I owe ~$50k in Self Employed Backtaxes

Background: I have been working as a self-employed 1099 worker for a company for about 10 years. I have only filed taxes for half of these years. As of 2021, I have been getting paid through my LLC, which has allowed me to write off some expenses, but the amount I owe seems overwhelming. The amount I owe is more than I will make this year before taxes, and I still have not filed 2024.
Should I seek out a CPA/tax professional’s help in my city? Should I continue to file individually and call the IRS? I am uneducated and confused as to how to file business taxes and personal income tax when I am paying myself through my LLC. It is all so daunting, and I am overwhelmed.
Thoughts/advice?

You are able to deduct expenses even before you were an LLC. The LLC did not impact your ability to deduct expenses. What kind of business is it?

Harlem said:
You are able to deduct expenses even before you were an LLC. The LLC did not impact your ability to deduct expenses. What kind of business is it?

I work for a Merchandising company. Gig work for music festivals.

You need to get current with 2019 - 2023 tax years now, and file 2024 by April 15 to qualify for a payment plan or other alternatives.

You also MUST start making estimated tax payments for this year. Your first quarterly estimated tax payment is due April 15.

I know it seems counter-intuitive, but if you don’t have enough money to pay your basic living expenses AND your current tax obligations AND your past due taxes, you need to prioritize the estimated payments for your current tax obligations. That’s how you stop digging a deeper tax debt hole.

You may qualify for a Partial Payment Installment Agreement on the past due tax debt, or possibly be a good candidate for an Offer in Compromise. The Offer in Compromise requires that you be current on your estimated tax payments and not have additional tax debt you cannot pay for at least five years.

Hiring a tax professional is a great idea if you can afford that! Here are a few places to find pros with tax resolution experience:

@Halston
Much appreciate the time you took to respond and offer solutions. I will look further into estimated tax payments and prioritize that, as I have heard staying current is the best way to move forward with the IRS. I have read a bit on Offer in Compromise and will look into that once I file my missing years. I’m assuming the “not having additional tax debt I cannot pay for at least five years” will be related to the amount I compromise with the IRS about? Still have some reading to do, but I am guessing if I am approved, I will be able to negotiate what amount I can realistically pay off (to a certain degree)?

@Bailey
It’s not related to how much tax debt you have; it’s just a requirement for everyone to file an Offer in Compromise. They won’t even consider your offer if you don’t make estimated payments when you are self-employed.

@Halston
Understood. I will make my estimated payments this year in hopes for an approved OiC. Thanks a ton.

Bailey said:
@Halston
Understood. I will make my estimated payments this year in hopes for an approved OiC. Thanks a ton.

It also helps prevent accruing more penalties and interest. When you make estimated payments, they also count as allowable expenses for OiC, and also for a Partial Payment Installment Agreement for the old tax debt. That sometimes is a better option than OiC depending on your specific situation. Like if you have a lot of home equity but not much cash.

Seek a CPA, go through the years you didn’t file, and comb through bank statements that year and curtail expenses that were ordinary and necessary to your work. If you have a van for your LLC, even better. It should drop that number significantly.

@Noor
I am leaning towards seeking out a CPA. I could use all the help I can get, as I have primed myself for failure in my mid-30s, but that is a different story. I imagine I should have been filing taxes for my LLC AND my personal income? Seems as if I bit off more than I could chew starting my LLC and not doing anything with it since then.

@Bailey
An LLC has no bearing on taxes; it is a legal entity. You haven’t elected to be taxed differently. It should go on your personal return on your Schedule C.

@Bailey
As others have said, your LLC changes nothing about how you pay federal income taxes. However, many states require you to pay some kind of tax to maintain your status as an LLC; the name of it can vary, though where I am it’s called a ‘franchise & excise tax’. I would strongly recommend looking into that as well.

Ok, that’s a lot to unpack. First step is to request transcripts so you can assess the damage.

Pull the account transcripts, which will tell you both what the current balance is and what returns haven’t been filed. If you’ve already filed returns and it’s been more than 3 years, those returns are out of statute and you can’t change them. Unfiled returns can still be provided, which should reduce the balance, assuming you’re looking at a substitute for return (SFR) filing on the unfiled years.

Prepare or engage someone to prepare all unfiled returns ASAP. Apply necessary deductions to the business for all years to reduce tax, which will further reduce interest and penalties. File for redetermination from the SFRs. This will reduce your balance. Then determine if you want to pursue an Offer in Compromise.

@Val
Thanks greatly for your time in providing helpful information. It is much appreciated. I haven’t heard about SFR and will look into this.