Scared to death... help?

Discussion in 'Growing and Managing a Business' started by SACREDTODEATH, Dec 1, 2010.


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    Dec 1, 2010
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    *I am scared to death on what will happen if I file my taxes, and/or backfiling. In a nutshell I have pretty much been income dependent since 1997. From about 1997-2001 I waited tables part time ( reported taxes and paid them) but also probably made about $13,000 a year on the side teaching classes that went unreported. People always paid me under the table through personal checks or money orders etc so it was "easy money" and I felt that since I had no medical benefits etc- and I was busting my butt making my own way.....I deserved to keep my money and it was really a harmless venture such as doing odd jobs-no worse than cutting hair out of my house and so forth. Some students paid me in checks, many paid in cash so that money would be very hard to be accountable for ( to reconstruct my income ) especially that far back.

    * In 2001 I was actually able to teach full time and continued to make about $25,000 per year ( tax free ) and has sustained at that amount until 2010, this current day.

    *Backing up a little bit, in additon to teaching.....In May 2007 I started an online business as an experimental gig and probably added about $6,000 to my $25,000 per year income...again with no taxes paid. So In about May 2007, between teaching and my online business, I am guessing I had around $31,000 in unreported income. This amount of money was still close to poverty level wages in my opinion and I wasn't getting rich, so reporting the income just wasn't a priority since I was financially struggling trying to raise my kids, and I am still struggling to this day.

    * In 2008 Between teaching classes and my online business I probably totaled around $35 k
    * In 2009 Between teaching classes and my online business I probably totaled around $35k
    * In 2010 Between teaching classes and my online business I probably totaled around $37k
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    *So where I am at now is to seek advice on If I should even backfile and "wake the giant" so to speak. Or If I should just get an EIN or start doing things normally via a sole proprietorship and start filing. I am almost 100% sure that I do not show any owed money to the IRS in the past because I have never been W-2'd or W-4'd , never been incorporated etc. I have also been told that If I owed the IRS money that I would know real* soon. I have no state or government leins on my credit as I have checked that the other day.

    * I have also been told that If I owed the IRS money that they usually let people know within a 3 year increment because of their statute of limitations etc. Im not sure if this is true or not.

    * Since May 2007 much of my income is easily traceable through Paypal and "re-construction" of income is probably going to be pretty easy from 2007-2010 between the checks that were deposited through my bank and through Paypal. So from about May 2007-to this current day (December 2011 ) I can give a very good, expeditious account of every single transaction whether it was through classes or the online business.
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    *So....where am I now.....???? I was told by a basic tax preparer to just file from 2007 to this present day and just say that's when I "started working", since the other years ( dating back to 1997 ) is all so old and so vague and will be almost impossible to reconstruct. I have also heard things like " Income disclosure statements" which keep you out of hot water saying that you at least knowledge that you "blew off" your taxes and are trying to step up to the plate in some way.

    * I have also heard or read online that the IRS is not really concerned with anything beyond the last 6 years? Not sure if this is true or not.

    *I have have had mixed advice from friends...some say backfile for the last 4 years ( since that's when my online business was really starting to take off ) Paypal will start reporting income to the IRS at the end of December 2011 /the new 1099 rule that goes into effect for online businesses January 2011.

    * Some say get a sole proprietorship or LLC and start filing beginning 2011-2012 and let the cards fall where they may. <---- Im thinking about doing this just to stay out of "evader" status and anything else that happens If I get "discovered" will be considered a tax "ammendment" ? By Law? not sure if this is true or not.

    *Some say just file 1 year back ( 2010-2011 ).
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    In scared to death for myself, my family and soforth. I had eventually planned on incorporating myself but being that fact that I have never gotten rich off this stupid way to live-I had just gotten ignorantly complacent and again, I felt a MORAL RIGHT that since I have not been to the doctor or dentist in 20 years, I had the right to live like this. but I know it cannot continue, I have to do something...SOON. Please help. Thank you. I am assuming I am a chronic non filer and please know I have not "structured" my income to evade taxes. All of my income has been in the same bank account for the last 10 years. And only one other bank when I lived in another city. Thank you for your time and please let me know what I can do. I think the main question I need answered at this point is: As long as I start filing NOW...( even just for 1 year back ) does this keep me from being an assumed evader ? That's my MAIN FEAR.
  2. Fergal

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    Nov 18, 2007
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    Welcome to our business forum SACREDTODEATH. I feel for your situation, your income was not very high and I can appreciate your fear at this point in time. My recommendation would be that you get advice from a professional accountant. Many accountants will offer a first consultation free of charge and even that initial consultation could put your mind at ease and help give you a lot of clarity as to how you are going to move forward.

    Do you have friends or family who use an accountant and who could recommend one to you? A friendly helpful accountant really could do a lot for you at this time and is best placed to give you the professional and expert advice you so badly need. To be honest you've had enough opinions already and what you need is professional expert advice that you can have confidence, certainty and trust in.

    Good luck with everything and please do post back with your thoughts and to let us know if you can find an accountant in your network that can help you.

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