OIC... a few basic questions

To be precise, I never said they had a 20 year agreement.

Right. I understood. That might be where the disconnect lies. I’ve seen similar things…guy is current paying $900 per month. He owes $500k. The $500k will never be paid off at this rate. It doesn’t even cover the annual interest accruals. So an offer is made and is rejected. Forgetting about present value considerations, IRS is basically taking the stance that they’ll collect more with the $900 monthly payments. But that’s not the whole story: Big caveat is that the $900 might change (upwards). In your client’s case, that is probably doubtful if he’s now on a fixed income. The other big caveat is that if the guy eventually has assets, they are there for the taking. I think your position is that this (assets) will never happen with your client.

It will indeed never happen, which is what we explained to the IRS. I think the IRS (unlike skassel) even believed us. But, would not go for it. Just in case, I guess.

I had another offer once, which ironically was also for $20,000. IRS thought he was hiding assets (wanted $250,000). Hard to prove a negative. I told the IRS that if they did not accept the offer, we would simply discharge the taxes in bankruptcy. Which is what we did. IRS received nothing.

FYI, the quote was for skassel who injected the 20 year agreement.

Pitch78, I don't believe you. Period. Ever heard of a statute of limitations? It won't take 20 years to match the $20,000 because the statute ends long before that. Well, unless you intend for your client to pay after the statute expires, which frankly wouldn't surprise me.

And I will say it again, because Pitch78 refuses to understand .

If the taxpayer owes $30,000, you CANNOT set up an Installment Agreement for $100 a month. PERIOD.

Maybe what’s going on here is that the IRS rejected the OIC…but he’s just on a current IA for $100 month…and the 20-years isn’t any kind of agreed-upon fixed term???

Not possible, Jeff. Mr. Pitch said his client owes $30,000. You cannot set up an IA that doesn't provide for payment in full of the underlying liability.

Jeff, it is final. We are liars......

How about those who are in disagreement, post their sources?

There is "Installment Agreement" and "Partial Pay Installment Agreement"; the terms are not interchangeable. Then there are terms like "payout" which are undefined and leads one to speculate the meaning.

You cannot set up an IA that doesn't provide for payment in full of the underlying liability.

Aren’t we just talking about a PPIA here (Partial Payment Installment Agreement), as authorized by IRC 6159?

The Secretary is authorized to enter into written agreements with any taxpayer under which such taxpayer is allowed to make payment on any tax in installment payments if the Secretary determines that such agreement will facilitate full or partial collection of such liability.

I have a client delinquent several years personal and S Corp taxes (back to 2011). The. 2011 return has been estimated by the IRS. The estimated return actually reflects a lower tax liability even with penalty and interest due to the income from the S Corp (no K-1). The client would like to just use the estimated return of course. In her opinion the S Corp earnings do not belong on her personal return - we had an interesting conversation about that. The S Corp return I prepared has enough income the total tax liability is over $20k. I’m thinking the k-1 amounts aren’t matched with the 1040’s but I believe the correct (not estimated) return should be filed? Any thoughts?

I am in the process of trying to set-up an installment plan,to my understanding, the delinquent returns must be filed first. Depending on what the total tax due is after the outstanding returns are filed a OIC might be an avenue I will need to pursue at some point.

A PPIA is specifically set up as a PPIA. It would be impossible to mistake an Installment Agreement for a PPIA.

All PPIA's require Group Manager approval and only Revenue Officers and Appeals can setup PPIA's.

It's very easy for Pitch to prove his point by redacting information and posting a copy of the approved PPIA.

dsocpa, there must be a valid assessment present for each year in order for IRS to consider an Offer. For Offer purposes, an SFR is fine.

SFRs are also fine for setting up an Installment Agreement. An SFR cannot be discharged in bankruptcy. So, file the other delinquent returns regardless of whether you are pursuing an Offer or an IA.

SFRs? You mean an estimated tax return? What if I have knowledge that return does not include all the income which should have been included?

At this point I'm not entirely certain how much this individual (or her S Corp) will owe. An OIC might not be appropriate. There is a large balance on the 2005 individual return the result of an audit. For the years filed with a balance due all are coded 530 currently not collectible.

There is no such thing as an estimated tax return. It's a substitute for return (SFR) under section 6020(b) of the IRC.

The first question I would ask about 2005 is when the statute of limitations expires. A return for 2005 due in 2006 probably was audited around 2008 or so. If that's the case, the statute could soon expire. Assuming a Power of Attorney is on file, get a copy of the account transcript and look for the TC 300 which is the assessment date. Assuming there wasn't anything else like a bankruptcy or an Appeal which held the statute, the end may be near on 2005.

Shouldn't be any difference on the 2005 or the 2011 than the other years that were filed with a balance due. They are likely all in currently not collectible status. Again, the account transcripts will show that.

As far as the SFR which does not reflect all income made in that year; any good Revenue Officer would tell you "if there is no chance of paying the total currently owed, what is the point of increasing the liability?"

The other real world problem with filing a corrected return to replace an SFR is that the statute of limitations ON THE INCREASED PORTION OF THE LIABILITY will carry a brand new assessment date and a new 10 year statute.

I would discuss these issues with your client and with IRS and document that you did so.

Those are the real world considerations that the licensed tax professional must take into account. It's also another reason that no one should ever hire the "tax relief" firms that advertise so heavily.

I would not recommend a client file a return that increases the amount due on an SFR assessment. First, IRS has determined a deficiency and issued a Statutory Notice that gives the taxpayer the right to contest the iRS determination in Tax Court. At that point the burden of proof shifts to the government to show that more is due. IRS has stated it will accept what it says is due. Don't rock the boat.

Ok but what if you know he had 100K of gross income from a sole prop business that was all cash so the IRS doesn't know about it? You're saying it's ok to not report that income just because the IRS issued an SFR based on official information returns? This would be one of those LALALALA things during a conversation with him. Something like "Stop talking, IF you really had that much income there could be an issue later but if you simply pay this SFR now MOST LIKELY that could be the end of it".

I know for a fact of a case exactly like that. SFR shows income of about 50K from 1099's but the guy is a contractor who made another 100K from cash during that year. He was told to pay the SFR amount and nothing happened. Still...

Bob

It's a conundrum Bob.

Pitch, do you wish to respond to my request?

Thank you all for your responses. Skassel, the 2005 return was examined 11-04-2010 (code 420). Additional tax was assessed by examination on 02-06-2012. I ran these a few months ago (yes, I've been working on this awhile) and just noticed there is a date 02-06-2022 under the code 160 line for late filing penalty and under code 240, miscellaneous penalty. I presume that would be the SOL date. As of 02-10-2016 the account was coded with a 530 Balance due account currently not collectable. It's 2018 so there are 4 more years to go before 2005 would drop off.
2008 SOL date is 12-22-2024, code 530 as of 2/10/2016. Between 2005 and 2008 the balance due is just under 10k. No returns have been filed between 2011 and 2014 therefore tax due has yet to be determined.
I apologize, the SFR returns are MD state returns. The feds have yet, to issue substitute returns even though there are W2's filed in the wage record. I had a case similar years ago but the SFR were issued and the employer was sent a notice to garnish wages. In this case no SFR to date. ... Don't know the client has managed not to have a SFR nor wage garnishment notice.

That's an incredibly long time for the IRS to take to make an assessment. I haven't seen a collection statute expiration date on transcripts in many years.

The 420 isn't an assessment. It's the examination itself. The TC 300 or 290 is the controlling item. If there were an amount beside the 240, there would be a separate penalty, but there likely isn't.

Clearly, you'll simply file original returns for the unfiled years.

Update, all returns were filed. Now the IRS is going back and moving 2005 (audited return) and 2008 from currently collectible status to considered collectible code 537. Those 2 years comprise over 1/3 of the total balance due. Interest on 2005 alone is over $2k. I am thinking the IRS moved the balance to 537 as she paid off her entire balance due for 2016?

Couple ?? with regard to the SOL. Does an IA or OIC make stop the SOL clock from running? Client is thinking she would have been better off just not filing and responding - her state prior to engaging my services.

Just an FYI, there is an amount next to the 240 code for Accuracy related penalty.