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Discussion Starter · #1 ·
Hello, I have lived in Ecuador full time since 2006 when I moved here from florida I have not filed us taxes in many years. I went through my self employment ebay income and find I owe no taxes but do owe 4500 dollars in social security the problem is I have less than 1000 dollars to my name and cannot pay the ss tax. My question is can I still file using the streamlined procedures if I cannot pay in full.
Thanks, John
 

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You can file using the streamlined procedures, yes, but the IRS then has the discretion to treat your filings as ordinary late filings. (An attractive part of the streamlined program is "sunsetting" the missing tax filings prior to the streamlined program window, so that'd be nice in your situation.)

One option is to pay as much as you reasonably can with your streamlined filing and then set up an installment agreement with the IRS. If approved that'll give you up to 72 months to pay, and only interest will accrue, not penalties. One potential problem is that the IRS then might not waive penalties on the remaining balance you didn't pay in your streamlined program filing.

Another option, especially if you're expecting income, is to get your FinCEN Form 114s filed (since you have to do that separately anyway) then wait a little bit to get your streamlined package filed with a bigger payment. A variation on that option is to take out a personal loan at the lowest interest cost available.

Yet another option is to try to make an Offer in Compromise. That again is outside the streamlined program and not guaranteed. (The streamlined program is basically a "pre-packaged" Offer in Compromise of a particular type.)

I think what I'd try to do is participate in the streamlined program but include a payment for whatever you reasonably can. Then, when you get a bill from the IRS for the remainder, try to set up an installment plan -- or just pay off the bill if you're expecting a windfall. All that would probably work.
 

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To add one idea, let's suppose you complete your streamlined tax filings and the total due is $4673.00. But you cannot pay the full amount. OK, move the decimal point and pay $467.30.

Ooops, you made a payment mistake. The IRS will send you a bill for the balance, plus maybe a bit of interest. Then set up an installment plan if you cannot pay the bill. That should be OK, but there are no guarantees.
 

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Discussion Starter · #4 ·
Thanks so it is best to get a loan and pay in full under the streamlined program, I have a couple of other questions.

1. I know that I have other 1099s that were not paid or filed from when I lived in the us from many years ago and one year that I asked for an extention but never filed. None of these were large amounts(under 30k gross) but I now know that being a sole proprieter requies I pay no matter what I earn. I called the irs to find out when they were but they said they can only go back 10 years and could find nothing in their records I dont remember anything and have no records of anything since I left the us (bad breakup). Is there any way the irs can "find" these records later and charge me even though I have been accepted in the streamlined program? how can I get completely compliant with the irs and not have to worry about them comming after me later for things I cant find.

2. Would a bankrupcy help in this situation as I also have many emergency room bills (I think I signed something that if I ever could pay I would in order to be treated) in the us and other small debts that I cant remember or pay.

I am basicaly looking to clear up all my financial and tax issues in the us but I dont know what they are and the credit reports are clear. I know a lot of people in this same same situation and nobody knows what to do....Help please
 

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1. If you have an outstanding tax bill the IRS is quite likely to send you a bill (again). However, a key value of the Streamlined Program is that (if you're accepted) it "wipes the slate clean" for events that occurred previously, and it gets you caught up.

2. U.S. tax debts are generally not dischargeable in U.S. bankruptcy, and (in the circumstances you describe) I think the word "generally" can be struck. You can obtain a copy of your credit report free of charge in order to see what outstanding debts you have then decide how to proceed.
 

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Discussion Starter · #6 ·
Thanks again, just one more thing I forgot to include that I have not paid taxes in Ecuador as Ecuador does not tax foreign earned income...internet sales to other countries are not considered domestic income. Is it a requirement that I have paid tax to a foreign country to qualify for streamlined. Are these foreign tax returns requested by the irs for review when I apply for the program? Should I start paying taxes here for 3 years before I apply for streamlined I have not had any correspondence or bills from the irs ever.
 

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Is it a requirement that I have paid tax to a foreign country to qualify for streamlined.
No. Of course your U.S. filings should reflect that truth.

Are these foreign tax returns requested by the irs for review when I apply for the program?
No. However, you should keep foreign tax returns (and other financial records) in your personal files, especially if those records relate to something you're reporting (or not reporting) to the IRS in case there's a future inquiry or audit. For example, if you're taking a Foreign Tax Credit on your IRS tax return, it's important to hang onto records that justify your FTC.
 

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Discussion Starter · #8 · (Edited)
Ok so its looks like I should do this quickly, would you recommend I file myself I think I can handle it from what I understand 6 years of fbars(I have never had more than 900 dollars in my ecuadorian account in all these years) and 3 years of 1099 income taxes. You mentioned a FinCEN Form 114
are there any other forms I should fill out I think I may be able to get the full payment together in the next 2 to 3 months. Can I send them something that I am planning to file soon to protect myself in case they do audit me before I am able to make payment.
I see a lot of horror stories about the irs and how you should not do it yourself but would the expense to have someone else do it (well over 1000 dollars) be worth it in my case?
 

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Ok so its looks like I should do this quickly, would you recommend I file myself I think I can handle it from what I understand 6 years of fbars(I have never had more than 900 dollars in my ecuadorian account in all these years) and 3 years of 1099 income taxes.
"FBAR" refers to FinCEN Form 114. If you have never had more than $900 (total) in your non-U.S. financial accounts -- if you have never had at least $10,000 -- then you never met the threshold for filing FinCEN Form 114. If you never met the threshold, you do not need to file that form. The Streamlined Program only requires that you file FinCEN Form 114 in the year(s) when you were required to file.

I think you mean IRS Form 1040 and related attachments. IRS Form 1099 is a report to you of certain income such as dividends, interest, etc.

Can I send them something that I am planning to file soon to protect myself in case they do audit me before I am able to make payment.
Not really for the Streamlined Program. The Streamlined Program is a specific formula.

I see a lot of horror stories about the irs and how you should not do it yourself but would the expense to have someone else do it (well over 1000 dollars) be worth it in my case?
It depends on how complex your tax situation is, but so far, from what you describe, you don't seem to have a complex tax situation. I would suggest trying tax preparation software -- TaxAct.com costs about $14 per year (or $0 for the current year, free edition) -- to see if that helps. Start with the 2014 free edition, for example, and see if it all makes sense to you.
 

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Discussion Starter · #11 ·
Is there any way I can stop paying social security to the US? Will I lose the US benefits I have accumulated as I do have enough credits to qualify.
 

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If you are enrolled in your local "social security" system and paying into it, there is a reasonable chance you may be able to avoid paying into the US system. However, it would be a whole bunch easier to justify if there is a social security treaty between your country of residence and the US.

That said, it does kind of highlight one of the big "disadvantages" of being "self-employed" outside the US.

But actually, if you are paying into both systems, you should be able to draw benefits from both systems when you hit retirement age. The SS administration in the US will "ding" you a bit for being eligible for a foreign state pension, but the amount they can deduct from your US benefit is limited.
Cheers,
Bev
 

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Is there any way I can stop paying social security to the US?
If you are self-employed, you must make U.S. Social Security/Medicare contributions (the "SE Tax"). The U.S. and Ecuador do not have a social security treaty, so there is no provision for an exception. Your ongoing contributions should boost your future U.S. Social Security retirement benefits (and potential spousal benefits). They also continue providing Social Security disability insurance coverage, and that's valuable. (You would lose U.S. Social Security disability insurance after a couple years without sufficient contributions.)

There are two ways to stop paying. One way is to work for an employer. If you don't have self-employment income, and you live outside the United States, you don't have to contribute to U.S. Social Security/Medicare. The other way is to terminate your U.S. citizenship.

Can I collect social security from both the USA and Ecuador
U.S. Social Security would certainly have no objection to collecting benefits from both systems, but you'd have to check with Ecuador's system since I'm not familiar with how that works.
 

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Discussion Starter · #15 · (Edited)
Well I am not going to renounce my US citizenship ever. I guess I need to find 3 years of social security money to enter the streamlined program somewhere...man this is hard no wonder so many people cant be compliant with the irs. I cant even let them know I am planning to pay.

What if I end up being audited before I can get the payment together can I still do an offer in compromise after I am selected for an audit or whatever they do. I understand that when they notify me I am no longer eligible for the streamlined program is this correct?

Would the payment "mistake" be the way to go I just dont want it to be not accepted then sent a bill I cant pay kicked out of steramlined and then sent another huge bill with all the penalties? I just dont trust the irs to do the right thing or am I just paranoid?
 

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Discussion Starter · #16 ·
I think it is a shame when less fortunate americans cant qualify for an irs program and we just have to sit and wait to be audited or have a bank account confiscated
 

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OK, let's net it out:

1. You're delinquent on your U.S. taxes -- and at least somewhat to your personal detriment, by the way, given that you're missing out on future U.S. Social Security retirement benefits.(**)

2. You simply cannot pay the full amount owed, not yet. You'll need more time to do that.

You're not the first person with this pair of problems, and you won't be the last. The IRS's Streamlined Program is a specific, standardized "amnesty" program, and it's a good one. If you're accepted into the program, great, but that's always the IRS's decision to make.

I think if I were you I'd try to get the best possible deal I could. That'd be the IRS's Streamlined Program. Pay what you can. Assuming the IRS accepts you into the Streamlined Program they'll obviously send you a bill for the balance (plus a bit of interest perhaps since they probably can't let you off completely on an underpayment within an already nice amnesty program). Pay that bill off when it comes if you can -- if you can tap into a low cost source of funds, that's worth considering(*). If you still cannot pay the bill, contact the IRS and ask for a monthly payment plan (called an Installment Agreement).

Chances appear to be excellent that the IRS will agree to that whole approach in the circumstances. Not guaranteed, but it looks pretty good. The Streamlined Program's instructions aren't exactly welcoming to the idea of not paying in full when you file under that program, but they do open the door a bit.

(*) One potentially tax-friendly source of funds, if you have it, is a mortgage. There's a mortgage interest deduction that might be useful in future tax years. Ecuador may have more or less tax-friendly ways to raise funds (if you can).

(**) An interesting point here, one I didn't really think of until now. The IRS's Streamlined Program lets you get caught up with your U.S. taxes without filing every missing tax return. However, your U.S. Social Security earnings history will not reflect contributions for years when you didn't pay. (There's no "free lunch" here.) So that's something to consider, whether it's wise to skip those missing years. I could imagine in a few cases that it wouldn't be wise, particularly in cases where you come up just short of qualifying for U.S. Social Security retirement benefits. Typically that would be among older filers nearing retirement age who haven't met the 10 year minimum. That's not most people, but it is a few people.
 
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