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Old 03-16-2015, 03:52 PM
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Exclamation Help! IRS Back Taxes

We owe about 40k in IRS back taxes from 2009-2013 - with interest comes to about $50k. (FYI we also owe state back taxes but have a pmy arrangement with them - so am focusing on the IRS).

My husband has a serious medical condition and am going to need to quit my job to care for him and likely move back east in about a month as he has family there at least and we would not be able to live on the west coast anymore as the cost of living is too high and we can't afford it.

I hired a tax relief company about a year ago -- they have been taking forever. They are trying to set-up payment arrangements with the IRS -- just gave them 433a - but don't know when they'll get to the point to solidify it -- at their rate it could be 8 months.

When I quit I am eligible to take a lump sum distribution from my pension plan that my company paid into. Amounts to about $20k. If I opt to take the lump sum, it would be payable in May 1, or I may be able to stretch it to June 1.

I know when the lump sum is actually paid out/check cut, the IRS gets notified.

Questions-
- We are going to need the money to live on when we move back east as I will not be able to work due to care for my husband. When I get it deposited to our bank acct, I will need to take the majority out right away to pay for rent/medical bills/ect. This will basically be the money we will be living on for at least 1+ years and can't risk a bank account levy. If I receive the lump sum and then take it out of the bank account right away with the intent to live on it, is that considered tax evasion? I would still pursue payment options with the IRS -- not trying to get out of our obligation -- but we will need to have money to live on, and we can still pursue payment arrangements after the May 1 disbursement. Don't want to get tagged for tax evasion though.

Also, Are there any other options?

Pls don't ask me to ask the tax group we hired -- they are useless. Should have known better than to hire a place off a radio station, even though I did do some homework.



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Old 03-16-2015, 09:16 PM
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- We are going to need the money to live on when we move back east as I will not be able to work due to care for my husband. When I get it deposited to our bank acct, I will need to take the majority out right away to pay for rent/medical bills/ect. This will basically be the money we will be living on for at least 1+ years and can't risk a bank account levy. If I receive the lump sum and then take it out of the bank account right away with the intent to live on it, is that considered tax evasion?========>>>>>>>>>unfortunately yes ; You should receive a Form 1099-R from the payer of the lump-sum distribution showing your taxable distribution and the amount eligible for capital gain treatment. the payer also reports it to the IRS.

You may defer tax on all or part of a lump–sum distribution by requesting that your employer directly roll over the taxable portion into an Individual Retirement Arrangement or to an eligible retirement plan. You can also defer tax on a distribution paid to you by rolling over the taxable amount to an IRA within 60 days after receipt of the distribution. A rollover, however, eliminates the possibility of any future special tax treatment of the distribution. Mandatory income tax withholding of 20% applies to most taxable distributions paid directly to you in a lump-sum from employer retirement plans regardless of whether you plan to roll over the taxable amount within 60 days. If you put any of your own after-tax contributions into any of the accounts, then that portion is considered non-taxable. You put the total amount of all retirement distributions on 1040 line 16a, and then subtract off any after-tax contributions you made, and the taxable amount goes on line 16b

I would still pursue payment options with the IRS -- not trying to get out of our obligation -- but we will need to have money to live on, and we can still pursue payment arrangements after the May 1 disbursement. Don't want to get tagged for tax evasion though.=======>>>>>>>>I guess you need to contact irs for help; even if you're ineligible for an online payment agreement, you can still pay in installments by completing and mailing Form 9465 and Form 433-F;you may call 800-829-1040 or the phone number on your bill or notice. Please visit the website.Taxpayer Advocate Service

Also, Are there any other options?====.>>>>>>>>>. I guess as mentioned above.



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Old 03-16-2015, 11:32 PM
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Thank you.

At my company, if I take a lump sum they notify the IRS at the same time they issue me a check. I'll get the 1099-R later of course. I wonder if I roll it over into an IRA if the payer would notify them at the time it is done as well.

But even if I roll it over into an IRA the IRS can take that, Correct?



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Old 03-17-2015, 12:34 AM
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One more thing... checked the IRS balances... actual taxes were $49,400. Now with interest it's $69,000. Plus the state is another $30k but they accepted a payment of $300 a month (was simple enough to do over the phone).

Can you explain why the tax group I hired asked us to complete a 433a instead of a Form 9465 and Form 433-F?

I'm starting to wonder if they know what they're doing.

Thank you much for your feedback!



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Old 03-17-2015, 01:24 AM
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Quote:
Originally Posted by Kentucky7 View Post
Thank you.

#1;At my company, if I take a lump sum they notify the IRS at the same time they issue me a check. I'll get the 1099-R later of course. I wonder if I roll it over into an IRA if the payer would notify them at the time it is done as well.



#2;But even if I roll it over into an IRA the IRS can take that, Correct?
#1I believe you need to contact your retirement plan admin for more accurate professional help;however, unless the distributions are periodic payments, you can roll over only a lump sum payment. Monthly or other periodic lifetime pension payments typically end with your death or, depending on your plan's options, with your spouse's death. So, there are no rollover possibilities for periodic payments, and you cannot count them as earned income to qualify for deductible IRA contributions. By choosing the lump sum, your pension may become part of your estate. Rolling over a lump sum payment into a self-directed traditional IRA allows flexibility in investment selection and governing your income stream, plus you'll gain tax-deferred compounding. You'll also add investment risk .

#2; Under both federal and state laws, IRAs are often protected from creditors. However, these protections are not available when the creditor is the irs. The IRS can levy against your IRA to satisfy outstanding federal tax obligations. When the IRS places a levy against your IRA, the agency does not need to seek a court judgment to collect the funds. The IRS must determine if you depend on the funds in your IRA for necessary living expenses by conducting a financial analysis of your living expenses and life expectancy to estimate how much can be withdrawn yearly to deplete the IRA in your lifetime. If you are dependent on your IRA money, or if you will be soon, the agency will not levy against the IRA. In addition, the IRS will also consider special circumstances, including extraordinary expenses or other sources of income that will be available to pay expenses during retirement.



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