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About Mike Wellman
Expertise
I was a former Manager with Price Waterhouse, now PricewaterhouseCoopers, the largest accounting firm in the world. I have had clients in almost every industry and of every size. I will only answer questions dealing with IRS problems such as delinquent tax returns, Offers in Compromise (Tax Settlement), IRS collection matters including installment agreements, liens, levies, seizures, audits, appeals, innocent spouse claims and injured spouse claims. All other will be referred to the question pool.

Experience
Over 25 years experience in taxation specializing in IRS collections, examinations and appeals.

Publications
New York Times, Wall Street Journal, Your Money.

Education/Credentials
BBA, Baylor University.

Awards and Honors
IRSOS.com won the Knowledgeweb award for educational excellence for content.

You are here: Experts > Business > Corporate Law > Tax Law (Questions About Taxes) > Back taxes..

Tax Law (Questions About Taxes) - Back taxes..

Expert: Mike Wellman - 11/5/2009

Question

First I use to work for PWC in Chicago on the consulting side (SAP), just before the spin off, cheers!

QUESTION:

My business partner has not been able to pay his federal or FICA taxes for the past two years. He has decided to “bury his head in the sand”, and hope this goes away.

His income is low (our industry is in the construction sector), and has no funds to pay the taxes.

The total amount owed maybe $20,000

What will happen to him if he continues in his state of denial?

I told him he should go into the local office and at least set a payment plan (he says “what good will that do, I have no money”). I argued you have to make it look like you are not willfully attempting not to pay.

Will the IRS turn off (or down) the interest meter and or forgive penalties? What encouragement can I give him?

Suggestions?

THANK YOU

ANSWER: In order to answer I need to know if he has filed and can't pay or if did not file because he would owe.

---------- FOLLOW-UP ----------

QUESTION: He filed for both (all) years, paid tha MN state tax but has not paid any federal tax for 2007 and 2008 (tax years).

Thanks!

Answer
The fact that the taxes have already been assessed means that he cannot lay low if he has a bank account or has regular customers who send him 1099's. They will begin to levy everything eventually. If he is really hand-to-mouth and is not living an extravagant lifestyle, then it is possible to get the account put in a hardship status, in which case he would still owe the tax but would not be expected to make any payments until things improve for him. Other possibilities include a monthly payment plan or even settling the liability for less than is owed.

The most important thing is to begin making estimated payments on current taxes so he does not dig an even bigger hole. Go to: http://www.IRSOS.com for more information on his options.

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