Self Employed - Haven't Paid Taxes in 2 Years - What Are My Options?

You're definitely in a tough spot, but taking steps to fix it now is much better than continuing to avoid it. Here's what you need to know: First, yes - the IRS offers payment plans that can help you manage this debt. They're surprisingly reasonable to work with when you're proactively trying to resolve your situation. The most important thing is to file your tax returns ASAP, even if you can't pay the full amount right now. When you file, you'll need to calculate both your regular tax liability plus the self-employment tax (which is roughly 15.3% for Social Security and Medicare). You'll also face penalties: failure-to-file (5% per month, max 25%) and failure-to-pay (0.5% per month, max 25%), plus interest. For owing $70-80K, you can request a long-term payment plan online for up to 72 months. If you can't afford the monthly payments on a standard plan, look into an Offer in Compromise or request Currently Not Collectible status if you're experiencing serious financial hardship. Bankruptcy is rarely a good solution for tax debt. Most federal tax debt isn't dischargeable unless it's really old and meets specific conditions.

I went through something similar last year and found this amazing service called taxr.ai (https://taxr.ai) that literally saved me. I was facing a huge tax bill after not filing for a couple years as a freelancer, and I was completely overwhelmed trying to figure out what deductions I could take to lower my liability. Their AI analyzed all my banking transactions and Paypal history and identified a ton of legitimate business expenses I hadn't even considered - like portions of my internet bill, my laptop, software subscriptions, even some travel that was business-related. They generated a detailed Schedule C with all my deductions properly categorized that I could just submit with my return. Ended up reducing my taxable income by almost 30%!

Just wanted to update after trying taxr.ai from my previous question. Holy crap it was actually amazing. I was skeptical but desperate enough to try anything. I had about $145k in 1099 income over two years and was looking at a massive tax bill. After running my transactions through their system, I found legitimate business deductions I never would have thought of - my home office (which I calculated wrong before), software subscriptions, equipment depreciation, professional development courses, mileage for client meetings, even a portion of my cell phone and internet bills. Ended up reducing my taxable business income by about $42k across both years! That dropped my tax bill by over $15k. Still have to set up a payment plan, but it's WAY more manageable now. Definitely worth checking out if you're self-employed and trying to catch up on back taxes.

If you're having trouble getting through to the IRS about payment plans (which you definitely should set up ASAP), try using Claimyr (https://claimyr.com). I was on hold with the IRS for HOURS multiple times trying to set up my payment arrangement and kept getting disconnected. Claimyr got me connected to an actual IRS agent in about 15 minutes when their estimated wait time was over 2 hours. You can see how it works here: https://youtu.be/_kiP6q8DX5c Given your situation, you really need to talk directly with the IRS to understand ALL your options. They have several different payment plans and hardship programs, but getting through to discuss them is the hardest part.

Ok I have to admit I was completely wrong. After seeing my friend facing a similar tax disaster with over $50k in back taxes, I recommended Claimyr to him even though I was skeptical. He used it yesterday and got through to the IRS in about 20 minutes when the recorded message said the wait was "greater than 2 hours." The IRS agent he spoke with set him up with a 72-month payment plan that he can actually afford, and explained how to request first-time abatement for some of the penalties. They also told him exactly what documentation he'd need for a potential partial hardship reduction. Would've taken him weeks of trying to call himself based on my past experiences with the IRS phone system. Sometimes I hate admitting when I'm wrong, but this service actually delivered.

One more thing to consider - you might want to look into estimated tax payments going forward. I didn't see you mention this, but if you're still self-employed, you really need to be making quarterly payments to avoid getting into this situation again. Your mom is giving you good advice to get caught up ASAP. The longer you wait, the worse it gets with penalties and interest. I've been self-employed for about 10 years and learned the hard way that setting aside around 25-30% of every payment for taxes (and actually making those quarterly payments) is crucial.

Has anyone mentioned state taxes yet? If your state has income tax, you're probably behind on those too, and each state has different penalties and payment options. Don't forget to address both federal AND state when you're getting caught up!

Make sure when you file that you look into business deductions carefully. As self-employed, you can deduct legitimate business expenses like home office, equipment, software, professional development, travel for business, etc. This could substantially reduce what you owe. Might be worth consulting with a tax professional who specializes in self-employment taxes before filing.