer receipts, but that's just the beginning. You should create a simple investment agreement document (doesn't need to be fancy) that clearly states your initial investment amount and the terms for repayment. For each payment received, have your grandfather specify in writing (even just an email) what the payment represents - whether it's returning your initial capital, profit distribution, or a personal gift. Keep a running spreadsheet tracking the remaining balance of your initial investment so you can clearly show when you've been fully paid back and subsequent payments are profits.
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Miguel Ramos
I see lots of complicated advice here but y'all are forgetting the option to just file the FBAR and check that foreign accounts box on Schedule B and leave it at that. Thats what my tax guy told me to do for money my parents business in Korea sends me. As long as you're reporting the accounts exist, the rest is just splitting hairs unless we're talking about serious money (like $50k+).
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Giovanni Colombo
β’I have to respectfully disagree with this approach. While filing the FBAR is absolutely necessary if you meet the $10,000 threshold, it only reports the existence of foreign accounts - it doesn't address your tax obligations on the income. The IRS treats different types of foreign income very differently. Investment returns, business profits, and gifts all have distinct reporting requirements and tax treatments. Taking a simplified approach could lead to significant underreporting penalties if audited.
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