Good evening ladies and gentlemen. My mom is in a bit of a pickle! A couple years ago, her mom and then her sister (my grandma and aunt) sadly passed away less than two weeks apart. This unfortunately sent my mom into a bad state for awhile. Mom didn’t end up filing her taxes for 2023 and 2024 tax years, for whatever reason, probably stress overload avoidance.

She has been doing better recently, and rightfully became concerned regarding this situation, but then reached out to one of those “we’ll help you avoid being crushed by the IRS” companies (Ovation Tax Group). They scared her with the prospect of “$40k plus penalties and interest”, and convinced her to sign up with them and give them a $5k+ deposit to “help”.

I’ve advised her to stop the charges with her bank, and file written notice of cancellation/rescinding the agreement. Hopefully this was sound advice? I then advised her to consult with a competent local CPA and/or tax attorney. I am trying to get her an appointment with my tax accountant, which won’t likely happen until after 4/15. My accountant’s assistant did advise that mom start by immediately filing her taxes (current, and 2023/2024 years also), and then going from there.

My mom is a very smart, able, and sharp lady, who has always done the right thing, and this is very out of character for her, but she’s coming to terms with this, and wants to move forward. For an understanding of her situation, she likely earned well under $100k/year as a W2 employee, with some minor additional income from being an organist/pianist at her church. No other income or tax complications, no investment income etc. She typically had to pay in a small amount into both state and federal each year, appx $2,500/year combined state/federal liability. I don’t believe that she’s done anything like this before, and I’m reading online about potential penalty forgiveness/abatement, if that’s still a thing.

Wondering if anyone has ideas/advice/experience, and could possibly recommend a good tax attorney and/or CPA in the Milwaukee, WI metro area.

Thank you for your consideration, and any advice.

It's not that big a deal, especially if she files correctly before they get wind of it - that's good faith. For folks who make a large innocuous mistake the IRS has a one time get out of jail free card, but I doubt she'll even need to use it. Yes, the potential penalties and interest can be crazy obscene, crafted to motivate you into paying promptly, but usually reserved for people that really deserve it.

I made a mistake once with cost basis on some investments and they came after me for $7900 with P&I. My CPA looks at it, corrected my error and theirs (turns out the IRS is not that great at math), and had me mail them a check for less than $4000. They countered saying I still owed $183, to which my CPA said, "they're wrong, but just pay it". I did. The P&I just magically disappeared.

Does she owe for those years or is she due a refund?

Years back I did not file one year. After I sobered and looked into it, because I was due a refund due to overpaying, it turned out that it was all good. I had actually paid my taxes for that year and had a few years to file the return. If I wasn’t due a refund, then I wouldn’t have paid my taxes by the deadline and it would have been a different ending.

This was a ways back and I have no clue to the current rules but your accountant may.

quote:

Originally posted by SpinZone:
Does she owe for those years or is she due a refund?

She believes that she likely owes, since her withholdings typically leave her with a $2k+ liability each year.

One thing I haven’t asked yet is if she is initiating this, or if she’s already been sent any letters or notifications of past due filing.

quote:

She believes that she likely owes, since her withholdings typically leave her with a $2k+ liability each year.

She should file ASAP.
They will likely send her a letter acknowledging the filing + payment. It will probably include a calculation for interest and penalties but the sooner she files, the better off she will be.

She definitely doesn’t need to pay anyone for help with this. Her return sounds simple, so just file using TurboTax or H&R Block, and pay any taxes owed, but not the penalty and interest. They will send her a bill for penalty and interest and she can request a waiver of the penalty at that time.

There are penalties for failure to file and failure to pay, and each caps out at 25% of the tax due. So a maximum penalty of 50%. If she owes $2000 for each year, that’s a $1000 penalty for each year. If she has to pay them both, $2000, which is much less that the “deposit” that the company got from her.

Folks have you on the right track to just file late, ASAP, and pay any amounts computed as due. They will bill her for any interest and penalties. Appeal the penalties, but she'll be paying the interest. Just be sure it's computed close to right.

quote:

They scared her with the prospect of “$40k plus penalties and interest”, and convinced her to sign up with them and give them a $5k+ deposit to “help”.

I’ve advised her to stop the charges with her bank, and file written notice of cancellation/rescinding the agreement. Hopefully this was sound advice?

I think this part is going to be tricky. If she's competent and signed up for a service, you may have a hard time shaking loose of that contractual obligation. Worth a shot, but perhaps a concussion of 25% of fee for a cancellation and refund might work.

Get ahold of the actual agreement and read it.

You mentioned too "stopping charges with her bank" - if she is paying for things like this with auto debit or giving sheisters her banking information get her to stop that if at all possible with everyone other than "trusted" entities like utilities, credit cards, etc.

I am not a tax atty etc.

I think her first priority is to get 2025 filed on time. The others are already late, but there's no reason for this one to miss the deadline. At the least she could file for an extension and make a payment of what she expects to owe. Then she'll have several months to get it completed.

Depending on her situation, last year's tax detail may impact this year's taxes. e.g. State or local taxes paid or refunded. Thus it may be cleaner to start with the oldest overdue return and work up to this year. That may eliminate having to then file amendments to the late returns if done from newest to oldest.

When it comes to a forgiveness program offered by the IRS, my suggestion is to use a professional service of some sort. Going solo with the IRS is not a recipe for success. As was pointed out by honestlou, the actual penalties may be relatively small, so it may be cheapest to just pay it. Or she could file for the forgiveness herself if a paid service won't do it for that amount, understanding that success is not guaranteed. We had poor results even using a tax attorney from one of those services.