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I currently have an installment plan with the IRS and I have two questions:
1. I also have now way to pay my 1999 taxes as an independent cotrator. What should I do?
2. I heard somewhere that there is a way to greatly reduce the intererst and / penalties?
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<< I currently have an installment plan with the IRS and I have two questions:
1. I also have now way to pay my 1999 taxes as an independent cotrator. What should I do? >>

Call the IRS, fess up, and ask if you can add the 1999 to the agreement. Not paying 1999 is cause to default the agreement, but that doesn't necessarily mean they will. While you're at it, renegotiate the payment amount if necessary (see below).

<< 2. I heard somewhere that there is a way to greatly reduce the intererst and / penalties? >>

There sure is. It's called paying your taxes on time. You need to be making estimated tax payments, accounted for in your budget which determines the installment agreement agmount, for year 2000, or you're going to be in this mess forever.

Phil Marti
Tax Preparer
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I currently have an installment plan with the IRS and I have two questions:
1. I also have now way to pay my 1999 taxes as an independent cotrator. What should I do?
2. I heard somewhere that there is a way to greatly reduce the intererst and / penalties?


1. Not being able to pay your 1999 taxes is grounds for IRS voiding your payment agreement. One of the conditions and terms of the installment agreement is that you remain current on your taxes. You can try to tie the prior tax debt and the current under a new installment agreement. However, do not be surprised if IRS will not do it and tells you to get a job with taxes withheld.
2. There are only 2 ways that you can reduce interest and penalties that I am aware of: 1) make an offer-in-compromise (which must usually be paid in full within 120 days of the date the offer is accepted or 2) file chapter 13 bankruptcy - reorganization - however, if you do not keep current on your taxes under a chapter 13, you can pay the 5 years of the plan and still have all the penalties and interest roll through because the chapter 13 will be dismissed instead of discharged.
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Hi,

..thought I'd jump into this thread. Guess you have a problem which will, as Phil mentioned, snowball into forever land. You need to file 1999 on time, and, as mentioned, call the IRS to get 1999 into the agreement. The OIC that RooCat mentiones is not so easy to come by. It can take up to a year before a decision is made and the decision is made based on assets, current income, and FUTURE income. Although many people like to throw out the OIC possibility for a variety of reasons, many times it raised false hope. Taxes are pay as you go, and the IRS will look at the history you are creating on your account. Further, ignorance is not a justifiable reason to abate anything since tax responsibilities are published by the Government in many free publications made available to the taxpaying public. If you are earning income, you must be either withholding or making quarterly payments. You need to begin ordering some publications that will help you to understand your responsibility, and, might I suggest, you begin with Pub 454. It is a Small Business Tax package which has 1040ES coupons in it. Since this is a new year, and I assume you are currently earning an income with your business activity, your first tax year 2000 Estimated Tax Payment is due on April 15th of this year. This is in addition to paying your past balance due. If you are earning income, you must discipline yourself to realize that the money earned is not all YOURS and you must set weekly/monthly/bi-monthly amounts aside for your quarterly payments. That is the only way to avoid your problem, and get it under control.
Toni
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<<The OIC that RooCat mentiones is not so easy to come by. It can take up to a year before a decision is made and the decision is made based on assets, current income, and FUTURE income. Although many people like to throw out the OIC possibility for a variety of reasons, many times it raised false hope. >>

For all of you out there that may have tax problems (or friends and relatives with tax problems), please read the above paragraph very carefully. Again. And again.

Toni is RIGHT ON in the words that he speaks. There are a number of folks out there that SWEAR that they'll get your taxes reduced or eliminated. Just sign this form...the "OIC". But before they will PREPARE the OIC, they may charge you thousands of dollars for the service.

And, sadly, these folks likely know that your OIC will have a snowball's chance in hell of actually being accepted by the IRS. Yet...that won't stop them from cashing your check.

If somebody tells you that they can get your back taxes reduced to pennies without even meeting you, discussing your case, reviewing your assets (both current and potential future income and assets), then grab your wallet and RUN as far and as fast as you can.

Then see a tax PRO with experience in collection matters...who will evaluate your entire case and give you an assessment of your chances for an OIC BEFORE you are charged for preparing the forms.

I'll get off my soapbox now. This is just a very sore subject with me. I'm really glad that Toni brought it up.

TMF Taxes
Roy
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Then see a tax PRO with experience in collection matters...who will evaluate your entire case and give you an assessment of your chances for an OIC BEFORE you are charged for preparing the forms.

Not to mention the fact that as a self employed person, you will have to fill out at least 3 sets of forms delineating in great detail: 1) all of your personal assets, debts, credit cards, net profit, expenses including groceries 2) all of your business assets, debts, payments, income besides 3) completing the OIC information and formula. You have to give a bank a lot less information for a loan. Additionally, the younger you are, the less likely the OIC will be accepted since IRS figures they have 10 years to collect out of your earnings.

The best approach is not to go there. Be religious about setting aside the amount necessary to pay your taxes on a timely basis. Divide your net tax including SET by your gross income to see how much of each dollar must go to Uncle. And don't forget your state income taxes. Again, divide your net state tax by your gross income so you can allocate the money for the state at the same time. Then put the money in a saving account and don't touch it for any reason except to pay your estimated taxes. The state amount probably won't have to be paid until you file but you will have the money to pay.
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