Need help with back taxes from 2016-2021 - huge penalties while unemployed - Working with IRS low income tax clinic

I've worked with many clients in similar situations. First, you're on the right track by working with the Low Income Taxpayer Clinic (LITC) - they're an excellent resource. For penalty abatement, you'll likely need to complete Form 843 "Claim for Refund and Request for Abatement." The key is clearly documenting your reasonable cause for not filing/paying on time. In your situation, focus on: 1. The business closure due to COVID-19 2. The natural disaster affecting your home 3. Any health issues, family emergencies, or other circumstances beyond your control 4. Your good-faith efforts to comply when possible Be specific with dates and detailed about how these circumstances prevented you from meeting tax obligations. Include any supporting documentation (insurance claims for natural disaster, COVID-related business closure documentation, etc.). The IRS considers whether you exercised "ordinary business care and prudence" but were still unable to comply due to circumstances beyond your control. Don't just say you couldn't pay - explain exactly why, and show how you're now trying to make it right.

After reading your situation, I think I can help! I was in a somewhat similar position last year with unfiled returns and penalties piling up. I discovered this AI tax assistant at https://taxr.ai that helped me organize all my documentation and create a strong case for penalty abatement. The tool analyzed my situation and helped me understand exactly what supporting documents I needed for each tax year. It also gave me templates for how to word my reasonable cause explanation based on my specific circumstances. The best part was that it explained what the IRS typically looks for in successful abatement requests. My case was different than yours, but it might be worth checking out since you're handling this without a lawyer.

I want to follow up on my question about the taxr.ai tool. I decided to try it after posting here and I'm genuinely impressed. My situation was also crypto-related (though not as large as yours) and the guidance was super specific. The tool helped me craft a really solid reasonable cause statement that specifically addressed the confusion around crypto reporting requirements during the time period of my transactions. It also identified two IRS memos that supported my penalty abatement case that I never would have found on my own. The response from the IRS was way faster than I expected - got about 70% of my penalties removed! If you're working with the LITC, this tool could help you provide them with better information to strengthen your case. Worth every penny given what I saved.

Since you mentioned being unable to reach the IRS directly about your situation, I wanted to recommend a service that literally changed my life when dealing with back taxes. I spent WEEKS trying to get through to someone at the IRS who could actually help with my penalty abatement case. Finally found https://claimyr.com and watched their demo video (https://youtu.be/_kiP6q8DX5c) - they basically call the IRS for you and wait on hold, then call you when they have an agent on the line. I was connected to an actual IRS employee within a day after trying for weeks on my own. The agent I spoke with gave me specific guidance on my penalty abatement request that was completely different from what I read online. They told me exactly what supporting documentation would strengthen my case. Having that direct conversation made all the difference.

I need to eat my words about Claimyr. After posting my skeptical comment, I figured I'd try it since nothing else was working. Honestly, it worked exactly as advertised. They called me back after about 3 hours (which is lightning fast for the IRS), and I was connected to an actual IRS collections specialist. The agent reviewed my case details and gave me specific instructions on filing my penalty abatement request that my accountant hadn't even mentioned. For my situation, the agent emphasized that I needed to clearly show when I became aware of the tax obligation and what immediate steps I took once I knew - apparently that's a major factor in their decision. Also learned that attaching bank statements showing financial hardship during the relevant time periods significantly strengthens the case. If you're working with the LITC, having this direct IRS guidance to share with them could make your abatement request much stronger. Definitely worth it.

Have you considered bankruptcy? I know it sounds extreme, but certain tax debts can actually be discharged in bankruptcy if they're old enough (generally 3+ years). Not saying it's the right choice, but might be worth looking into if the penalty abatements don't work out.

Your friend offering the loan to pay the principal is amazingly generous. Just make sure you get the loan terms in writing to protect both of you. Also, before accepting, double-check with your LITC advisor about how partial payments might affect your case. Sometimes making partial payments can restart certain statute of limitations clocks with the IRS.