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Posted by caj111 on September 12, 2008, 10:45 am
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Okay,
I am a tax attorney and accountant who normally doesn't deal with
individual tax issues so forgive my ignorance about installment
agreements and offers in compromise. This is just a charity case for
me that I'm doing for free as a favor to friends. Here are all the
relevant facts I think:
Married couple in their late 50s earning (and probably spending) just
over $31,000 annually. I really don't think they save much money
because they live in the suburb of a rather expensive metropolitan
area. Only one spouse works, the other is suffering from a back
injury and can't work. He gets unemployment payments which will run
out soon.
Some years ago husband worked as an independent contractor and wrongly
assumed that he didn't have file or pay taxes. These unpaid taxes
date back to 1993 and 1994. Penalties and interest have ballooned the
total amount over the years to more than $25,000. Even though it's
been more than 10 years, SOL has not expired.
They have no assets to speak of except a car and a truck. The truck
probably could fetch $1000 at best; they don't drive it at all, it
sits in a driveway getting rusty. The car has more owed on it than
its blue book value.
Bottom line here... do the numbers suggest they should try for an
installment plan or an offer in compromise?
I don't see they'd have much to lose by filing for an offer in
comprimise, because their monthly income level is low enough such that
they would be exempt from the $150 filing fee and 20% downpayment. Am
I wrong?
I suppose it is possible that with a little more belt-tightening they
might be able to scrounge up a monthly payment on the installment plan
but I don't see any installment plan paying off this balance in five
years or less. The IRS could see them as having many more years of
earning power but I'm not certain they'd ever be able to make a dent
in this tax debt the way penalties and interest accrue.
--
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<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
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<< to this newsgroup as well as our anti-spamming policy >>
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Posted by Phil Marti on September 12, 2008, 11:18 am
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"caj111" wrote:
> Married couple in their late 50s earning (and probably spending) just
> over $31,000 annually. I really don't think they save much money
> because they live in the suburb of a rather expensive metropolitan
> area. Only one spouse works, the other is suffering from a back
> injury and can't work. He gets unemployment payments which will run
> out soon.
What are his long-term propsects? Are we talking about an eventual return
to work or disability?
> Some years ago husband worked as an independent contractor and wrongly
> assumed that he didn't have file or pay taxes. These unpaid taxes
> date back to 1993 and 1994. Penalties and interest have ballooned the
> total amount over the years to more than $25,000. Even though it's
> been more than 10 years, SOL has not expired.
The statute is 10 years from assessment, which was probably late because of
unfiled returns. When will the statutes expire?
> They have no assets to speak of except a car and a truck. The truck
> probably could fetch $1000 at best; they don't drive it at all, it
> sits in a driveway getting rusty. The car has more owed on it than
> its blue book value.
>
> Bottom line here... do the numbers suggest they should try for an
> installment plan or an offer in compromise?
On the surface, pending answers to the inserted questions, it looks to me
more like a hardship currently not collectible. (Can't pay from existing
assets or make payments from current income.)
I'd stay away from an Offer since that would extend the statute, and
expiration of the statute is their best friend at this point.
--
Phil Marti
Clarksburg, MD
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by Paultry on September 12, 2008, 12:27 pm
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Phil Marti wrote:
> "caj111" wrote:
>
>> Married couple in their late 50s earning (and probably spending) just
>> over $31,000 annually. I really don't think they save much money
>> because they live in the suburb of a rather expensive metropolitan
>> area. Only one spouse works, the other is suffering from a back
>> injury and can't work. He gets unemployment payments which will run
>> out soon.
>
> What are his long-term propsects? Are we talking about an eventual return
> to work or disability?
>
>> Some years ago husband worked as an independent contractor and wrongly
>> assumed that he didn't have file or pay taxes. These unpaid taxes
>> date back to 1993 and 1994. Penalties and interest have ballooned the
>> total amount over the years to more than $25,000. Even though it's
>> been more than 10 years, SOL has not expired.
>
> The statute is 10 years from assessment, which was probably late because of
> unfiled returns. When will the statutes expire?
>
>> They have no assets to speak of except a car and a truck. The truck
>> probably could fetch $1000 at best; they don't drive it at all, it
>> sits in a driveway getting rusty. The car has more owed on it than
>> its blue book value.
>>
>> Bottom line here... do the numbers suggest they should try for an
>> installment plan or an offer in compromise?
>
> On the surface, pending answers to the inserted questions, it looks to me
> more like a hardship currently not collectible. (Can't pay from existing
> assets or make payments from current income.)
>
> I'd stay away from an Offer since that would extend the statute, and
> expiration of the statute is their best friend at this point.
>
What Phil Marti said. And,
Prepare a Form 433-A Collection Information Statement and
apply the financial standards shown here:
http://www.irs.gov/individuals/article/0,,id=96543,00.html
Some expenses are allowed without question, others are
actual with maximums as shown in the standards.
Ensure taxpayers are in full compliance with filing
requirements and have sufficient withholding or estimated
payments to offset current year taxes.
Anticipate the filing of a Notice of Federal Tax Lien if not
already done.
If allowable expenses exceed income, they have no assets of
value, and no prospects for future financial improvement,
plead their financial hardship situation to the Service.
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by caj111 on September 12, 2008, 5:25 pm
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> Anticipate the filing of a Notice of Federal Tax Lien if not
> already done.
>
> If allowable expenses exceed income, they have no assets of
> value, and no prospects for future financial improvement,
> plead their financial hardship situation to the Service.
>
Okay, thanks so far for everyone's assistance.
I have some more information.
Whether or not the husband will be going back to work I don't know but
it doesn't look like it for the foreseeable future.
I just obtained a copy of the federal tax lien which was filed in
August 2004. There was no property specified in the lien, however, I
assume because there was nothing to lien. However, on the lien I
noticed the "Date of Assessment" as December 1998.
Does that mean in December 2008, that's it?
The lien gets released and taxes can't be collected anymore?
Also, a Levy on Wages, Salary and Other Income was filed in August
2004 but it has since been released, I don't know when.
Also, does this stay on their credit report if the taxes are never
paid, even after the ten-year statute has run? Even though 10 years is
a long time, being completely relieved of liability for the taxes
seems too good to be true.
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by Phil Marti on September 12, 2008, 5:55 pm
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"caj111" wrote:
> I just obtained a copy of the federal tax lien which was filed in
> August 2004. There was no property specified in the lien, however, I
> assume because there was nothing to lien.
No property is specified on the notice because the Federal tax lien attaches
to all the taxpayer's property, including after-acquired.
> However, on the lien I
> noticed the "Date of Assessment" as December 1998.
> Does that mean in December 2008, that's it?
> The lien gets released and taxes can't be collected anymore?
Yup, that's how it works, assuming there hasn't been some intervening
action, such as a bankruptcy or offer in compromise, to extend it.
> Also, does this stay on their credit report if the taxes are never
> paid, even after the ten-year statute has run?
Yes, it will remain on their credit reports for some time after it's
released. They should get their credit reports about 6 months after the
collection period expires to make sure that the credit reports have been
updated to show that the lien is no longer active. Reporting agencies are
much better at picking up liens than they are satisfactions.
--
Phil Marti
Clarksburg, MD
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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