Hi,
I have a large 2021 tax bill. About $45,000. Came about from early Roth IRA withdrawal in May 2021 that was "hardship" based. But the hardship doesn't fit one of the ones the IRS lists as a valid hardship or exception. For instance, since the withdrawal was made in 2021, no COVID related hardship is recognized by the IRS. Basically, the hardship was part COVID and mostly family law related, as I had to move to Moscow to deal with extremely complicated custody matter of child that is expected to go on for several years. Can't pay tax debt off in 72 months. Rather tricky now to get work here as American. I am trying to figure out what makes sense given what I view as hardships, be it offer in compromise, or bankruptcy chapter 7 filing.
Dealing with dollar losing 25% compared to when I moved, and expensively dealing in court with a mother trying to raise a child to hate the US and causing him psychological trauma to me is a rather profound hardship, but the IRS doesn't see it that way. Basically, the only hardships they seem to recognize are mainly health and disaster related.
I have no US real estate and no 2nd home. Just an apartment in wife's name here in Moscow which is via mortgage, and there is no home equity line of credit accessible to me here (banking system here has not developed to that point). We filed 2021 return jointly. As I understand, IRS can not force us to sell an only residence.
I sold our only car to raise some cash to pay the IRS. Other than that the only physical assets I have are a few musical instruments. Since I am trying to get music lessons up and running, I am trying to prevent having to sell those.
I also have Roth IRA, but not worth that much now (not nearly enough to pay taxes). I don't receive wages, just government retirement and disability pay.
Filed 2021 taxes on time, am paying monthly what I can afford, while penalties and interest monthly amount to more than I am paying, instructed IRS to apply to my current debt a previous refund that I never received, which they did. Have no negative history with my taxes.
So... given above, I am wondering:
1) If my current Roth IRA balance is my only emergency funds, can the IRS put a lien and take the whole thing, despite the financial risk it would cause?
2) Since I am doing what I currently can to pay monthly (which at current rate would have me paying off debt in 15 years at best), will IRS view that as reason to not garnish my retirement and/or disability pay (without which can't cover living expenses), and not seize my Roth IRA, or is it all open game? In other words, if I do what I am doing now, will IRS likely not put lien on financial assets for several years, allowing me to file for chapter 7 in 3 years?
3) While working this all out, would my best bet be to file for an offer in compromise hoping that it be miraculously considered? Or, as far as payment plans, would the IRS even consider any sort of plan, if I can't commit to paying off within 10 years? Would be really nice to somehow reduce the 0.50% monthly unpaid penalty to 0.25%...
Anyway, curious if there are ideas I haven't considered. From what I read about non collectible status, that doesn't seem to offer much, hence didn't mention it above.
