"I Haven't Filed Taxes In 10 years" (And He Make $250,000 A Year)

Summary

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Episode Overview

Theme:
This episode of The Ramsey Show Highlights tackles a caller's major financial and legal dilemma: he hasn't filed federal taxes in nearly a decade, despite earning a substantial income from rental properties. The hosts offer practical advice on how to confront years of tax neglect, improve financial management, and simplify an overcomplicated property portfolio. Listeners are offered a frank look at the risks of evading the IRS and the value of owning one's financial responsibilities.

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Key Discussion Points & Insights

1. Caller Background and The Tax Dilemma (00:06 – 01:38)

• Caller "Claude" reveals he has:

  • Not filed federal taxes since around 2016.
  • Accumulated 26-27 fully paid-off rental properties after entering the real estate market post-high school.
  • Earned between $10,000 and $15,000 per month (about $150,000–$200,000+ annually).
  • Just bought a house through private financing, now seeks permanent financing but is blocked by lack of tax records.

• Key insight:

  • Owning multiple properties and significant income mean IRS non-compliance is extremely high risk.

• Notable Quote:

  "I haven't paid my [IRS] in several years. ... I would like to secure permanent financing. But I haven't done my federal taxes in several years."
  — Claude (00:06)

2. Root Causes and Missed Warnings (01:11 – 01:29)

• Claude admits, "I'm just kind of ignorant, I guess." The hosts reject this, acknowledging his success but highlighting a lack of financial process.

• He has not been contacted by the IRS and much of his income is unreported cash, which worries the hosts.

• Notable Host Response:

  "You're not ignorant. People don't own 27 [properties]. ... You're very successful."
  — Host (01:00)

3. Assessing the True Liability (01:29 – 02:19)

• When asked if he has the money to resolve back taxes, Claude is unsure. He estimates his net worth at about $4 million in real estate, mostly acquired cheaply, yet cash flow is tight.

• Host's Immediate Advice:

  "Get with an enrolled agent or CPA yesterday ... get on a payment plan and get this mess cleaned up."
  — Host (02:19)

4. Transparency, Integrity, and Legal Risks (02:43 – 03:16)

• Caller wonders about reporting cash income; hosts stress the absolute necessity:

  • "You should report every dime you make. Give to Caesar what is Caesar's."
  • IRS has wide-reaching powers—ignoring them could destroy his life or even result in jail time.

• Memorable Moment:

  "You got to do this with integrity, my guy."
  — Co-host (03:01)

• Serious Warning:

  "The last people you want on your back is the IRS. They can destroy your life."
  — Host (03:02)

5. Action Steps and Professional Help (03:16 – 04:10)

• Claude agrees: "I guess I need to go to a CPA."

• Hosts urge thorough documentation, possibly hiring a bookkeeper, and reiterate not to put this off any longer due to compounding consequences.

• Co-host Encouragement:

  "The good news is, you have the assets to clean this up very quickly."
  — Co-host (03:44)

6. Cash Flow Crisis and Property Management (04:10 – 06:09)

• Despite owning 27 rental properties free and clear, Claude's income is surprisingly modest (around $10,000/month) and he feels broke.

• Reason: Many properties are low-income rentals needing frequent, costly repairs due to prior neglect.

• Memorable Critique:

  "For a guy who doesn't pay taxes and makes 15 grand a month, you shouldn't be this broke."
  — Host (05:28)

• Claude’s Realization:

  "When they're coming open, I'm spending a fair amount of money on repairs and maintenance... because you neglected to do it."
  — Claude (04:54)

7. Simplification & Re-investment Strategy (06:09 – 07:11)

• Hosts suggest selling lower-tier properties, upgrading to fewer, higher-quality rentals for better cash flow and less hassle.

• Claude has already begun this process—sold a property for $55,000 that was bought for $10,000, but spent heavily on taxes and repairs.

• Significant unrealized capital gains tax liability is uncovered.

• Advice:

  "What would it look like if you sold a couple of these low income properties and got nicer properties… Instead of having 26, maybe you have 10, or maybe you have 8."
  — Co-host (06:21)

• Claude’s Oversight:

  "I've never depreciated any of them either."
  — Claude (07:06)

8. Compounding Problems: Embezzlement & Overwhelm (07:11 – 08:10)

• Claude confesses his former secretary embezzled money, compounding his mess.

• Hosts urge radical simplification and immediate professional intervention, predicting it’ll take months to untangle.

• Defining Quote:

  "Neglecting the problem is not going to make it go away, especially when it's the IRS."
  — Host (07:39)

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Notable Quotes & Memorable Moments with Timestamps

• [00:06] Claude: "I haven't paid my RS in several years."
• [01:00] Host: "You're not ignorant. People don't own 27 [properties]. ... You're very successful."
• [02:43] Claude: "Should I be even reporting the cash?"
• [03:01] Co-host: "You got to do this with integrity, my guy."
• [03:02] Host: "The last people you want on your back is the IRS. They can destroy your life."
• [05:28] Host: "For a guy who doesn't pay taxes and makes 15 grand a month, you shouldn't be this broke."
• [06:21] Co-host: "What would it look like if you sold a couple of these low income properties and got...nicer properties?"
• [07:39] Host: "Neglecting the problem is not going to make it go away, especially when it's the IRS."

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Takeaways for Listeners

• Financial neglect—especially tax evasion—goes from manageable to disastrous when ignored.
• Professional help from a CPA/tax pro is essential when years of records are unfiled or cash businesses are involved.
• Even big asset holders can find themselves 'paper rich but cash poor' without proper management and strategic re-investment.
• Simplicity and transparency in finances—and in property portfolios—bring stability and peace of mind.

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Practical Next Steps (from Hosts)

• Contact a CPA or enrolled agent urgently to assess and address all unfiled taxes.
• Prepare to liquidate some assets, if necessary, to settle IRS debt outright.
• Shift strategy from volume (many low-value, high-maintenance properties) to quality (fewer, better-performing assets).
• Consider hiring bookkeeping help to keep business operations transparent and compliant.
• Don’t ignore tax issues, no matter how intimidating or complicated they become.

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Useful for anyone facing tax confusion, property management headaches, or the temptation to postpone difficult financial decisions — this episode illustrates the real impact of avoidance and the liberating power of facing problems head-on with professional assistance.

Transcript

[A]

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[B]

I haven't paid my RS in several years. Basically I got out of High School 0708, kind of fell into a good job working for foreclosure companies and started buying up foreclosures and kind of amassed about. Got about 267 doors rental but it's all paid for. But I'm at the point I just bought a house.

Through private financing. But I would like to secure permanent financing. But I haven't done my federal taxes in several years.

[A]

And they're going to want to see tax returns for you to get that financing.

[B]

Yes sir.

[A]

And this is the only reason you've decided? I guess you should probably deal with that.

Why haven't you filed?

[B]

I'm just kind of ignorant, I guess.

[A]

No, you're not ignorant. People don't own 27. Thank you.

[C]

Thank you.

[A]

You're very successful.

So what has caused you to just ignore the taxes completely? Because you file taxes up until what year?

[B]

I think the last time was 16. I did it.

[A]

Okay, so we're coming up on 10 years and nobody's knocked down your door yet. You, you haven't got anything in the mail?

[B]

No sir, I haven't. I don't really. On paper I guess show making a bunch. Most of that income's in cash and you've spent it.

[A]

Do you have the money to pay all these back taxes, penalties, fees?

[B]

I don't have any idea what it would be.

[A]

Well, how much have you made in the last 10 years?

[B]

I mean I'm anywhere from 10,000amonth to 15,000amonth just depending on. And I got a lot of irons in the fire.

[A]

So you're Talking about making 150 to 200 grand every year for the last decade?

[B]

Yeah, I mean this slowly escalated year to year.

[A]

All right. I'm going to call it half a million. Just ballpark numbers. How would you come up with half a million dollars to pay the irs?

[B]

That's a good question. I mean I figured up the other day before I got came on here, I, I got about conservatively $4 million in real estate.

[A]

So it sounds like if I were in your shoes, here's what I would do. Personally. Number one, I would get with an enrolled agent or CPA yesterday and start tracking down exactly what I need to do to get current, get on a payment plan and get this mess cleaned up and then whatever that bill total is, if it's $500,000, I'm not even going to get on a payment plan. I'm going to liquidate enough properties that I knock this out.

[B]

I mean, should I be even reporting the cash?

[A]

You should report every dime you make. Give to Caesars. What is Caesars? So I know you want to avoid that. I don't know if you're going to take my advice, but I don't want to. I don't want the next phone call from Claude to be from a jail cell.

[B]

Yeah, that'd be ugly.

[A]

Yeah.

[C]

You got to do this with integrity, my guy.

[A]

The last people you want on your back is the irs. They can destroy your life.

[B]

I know that's right.

[A]

And so I would not ignore this any longer. It's been almost a decade.

What are you going to do next?

[B]

I guess I need to go to a cpa.

[A]

That's right. And you're going to need to get with the IRS and get and figure out exactly what you owe, and they can help with that. But do not avoid. I know you deal with a lot of cash. I would get things on the books. I would have everything, every I dotted, every T crossed.

[B]

Okay.

[A]

And that might mean you need to hire someone to do the books. If you don't like doing it, you don't want to do it. I would hire someone who can do it.

[C]

The good news is you have the assets to clean this up very quickly.

[B]

Yeah.

[A]

How much debt do you have otherwise?

[B]

I mean, I borrowed 165,000 on that house from that private investor, but, I mean, I've got. I've been offered 275 for it like it is, but besides that, I don't owe a dime.

[C]

All the 26 properties are free and clear.

[B]

Yeah.

[A]

So could you sell one or two of those to knock out this IRS debt? Worst case.

[B]

I mean, I've been doing letting a few go, but the dagum property taxes and other unforeseen things are beating me up.

[A]

It just doesn't make sense. Why are you so tight on cash?

[B]

I mean, just if you're all paid.

[A]

For, they should be cash flowing beautifully. Are you just spending every single dime you get?

[B]

No, not well.

Okay, so I bought all these houses kind of cheap.

Several years ago over the last several years. And then I was just shoving people in them doing the minimum. And so now I'm kind of paying the popper on that. So when they're coming open, I'm spending a fair amount of money on repairs.

[A]

And maintenance and all that. Because you neglected to do it.

[B]

That's right, man.

[A]

That's part of the Business. I. You know what? If this is too much for you to handle, I would liquidate a bunch of properties and just keep what you can actually manage. And manage well.

[B]

Well, I mean, it's my soul. It's my main income.

[A]

Yeah, but if you liquidated the properties, you'd have something called money. And right now it sounds like you're tight on cash flow for some reason because you're just bleeding out with 27 properties to manage. It's more expensive.

[B]

Yeah, I mean, if I have. I got a few thousand bucks left over at the end of the month. I'm doing good. I'm not. I wouldn't.

[A]

I'm just confused. For a guy who doesn't pay taxes and makes 15 grand a month, you shouldn't be this broke.

[B]

Well, I'm. I'm at about 10 right now. I mean, if I got everything full.

[A]

I'm at 15 out of 27 properties. You're only making 10 grand a month? They're all paid for.

[C]

What kind of properties are these?

[B]

Well, I've got. Well, it's definitely low, low income stuff like.

[C]

Okay.

[B]

I mean, I bought some of these things in zero nines about when I started buying. I mean, I bought things for $5,000.

[A]

So you're making like a few hundred bucks off each one.

[B]

A few hundred dollars? I mean, I'm. The bottom of the rent in my area is like 600 bucks. 600 to.

[A]

Okay, I'm just saying you have, you have 27 properties and you make 10 grand off of those. That's 370 each on average.

[B]

Yeah, and I've got like five empty right now.

[A]

What would vacancies too?

[C]

What would it look like if you sold a couple of these low income properties and got six, some nicer properties where you can garner a higher, you know, a higher rent and still pay for them fully in cash. And then Instead of having 26, maybe you have 10, right? Or maybe you have 8.

[A]

They're higher quality. Higher quality tenants pay more.

[B]

That's kind of what I've been doing. I just sold one last week for 55,000 that I bought for 10, but I paid 40,000 in property taxes.

[A]

What about the capital gains on those?

[B]

That's what I'm. I don't, I don't know.

[A]

Oh my goodness. So on top of your income, you could have a huge capital gains bill from all these investment properties that appreciated since.09 when you bought them for, you know, pennies on the dollar.

[B]

But I've never depreciated any of them either.

[A]

Wow.

[C]

You need, I think you need help. I think you need somebody to help you with the, the financial, like the books on this and help you to understand what it is that you're doing.

[B]

Yeah, well, I also had a secretary that was embezzling money too.

[A]

Oh, no. Goodness gracious.

[C]

Wow. I think the word for you in the new year, because I'm already talking about the new year, is simplification. You need to simplify your life.

[B]

You got a lot going on. Yeah.

[A]

But right now you've just been ignoring it and it's just compounded and compounded and so now it feels so overwhelming. So I would jump on ramseysolutions.com get in touch with a tax pro today and they're going to have their hands full with you. You might be their full time client for the next few months as they uncover and turn over every stone that you have left to rot. So goodness gracious, Claude, I'm sorry you're dealing with this, but man, neglecting the problem is not going to make it go away, especially when it's the irs. Good luck.

[B]

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