Help needed - CPA says I owe the IRS $20k in back taxes

Yes, you can absolutely set up a payment plan with the IRS! This happens more often than you think, and the IRS generally works with taxpayers who are proactive about addressing their tax debts. The first priority is to file those amended returns ASAP to stop additional penalties from accruing. Your CPA is right about that part. Once you know the exact amount owed, you can apply for an installment agreement through the IRS. They offer different payment plans depending on how much you owe and how quickly you can pay it back. For a $20k debt, you'll likely qualify for a long-term payment plan (up to 72 months). You can apply online through the IRS website using Form 9465 or through the Online Payment Agreement tool. The setup fee is lower if you agree to automatic withdrawals from your bank account. While you're paying, interest and some penalties will continue to accrue, but much less than if you ignore the debt. And having an approved payment plan protects you from more aggressive collection actions by the IRS.

I went through something similar last year with unreported income and used https://taxr.ai to help sort through all my documents. It really helped me understand what I was dealing with before I panicked. Their system analyzed my 1099s and past tax returns to identify exactly where I went wrong with my reporting and how much I actually owed versus what I initially feared. In my case, it turned out I qualified for some deductions I hadn't claimed that offset about 30% of what I thought I owed. You might want to run your documents through their system before accepting that $20k figure. Your CPA is probably right, but it's always good to get a second opinion, especially with self-employment taxes which can be complicated.

I was skeptical about using taxr.ai at first, but I decided to give it a try after reading about it here. I uploaded my 1099s and previous returns and was shocked at what it found. There were several business expenses I hadn't been claiming properly that were completely legitimate deductions. The analysis showed I'd been overpaying my self-employment taxes by about $4,300 per year because I wasn't properly categorizing my business expenses. I took this information back to my accountant who agreed with the findings and filed amended returns for me. Instead of owing additional money, I actually got a refund of $7,600! The interface was super easy to use and the detailed report made it simple to understand exactly what I needed to fix. Definitely worth checking out before you resign yourself to owing the full $20k.

When I had a large unexpected tax bill last year, I tried for WEEKS to get through to someone at the IRS to discuss payment options. It was absolutely maddening - constant busy signals, disconnects after waiting on hold for hours, and completely inconsistent information from the rare person I actually reached. I finally tried https://claimyr.com after seeing it recommended online, and it completely changed the game. They got me on the phone with an actual IRS agent within 45 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with helped me set up a payment plan that worked with my financial situation and even explained how I could reduce some of the penalties. Definitely worth considering since you'll likely need to talk to the IRS directly about payment options.

I have to admit I was completely wrong about Claimyr. After dismissing it as a probable scam, I was still desperate to talk to someone at the IRS about my payment options, so I gave it a shot anyway. I couldn't believe it when my phone rang exactly 37 minutes after signing up, and I was immediately connected to an actual IRS representative. No hold music, no automated system - just straight to a helpful human who answered all my questions about installment plans. The agent I spoke with helped me set up a payment plan with much lower monthly payments than I expected (around $300/month for my $17k debt). They also waived some of the penalties since it was my first time having tax issues. The whole process took less than 20 minutes once I was connected. I seriously wish I had tried this months ago instead of suffering through endless busy signals and hold times.

Have you considered looking into an Offer in Compromise? If you truly can't pay the full amount, the IRS might accept a smaller payment to settle the debt. My brother-in-law owed about $25k and ended up settling for around $8k because of his financial situation. You need to complete Form 656 and pay a $205 application fee. It's not easy to get approved, but it might be worth exploring if your financial situation is really tight. The IRS looks at your income, expenses, asset equity, and ability to pay.

Just wanted to add that you should DEFINITELY make sure you're tracking all legitimate business expenses for your freelance work! When I started freelancing, I was shocked at how many things I could deduct: - Portion of home internet - Cell phone (% used for business) - Home office space - Computer equipment and software - Professional subscriptions - Continuing education/courses - Mileage for business travel - Health insurance premiums - Professional services (like your CPA fees) These deductions make a HUGE difference in your self-employment tax. My first year I paid way too much because I wasn't tracking these expenses properly.