Chapt 7, Back taxes, payments, and statute of limitations

[debtprison]

Hello. Some background. $20,000 in tax debt for the years 1999 - 2003. I did a chapter 7 in 2003 but the tax debt survived (I was stupid).

I am planning on doing another chapter 7 in 2011 unless things get better. I see that this should wipe out all the tax debt (They have a lien but I have no assets anyway and after ten years the lien generally falls off). I have to wait until 2011 because 8 years must pass between Chptr 7 filings

My question is I want to get the IRS off my back enough such that I can make it the next two years. My income right now is less than $12,000 a year but I want to avoid anything which might jeopardize the possibility of discharging all the tax debt in 2011.

If I make voluntary small payments of say $20 a month to get them off my back or if I fill out a financial statement to get labeled as noncollectable will this in any way set back the clock for being able to discharge the tax debt in 2011? What if I do an offer in compromise agreeing to monthly payments?

I just need to to survive until 2011 without resetting the statute of limitations for being able to discharge the back taxes in a BK or alternatively a standard expiration of the SOL.

I make $12,000 a year now and have since 2003. My oiriginal tax debt was $8,000 but it grew to this because I could never afford to pay. On top of this I have another $20,000 in student loans. The way things are now I could never even afford to pay a tenth of the interest which occurs per month! I'd like to be able to die without owing someone at least.

Thanks.

[tdawg]

from what I've read, if you do an offer in compromise, that will add to the collectable time table, so could cause you problems for 2011. But, outside of that, sending in payments, ignoring them, or being labeled as noncollectable will not cause you any problems.

[debtprison]

from what I've read, if you do an offer in compromise, that will add to the collectable time table, so could cause you problems for 2011. But, outside of that, sending in payments, ignoring them, or being labeled as noncollectable will not cause you any problems.

Thanks! An OIC will affect any C7 discharge or just the standard SOL being reset for normal debt?

[debtprison]

I guess some advice for people reading.

I had these tax debts from 1999 - 2003.

In 2003 I rushed and did a chapter 7 pro se. I was not aware that had I waited another year or two I could have had all my back tax debt discharged.

It would have really made a difference in getting a new start since I have had bank accounts garnished, wages garnished, tax liens, etc. and that has always hurt.

It makes sense to get pro advice or to at the very least research every little thing yourself before acting and not take what is said on the surface. I always believed that there was no way to have IRS debt discharged under a chapter 7. That was wrong.

[HHM]

To get the IRS to back off, you have 2 options

1. Ask (and qualify for) non-collectable status. This generally requieres that you submit basic financial information to the IRS and demonstrate that you have no ability to presently pay the taxes. This should buy you the 2 years you need

2. If you cannot get non-collectable status, propose a payment plan you can afford and start making payments. This will at least protect you from any levy.

[tdawg]

Hey debtprison,

Get this book:

Stand up to the IRS / by Frederick W. Daily.

I checked it out from my library, and it has some very good strategy tips.

I'm in a similar boat as you - tax debt from a failed business in 1999 - 2001, all federal income tax (no payroll tax), and I was amazed to find out that this can be discharged in a chapter 7. I didn't believe it until I went to the IRS's website and saw that it's true. Everyone I talked to (including a couple bankruptcy attorneys) told me that federal income tax debt could not be discharged. Good luck!

[debtprison]

To get the IRS to back off, you have 2 options

1. Ask (and qualify for) non-collectable status. This generally requieres that you submit basic financial information to the IRS and demonstrate that you have no ability to presently pay the taxes. This should buy you the 2 years you need

2. If you cannot get non-collectable status, propose a payment plan you can afford and start making payments. This will at least protect you from any levy.

It's a weird situation since I work as a 1099 independent contractor. Within the last three years they started with the Levys. Now I earn small amounts of $ from many different companies so it is weird. A few where I made like $15 a month from I just let it go. Another where I make $100 a month from they at first took all my money and sent it to the IRS but after talking with me determined that the first $700 or so is exempt and after that have not sent anything to them.

The main thing I worry about is a levy of a bank account during a time when I am receiving a ACH (I usually have no money in the account as I live paycheck to paycheck). I also hate the hassle when they gnarnish my pay from a company. Usually at first the company just won't pay me and I have to call and find out what is happening. When you live paycheck to paycheck not getting a check can be a big deal when you were planning on using it to pay rent.

I am going to start a regular job which pays in all cash (but I will still report it on my taxes, its just that there is no possible way to seize it) soon so in theory even if they levied everything I make as an I.C. I could still survive.

I'm not really sure which way to go here. I want to avoid anything which will reset the SOL for either the chapter 7 or the standard irs debt SOL, if possible.

I'm thinking maybe my best bet is to just keep things the way they are and only do a filing for "non-collectible" if they hit me hard such that I can't live. The downside of doing the non-collectible thing is that it gives them all my financial information which potentially makes it easier for them to seize everything if for some reason they decide to do so in the next two years. Right now even though I report all my 1099 earnings on my taxes, many of the main companies paying me do not file 1099's with the IRS so the IRS has no idea they are paying me.

The installment agreement isn't really much an option besides paying at most $20 a month. I just don't have any money or disposable income now.

[debtprison]

Hey debtprison,

Get this book:

Stand up to the IRS / by Frederick W. Daily.

I checked it out from my library, and it has some very good strategy tips.

I'm in a similar boat as you - tax debt from a failed business in 1999 - 2001, all federal income tax (no payroll tax), and I was amazed to find out that this can be discharged in a chapter 7. I didn't believe it until I went to the IRS's website and saw that it's true. Everyone I talked to (including a couple bankruptcy attorneys) told me that federal income tax debt could not be discharged. Good luck!

Thanks. That's exactly what happened to me. Business went from $50,000 in profit to $12,000 in profit and has never recovered.

What I find ridiculous is even when I make $12,000 a year I still have to pay $1,000+ in self employment taxes. Even though I am below poverty. And they gnarnish my pay still even though I am below poverty with no assets. It's ridiculous. I have to live like some kind of criminal when I'm not. I'm just poor.

[HHM]

I'm thinking maybe my best bet is to just keep things the way they are and only do a filing for "non-collectible" if they hit me hard such that I can't live.

I think that is a mistake. It is always better to be proactive. Given the amount of tax debt involved, just ask for non-collectable status, it is not that hard. Do you really want to be looking over shoulder for the next two years. What's the worst that can happen, if they deny your non-collectable, than you are in the same position you are now...so just do it.

Just be sure to file your tax returns on time each year.

[debtprison]

I think that is a mistake. It is always better to be proactive. Given the amount of tax debt involved, just ask for non-collectable status, it is not that hard. Do you really want to be looking over shoulder for the next two years. What's the worst that can happen, if they deny your non-collectable, than you are in the same position you are now...so just do it.

Just be sure to file your tax returns on time each year.

Thanks. I would normally be inclined to agree but right now they don't know where 70% of my money comes from and could not levy on it if they wanted to. If I file statements I have to give them all those details and it would let them in theory be able to try to levy on those companies. That's what worries me.

[HHM]

My income right now is less than $12,000 a year...

right now they don't know where 70% of my money comes

So, what exactly are you saying?

Fraud is fraud. If you are getting paid under the table, intentonially hiding income and assets, waiting 2 years won't really matter.

[debtprison]

So, what exactly are you saying?

Fraud is fraud. If you are getting paid under the table, intentonially hiding income and assets, waiting 2 years won't really matter.

Sigh, that's a pretty heavy...

I am a 1099 Independent contractor. I file taxes but I don't itemize the companies which pay me. The only way the IRS knows which companies pay me is by the ones which send 1099s. I still include the income on the 1040 even if I don't get a 1099.

So while my tax return might show gross income of 11,000, they only know where 3,000 of it comes form since the other companies don't send out 1099s.

If I give them full financial statements I have to list and itemize every company which pays me. So they would have a much easier time garnishing all $11,000 rather than the $3,000 they know of now.

It's true that they could find out all the companies by investigating where checks are cashed or looking at the bank account but for the piddly amount of money I make I am probably not much of a priority. (Right now I think I am solely on the Automated Collection System)

Giving them all my financial info would be possibly making it easier for them to garnish more from me. That's why I am hesitant. It would make it easier to garnish more of my income if they chose to.

[debtprison]

So, what exactly are you saying?

Fraud is fraud. If you are getting paid under the table, intentonially hiding income and assets, waiting 2 years won't really matter.

I see where you misunderstood now. Keep in mind I am an independent contractor and considered self employed, not a wage earning employyee here.

I REALLY do make no more than $12,000 a year. Last year for example I received two 1099's which showed about $1,000 in income. I still filed for $12,000 regardless and know better as that is fraud and punishable by jail.
The only people they have attempted garnishments from in the past have been the ones which sent me 1099s. They have never touched anyone who did not send a 1099. That's what I mean by them not knowing where 70% of my money comes from -- they can't garnish it as easily as the other 30%. But if I were to send them itemized details on who pays me what exactly it would make garnishing that other 70% potentially easier should they decide to do so...

[debtprison]

Keep in mind here that if they levy someone who pays me $300 a month it would probably be enough to make me homeless if it were to happen two months in a row. I don't have a lot of income and that's why I am a bit scared to give them all this information unless I am protected. There is no hiding assets or fraudulent tax returns. The most I am guilty of with them is ignoring them.

[HHM]

But if you only make $12,000 per year, then you are a no brainer for non-collectable. I think you are overestimating the risks.