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joenobody

Large Tax Debt. Selling my house before IRS/collectors take it. Bad idea?

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I haven't filed taxes for 4 years(not including 2018). I will owe a few hundred thousand when I file and I have about 100k equity in my house. That's the only asset I have and I don't make nearly as much as I used to. I make enough just to get by nowadays. 

I never heard from IRS until Nov 2018 when they sent a letter asking about my 2017 taxes(I made some real estate transactions in 2017 so that's why they finally noticed).They sent a second notice last month. I'm working on getting all my stuff together to file but meanwhile trying to figure out if I can save my equity in the house without pissing them off for tax evasion or anything like that. From what I've researched, it's not likely or easy for them to take your primary residence but I think I have a big enough equity that they might.

 

Now here's how I think I might be able to save the equity in the house:

I have about 150k credit card debt. Recently I did a balance transfer to my brother's credit cards to be able to raise my score and apply for a business loan. I'm thinking maybe I can sell my house and pay my brother back for the credit cards. Either pay his credit cards off from my bank account or write him a check. 

I know tax debt is above all but if I borrowed money from someone to pay them back in a few months, would they say I should have still paid the IRS with that borrowed money? Or will they say I need to use the credit cards that are now paid off to pay the taxes? or would this all be considered tax evasion especially since not filing taxes is considered criminal( just learned). I've talked to a tax attorney and I felt like he's not really sure but he was very sure about getting a 5k retainer... Any help from anyone with experience would be greatly appreciated. 

Sorry if there's a different section about tax questions, I didn't see one. 

 

EDIT: the attorney did tell me that I can file chapter 7 in 2 years and get ride of the tax debt along with credit cards. I always thought tax debt is like student loans that can't be wiped off in BK

Edited by joenobody

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Let me start with a couple of things:  first, I hope you find a path out of this, and second, I am not qualified to give tax advice.

 

With that out of the way, it would seem to me that you would be in a stronger position with the IRS being less solvent than more, so BTing the card balances to someone else may not have helped.

 

Given the serious nature of your situation I am begging you to augment whatever feedback you get from internet strangers with actual professional advice.  There's too much at stake.

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IMHO your brother is about to get screwed. I would not transfer any more debt to him.

 

a payment plan with the IRS seems in order; you also need to file the neglected taxes asap.

 

find a good CPA and hope the IRS will negotiate a reasonable payment plan. The equity in your house means little when you already spent the money that was due over the past 5 years. I would worry less about the equity and more about getting the taxes filed and payment plan worked out.

 

do you have an unpaid state tax liability too?

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I urge you to seek out an "Enrolled Agent" (EA).  They're CPA who are specifically credentialed by the IRS and are experienced in negotiating with the IRS for the best possible outcomes in situations such as yours.

 

For now, you can set concerns about an IRS lien against your house (or ultimate seizure aside), as well as an accusation of "tax evasion".  If you respond to the IRS request for delinquent returns in timely fashion, and either set up a payment agreement or file for bankruptcy (if appropriate), the IRS shouldn't move forward in an attempt to enforce collection of your tax liability.

 

On the other hand, if you don't respond to their notices, or follow through in a manner that you promise you will, then the IRS most certainly will escalate to enforcement actions ultimately.

 

I don't suggest you troll the internet further looking for casual advice.  In short order, seek out a referral to the qualified EA in your area that has a proven track record of being of help.  Lay your situation on the table, collect the information he requires, and follow his guidance and advice.

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checks calendar...

 

yep, its a Friday.

 

coincidentally, the same day of the week as the first thread was created in November.

 

On the off chance this may be legit, I would recommend OP to spend time with their CPA and local counsel adept at dealing with the IRS.  There is NOTHING any of us here can offer given what is at stake.  The dollar amounts in question coupled with federal tax issues CAN spell a few years in prison (just ask Wesley). 

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3 hours ago, hegemony said:

IMHO your brother is about to get screwed. I would not transfer any more debt to him.

 

a payment plan with the IRS seems in order; you also need to file the neglected taxes asap.

 

find a good CPA and hope the IRS will negotiate a reasonable payment plan. The equity in your house means little when you already spent the money that was due over the past 5 years. I would worry less about the equity and more about getting the taxes filed and payment plan worked out.

 

do you have an unpaid state tax liability too?

He's not screwed if I'm transferring the balance back to my cards or if I pay him back with the equity I have from the house. State tax hasn't been filed either. 

3 hours ago, hdporter said:

I urge you to seek out an "Enrolled Agent" (EA).  They're CPA who are specifically credentialed by the IRS and are experienced in negotiating with the IRS for the best possible outcomes in situations such as yours.

 

For now, you can set concerns about an IRS lien against your house (or ultimate seizure aside), as well as an accusation of "tax evasion".  If you respond to the IRS request for delinquent returns in timely fashion, and either set up a payment agreement or file for bankruptcy (if appropriate), the IRS shouldn't move forward in an attempt to enforce collection of your tax liability.

 

On the other hand, if you don't respond to their notices, or follow through in a manner that you promise you will, then the IRS most certainly will escalate to enforcement actions ultimately.

 

I don't suggest you troll the internet further looking for casual advice.  In short order, seek out a referral to the qualified EA in your area that has a proven track record of being of help.  Lay your situation on the table, collect the information he requires, and follow his guidance and advice.

I'm actually getting started with an EA. He said because he's bound by a code of ethics, he has to tell me that if I sell my house the equity belongs to the IRS. He wouldn't tell me what he thinks would happen if I pay my brother back with the equity or pay the cards. I don't know... Maybe I'll just live with the fact that I can't save my equity at this point. If they just put a lien on the house and not take it from me at least I can still stay in my home. 

By the way, if I owe the IRS more than the equity on the house will the lender even bother foreclosing on it if I stop making my mortgage payments? They would get $0 since IRS debt would have to be paid first. 

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2 hours ago, centex said:

checks calendar...

 

yep, its a Friday.

 

coincidentally, the same day of the week as the first thread was created in November.

 

On the off chance this may be legit, I would recommend OP to spend time with their CPA and local counsel adept at dealing with the IRS.  There is NOTHING any of us here can offer given what is at stake.  The dollar amounts in question coupled with federal tax issues CAN spell a few years in prison (just ask Wesley). 

Not sure what you mean about my post in November. Back then situation was different. I hadn't been contacted by the IRS.

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21 minutes ago, joenobody said:

I'm actually getting started with an EA. He said because he's bound by a code of ethics, he has to tell me that if I sell my house the equity belongs to the IRS. He wouldn't tell me what he thinks would happen if I pay my brother back with the equity or pay the cards. I don't know... Maybe I'll just live with the fact that I can't save my equity at this point. If they just put a lien on the house and not take it from me at least I can still stay in my home. 

By the way, if I owe the IRS more than the equity on the house will the lender even bother foreclosing on it if I stop making my mortgage payments? They would get $0 since IRS debt would have to be paid first. 

 

Off the top, sounds like you're in informed hands.  He's being straight with you ... if there's evidence that you sold your house and dispersed the proceeds to avoid seizure by the IRS, then I imagine that the IRS might seek out legal remedies by which to attach those proceeds.  But, honestly, this topic is outside of my turf -- look to the EA for the scoop.

 

You've suggested some tactics through which you might deal with this situation.  I suggest you look to the EA to understand the possible consequence of each scenario on the table (including scenarios he suggests be considered); acknowledging that he likely can't advise you to pursue some (or maybe any) of those avenues ... but hopefully he might at least identify the ramifications so you're better positioned to make a call.

 

In other words, it may be helpful to tell him you understand that there are some actions that he can't actual advise on, but that you'll benefit if he simply can identify possible consequences.

 

 

 

 

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18 hours ago, hegemony said:

IMHO your brother is about to get screwed. I would not transfer any more debt to him.

 

a payment plan with the IRS seems in order; you also need to file the neglected taxes asap.

 

find a good CPA and hope the IRS will negotiate a reasonable payment plan. The equity in your house means little when you already spent the money that was due over the past 5 years. I would worry less about the equity and more about getting the taxes filed and payment plan worked out.

 

do you have an unpaid state tax liability too?

 

This^. You have negative net worth right now not even considering taxes owed. Also, search out your options with the IRS based on insolvency. Keep your brother out of it. You may be adversely hurting your brother and yourself with the IRS. It's nice your brother is willing to help you out but let him do so after you've straightened things out.

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When I was in a tough spot with the IRS, my attorney advised me not to pay off the credit card balances I had at the time.  If I paid them off anyway, she advised that I should then close them or at least have all the credit limits reduced to $100.  Otherwise the IRS would consider the available credit as if it were cash and be less likely to accept an Offer in Compromise.

 

BUT, each case is individual and your own attorney's opinion is more important.

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On 3/15/2019 at 3:49 PM, joenobody said:

I haven't filed taxes for 4 years(not including 2018). I will owe a few hundred thousand when I file and I have about 100k equity in my house. That's the only asset I have and I don't make nearly as much as I used to. I make enough just to get by nowadays. 

I never heard from IRS until Nov 2018 when they sent a letter asking about my 2017 taxes(I made some real estate transactions in 2017 so that's why they finally noticed).They sent a second notice last month. I'm working on getting all my stuff together to file but meanwhile trying to figure out if I can save my equity in the house without pissing them off for tax evasion or anything like that. From what I've researched, it's not likely or easy for them to take your primary residence but I think I have a big enough equity that they might.

 

Now here's how I think I might be able to save the equity in the house:

I have about 150k credit card debt. Recently I did a balance transfer to my brother's credit cards to be able to raise my score and apply for a business loan. I'm thinking maybe I can sell my house and pay my brother back for the credit cards. Either pay his credit cards off from my bank account or write him a check. 

I know tax debt is above all but if I borrowed money from someone to pay them back in a few months, would they say I should have still paid the IRS with that borrowed money? Or will they say I need to use the credit cards that are now paid off to pay the taxes? or would this all be considered tax evasion especially since not filing taxes is considered criminal( just learned). I've talked to a tax attorney and I felt like he's not really sure but he was very sure about getting a 5k retainer... Any help from anyone with experience would be greatly appreciated. 

Sorry if there's a different section about tax questions, I didn't see one. 

 

EDIT: the attorney did tell me that I can file chapter 7 in 2 years and get ride of the tax debt along with credit cards. I always thought tax debt is like student loans that can't be wiped off in BK

The first thing you need to do is file your back taxes.

 

If you haven't filed a tax return in 4 going on 5 years then odds of landing a serious business loan is zero to none.

 

It doesn't matter what structure your business is in the banks are going to want a personal guarantee with proof of income.

 

Any credit board can not give you the advice that you need.

 

Seek out an individual who is local to you, such as an EA, that can help guide you out of this. You don't really need a tax attorney you need a LOCAL professional in tax resolution.

 

I wish you the best.

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Are taxes dischargeable in BK if the returns weren't filed as required. One could try to have the taxes owed declared "currently uncollectible" by the IRS to get out from under IRS levies.

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Did you not earn any income and that is how you got into all the debt or did you earn income and not file?

 

if you didn’t earn income then you don’t have to file.  Guess I didn’t understand your situation.

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OP needs a lawyer that specializes in back taxes and won’t find their answer here. And definitely won’t get advice on how to hide assets. They have already committed crimes by not filing don’t compound it.

 

But they clearly had income to owe the IRS over $100,000. This debt isn’t going anywhere soon. The only one I feel (slightly)bad for is OPs brother but they allowed the transfer of debt. I never would.

 

 

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