Surge in First-Time Delinquent Income Taxpayers
April 14th, 2009Via: Reuters:
As a deep recession strips Americans of their jobs, homes and investments, the 2009 U.S. tax season promises to see a large uptick in first-time delinquent income taxpayers.
“Our calls are up 280 percent,” said Richard Boggs, founder and chief executive of Los Angeles-based Nationwide Tax Relief, a firm that helps delinquent taxpayers resolve tax issues.
“We’ve seen a huge rise in what we call the rookie delinquent taxpayer,” he said. “They are incredibly scared, and they have no idea what’s going to happen to them because, God bless them, they’ve never owed before.”
As the weak economy puts job security and a steady flow of income on a slippery slope, many are wary of the U.S. tax man, tax consultants say.
With household balance sheets under pressure, more U.S. households are having trouble keeping up with their day-to-day bills and struggling to pay their taxes.
“Folks are not paying their taxes because they are spending it on necessary living expenses,” said Kristin Lavieri, an accountant with Weinstein & Anastasio, PC in Hamden, Connecticut.
She added that more of the self-employed, who are required to pay taxes each quarter, are likely to end up with back taxes. “When there is not enough money for general operating expenses, there most definitely isn’t going to be enough for quarterly estimates,” Lavieri said.
Among those not self-employed, many also have to make tough decisions that could carry long-term financial consequences.
Many withdrew funds from 401k and IRA retirement savings accounts before the permitted time, unaware of the punitive taxes and penalties this would generate, said Larry Walker Jr, president of the financial and tax services firm 4-Serenity Inc in Snellville, Georgia.
Withdrawals from a retirement account before reaching the age of 59.5 are considered taxable income and generally incur an additional tax of 10 percent of the amount.
Other taxpayers did not have enough tax withheld from paychecks. As a result, they now owe taxes or will not receive the amount of refund they usually do, Walker said.
Tax season has always been traumatic for me since I took over the family tax preparation. It is an appalling effort that fills me with such fear and loathing that I can barely complete the entire exercise. I get all stirred up. I am also terrified of the IRS from when I was part of the Marriot giveover of its tip sheets to the IRS in a deal with the US GovMent. Pro Bono advise. Going to court by myself to contest the charges. Nevertheless. I hate losing.
I have an intense aversion to revealing information that is to me, so intensely private. And then awaiting the final “verdict” from the program I use ( Tax Act.com). Whether we owe or not.
Then wait. Yep. No sooner is this done, the first quarter payments are required by April 30 federal state and local. It appears the system is set up to deliver as much concentrated financial pain as possible. Hey but you know, states and the feds are making money off of those late payments so whooppee.
And yep, I am one of those people who cashed in a retirement account in 1989 just so I could pay off my car and pay for school. I didn’t care. I wanted to change my life and I didn’t care how much it cost me.
But to cash in and pay the ten per cent penalty to survive day to day operating and living expenses? That is REAL PAIN.
There is so much wrong with this picture.
The bright side of this story, if there can be one, is that the BEAST of the U.S. government (actually the Federal Reserve) will eventually find its very own self starved to death by its very own policies.
Just like people who are squatting in their foreclosed homes- what can the IRS really do but keep piling on penalties for people who cannot pay?
I have no answers. I’m just imagining that the system as it is is doomed to fail. But there will be a lot of personal pain before it does and that is what makes me heartsick.
Yeah, a surge in first-time delinquent taxpayers all right. I was almost one of them (April 13th, the longest I’ve ever let it ride). Maybe I should have “surged” a little harder. The Market Ticker guy was saying we might be in for a tax revolt, but it won’t be me that gets that ball rolling. I expect someone will, though…
I wonder if anyone has written a guide to what your individual tax “contribution” actually pays for. Say, for instance, you pay five large…how many Pentagon toilet seats and banker blowjobs is that, exactly? Or maybe it gets one banker’s Rolex out of hock and funds a half month’s hush money payment to his ex-mistress. We really need good, timely information like this to be good citizen-taxpayers…