Grandma hasnt filed her taxes for years...we just know that as of 2010 she owes 31k (with penalty fees and everything). She gets $1,200 for her pension and $1,200 SSI...what are her options as far as dealing with this. Can she file bankruptcy and get the taxes dealt with...she has no assets for the IRS to seize and barely has enough to live on as it as and cannot afford to make payments on this debt. Ideas, suggestions? Yes i know this is a serious issue so if you're only response is "you should consult an attorney and look at my profile..." then move on and advertise on someone elses questions please
Family Law Attorney
The money your grandmother is getting likely is not "SSI" as the maximum monthly SSI a person can get is less than $800. SSI is a needs-based benefit. She likely is getting SSDI which is based upon her earning history.
Your grandmother likely does not actually owe $31k for one year if her incomes are the amounts indicated in your post. The alleged taxes owed are more than the incomes she received.
In the notice from the IRS, there should be the numbers the IRS uses to figure the taxes she allegedly owes.
She cannot file bankruptcy to get rid of the taxes for the last few years.
The only way to fix her problem is to figure out what her incomes and deductions are and file the tax returns.
Unfortunately for her, the tax problem is not going to go away by itself. She does need to consult with professionals to see how much taxes she does owe. A tax preparer or CPA may be all she needs right now to find out how much taxes she does owe. Once she knows the numbers, she may need the help of an attorney to reach some sort of arrangement with the IRS.
Bankruptcy in her case is unlikely to work as hoped. Federal tax debts are part of the bankrupt estate, but are not discharged. For a lengthy but detailed discussion, see -- http://www.irs.gov/publications/p908/ar02.html. I would not lightly recommend bankruptcy.
SSI is not subject to levy (seizure or garnishment), but the pension is.
Generally, your grandma should: (1) get current on all required tax returns -- file them even if she cannot pay (this may require obtaining a wage and income transcript for each year), and file them even if the IRS has already filed returns on her behalf; (2) consider an Offer in Compromise, and installment agreement, or both (which can usually be appealed if denied); and (3) if she is still unable to get a fair settlement, then try talking with the Taxpayer Advocate Service.
Can your grandmother do all this by herself (with your help perhaps)? Sure. Taxpayers are always able to handle their own cases. You don't have to hire a tax lawyer or skilled accountant. But the likelihood of making mistakes, not seeing your options, not understanding the implications of decisions, or miscommunicating are enhanced without a knowledgeable advisor.
This answer or response should not be considered legal advice, and does not create an attorney-client relationship. If you have further questions, I would be glad to discuss your situation further. I can be reached at US - (801) 746-6300, or online at -- http://www.lewishansen.com/attorneys/robinson.html
Good news, probably. She may not owe them anything and might even be due a refund. For sure, she owes less than they claim.
This is because, when she didn't file taxes, but the IRS knew she had income (the pension, at least) they "filed" for her, making every assumption in their favor, without any of the deductions or exemptions she was probably entitled to.
Assuming that she was getting $1,200 per month from the pension, that would be $14,400.00 per year. The SSI, SSDI or Social Security Retirement benefits, whatever, would not be taxable at this level of other income. If she is single and under 65, last year she would have had to file a tax return, as her income exceeded $9,750. $11, 200 if over 65. More if she is blind, or her husband died during the year.
Therefore, her taxable income would have been, at most, $4,650.00, and her taxes, at most, $463.00, last year. Prior years would be on a similar scale. It is likely that some money is being deducted from her pension for taxes. It is also possible that she might have other deductions or credits available to her.
You need to file her taxes for whatever number of years they are claiming she hasn't filed. If she is due a refund, you will get it for tax years 2009-2012. If there were refunds due prior to that, they may offset taxes owed in other years, but no cash refund. At the very least, you will knock down the amount owed, significantly.
See a tax professional, now. Her returns should be very simple, and not expensive to prepare. Free tax preparation may be available through your local community action program.
The foregoing answer does not establish an attorney client relationship, is not confidential, and should not be relied upon in place of an actual consultation with an attorney. Mr. Boone is licensed to practice in Massachusetts, before the U.S. Tax Court, and the Federal District Court of Massachusetts. Most initial consultations are free. Further information is available on my profile and at www.boonehenkofflaw.com.
I would like to add that Mr. Boone is correct and she probably owes significantly less than they claim. Also, after the returns are prepared and the final amount owed is realized, she could look at doing an offer-in-compromise or an installment agreement/currently not collectible for the balance owed.
This is not legal advice nor intended to create an attorney-client relationship. The information provided here is informational in nature only. I may not be licensed in the jurisdiction which you have a question about so the answer could be only general in nature. Visit my website: www.waterstaxlaw.com