Today TaxMama hears from Wyetta in the TaxQuips Forum with this problem. “I tried to make a payment arrangement with the IRS for 2010 taxes owed. The IRS told me that I have to file for 2006, before they could offer a payment arrangement. Please instruct me on how to handle this situation – how to minimize the damages and penalties. I have a tax liability from 2006 also.”
Prepare the tax return for 2006. File it. THEN, go back to IRS to arrange for an installment agreement for both years.
How can you minimize any penalties and interest? I have no idea. Sorry, I know nothing about you or your situation.
Why didn’t you file the 2006 tax return? Did you have a very valid reason, like illness, death in the family, insanity, substance abuse, hurricanes, floods, etc.?
Not filing simply because you didn’t have the money to pay the 2006 taxes won’t get your penalty reduced. But if you have a good reason for not filing then, AND not filing still for the next several years, perhaps you can convince IRS to waive the penalties. That will also reduce the related interest expense.
If you only had a good reason in 2007, but that reason resolved itself in 2008 or 2009 and you still didn’t file – you will get no relief from IRS.
I wish I could give you a better answer, but speaking in a vacuum, this is the best I can do. Good luck.
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