By / Legal Tips

He Didn’t File for Years—Then Owed Six Figures: What Self-Employed Pros Can Do Next

You’re 1099, busy, and the years blurred. Now you’ve finally filed—and the balance is jaw-dropping. Take a breath. You have options with the IRS and the Massachusetts DOR. Here’s the practical path forward.

First: Stabilize (Today–This Week)

  • Open every notice. Deadlines matter for penalties and appeal rights.
  • Stop the bleeding. If you can, make a small good-faith payment now (even $100–$500). It reduces interest and shows effort.
  • Gather proof of income/expenses. 1099s, bank statements, mileage logs, receipts, prior returns, bookkeeping files.
  • Don’t move assets around. It can complicate resolution and send the wrong signal.

Step 1: Get Fully Filed & Correct

The first step is to get all returns filed, ensuring they are accurate, not rushed. This requires you to reconstruct the year(s) by pulling bank and credit card exports, matching deposits to your 1099s, and carefully separating business from personal expenses. Be sure to claim legitimate deductions only, such as the home office, mileage, supplies, health insurance, or retirement contributions, if you qualify. It’s crucial to file both federal and Massachusetts returns; if MA returns are missing, the DOR will create an estimate that is often higher than what you truly owe, so a correct filing helps immediately.
Tip: If an older return was wildly off, an amended return can shrink what you owe.

Step 2: Get Compliant Going Forward

Getting compliant is essential, as collections programs require you to be current on your new tax obligations. This means making quarterly estimated payments, so set calendar reminders for the April 15, June 15, September 15, and January 15 deadlines. The easiest way to manage this is with a pay-as-you-go system, where you aim to set aside ~25–30% of each 1099 deposit into a separate tax account. To stay compliant and avoid penalties, many filers use the reasonable “safe harbor” rule, which generally involves paying either ~100% of last year’s total tax (110% for higher incomes) or ~90% of the current year’s tax.

If You Can’t Pay in Full: Your Main Options

IRS Options
  • Standard Installment Agreement. Spread payments over time; interest/penalties continue until paid, but enforcement pauses if you stay current.
  • Partial-Pay Installment Agreement. Smaller monthly amount; you may pay less than the total before the collection clock runs out if finances stay tight.
  • Currently Not Collectible (CNC). If you can’t afford any payment after basic living costs, IRS can pause collection. They’ll review later.
  • Offer in Compromise (OIC). Settle for less than you owe if your reasonable collection potential is lower than the debt. Requires full financial disclosure and careful strategy.
Penalties & Interest
  • First-Time Penalty Abatement (FTA). If you were on-time for the prior three years, you may get a one-time relief on failure-to-file/pay penalties.
  • Reasonable Cause. Serious illness, natural disaster, or events outside your control can support penalty relief—with documentation.
  • Interest keeps running by law. The sooner you act, the cheaper this gets.
Massachusetts DOR (MassTaxConnect)
  • Payment plans. MA offers online plans via MassTaxConnect; terms depend on balance and compliance.
  • Hardship/CNC-style relief. If you truly can’t pay, DOR can consider hardship status based on a financial statement.
  • Compromise. In limited cases, DOR may accept less than the full amount when collection is unlikely and compromise is in the Commonwealth’s best interest.
  • Enforcement. Both IRS and DOR can file tax liens and issue levies if accounts go ignored. Staying responsive protects you.

What Determines Your Best Path?

  • Cash flow & household budget (actual ability to pay).
  • Assets & equity (home, vehicles, savings).
  • Business outlook (stable vs. volatile income).
  • Compliance history (late vs. on-time years).
  • Health or life events (supporting reasonable-cause narratives).

A Simple Decision Map

  • Can you full-pay within ~6–24 months? → Standard installment.
  • Only afford a small payment? → Explore Partial-Pay IA or CNC.
  • Debt far exceeds your realistic ability to pay over time? → Evaluate IRS OIC; consider MA compromise where appropriate.
  • Were penalties the main driver? → Request FTA and/or reasonable-cause abatement.

Avoid These Common Mistakes

  • Ghosting the notices. Silence triggers liens/levies.
  • Overpromising a payment you can’t sustain. Defaulting restarts enforcement.
  • “Fixing” books after the fact with guesses. Bad numbers kill relief requests.
  • Board members unsure of what to do next.

How a Tax Attorney Helps (vs. a Preparer)

  • Attorney-client privilege for sensitive conversations.
  • Strategy first, forms second. We match your finances to the right program (IRS & DOR) and build a defensible file with proof.
  • Negotiation & advocacy. From penalty relief to OIC financials to payment terms—handled for you.
  • One plan, two agencies. Coordinated IRS + MA resolution so nothing falls through the cracks.

FAQ's

Will a lien ruin everything? A federal/state tax lien is public and affects credit and lending. Acting early can prevent it—or set up a path to release/withdrawal later.
Can I keep operating my business? Usually, yes. Staying current on new taxes is key to any deal.
How long can they collect? Both IRS and MA generally have lengthy collection periods after assessment. Don’t bank your future on “waiting it out.” Build a plan.

No judgement. Just a plan.

If you’re a self-employed professional in Massachusetts who just landed a six-figure tax bill after late filing, we can help map the fastest, least painful path forward—with both the IRS and the MA DOR. Contact Laura Brown to talk options.