One-Year-Rule

[Snaggletooth]

NATP has a very enlightening article on how to invoke the "One Year Rule" on installment sales for cash-strapped clients. I didn't even know it exists (and the writer emphasizes that it is not well-known at all).

Good and helpful. All of us wind up with 433A and 433B clients from time and time.

[taxea]

One-Year-Rule

Hey, Snaggletooth...how about sharing this item with us. I checked the site but as I am not a member I couldn't find the article.taxea

[Snaggletooth]

Reference

Good evening to Wahiawa -

I was really impressed by the article, and not sure what kind of factors are involved with me attempting to reproduce a printed article without NATP sanctions.

However, the author is Terrence J. Moore, a tax lawyer practicing in Southern California.
He might respond if you contact him. He has a website and an e-mail address, and readers of the article are invited to use it. I guarantee if you are helping someone arrange for an installment agreement, this article will be extremely valuable.

Website:

http://www.moorelawonline.com

e-mail address:

tjlmaw@pacbell.net

Best wishes - Snag

[Lion]

Article

I joined not long ago and was finally getting around to reading their journal that came recently. You're right; it's a great article. I didn't know about the rule. Thanks for pointing that article out to me. I might not have read it thoroughly since I'm not doing any representation right now, but it's a short and to-the-point article that I'm glad I read thoroughly. Now, I have a new piece of info stored in my brain to pull out and use at the appropriate time. That's why I joined multiple organizations (NATP, NAEA, and NY/CT-ATP) to broaden my horizons in a way that can make me more valuable to my clients. Thanx.

[taxea]

Snag...mahalo nui from Wahiawa. I appreciate your references and will research this through the author.

EDIT: I checked Moore's site and he has an interesting and useful article on voluntary payments to the IRS. Boy..the things they don't tell you....According to Moore these payments can be designated strictly to the principle portion of the outstanding tax liability.

1. write the following on the front and back of the check "SSN, type of return-year of return, principle
portion only.
2. send the check to LOCAL tax office (personally I would instruct the client to take the check to the office and get a receipt)
3. keep good records of each payment (copy of front and back of check with receipt attached)
4. get an accounting from IRS every 6 months to insure that they have properly posted the check

This changes my whole procedure for installment agreements.taxea

[Zee]

Can anyone provide a link to the article?

[New York Enrolled Agent]

Snag...mahalo nui from Wahiawa. I appreciate your references and will research this through the author.

EDIT: I checked Moore's site and he has an interesting and useful article on voluntary payments to the IRS. Boy..the things they don't tell you....According to Moore these payments can be designated strictly to the principle portion of the outstanding tax liability.


This changes my whole procedure for installment agreements.taxea

First - One small point - I think Mr. Moore needs to change principle to principal.

Are you sure IAs allow this procedure? When a taxpayer signs an IA, I believe the payments are agreed to be paid off in the best interests of the United States. This is a trade-off for being allowed to pay off the liability over time. Take a look at the instructions in Form 9465 and see if you agree.

[taxea]

One-Year-Rule

"Are you sure IAs allow this procedure? "

This is why I want to read the article. At least the client can pay on the principal to get it lower before dealing with the interest and asking for a waiver of penalty. taxea

[Snaggletooth]

Observations

Clearly, this is an article dedicated to legal practice, procedural axioms, and strategy. I seriously doubt that there exist any cites in the codes, regs, rulings, etc. to support Mr. Moore.

Does not mean that Moore's strategy won't work. (Contrarian: does not mean that it will either, but there must be some degree of confidence for an attorney to write such an article and allow himself to be identified as the author.)

[taxea]

One-Year-Rule

I sent him an email asking for a copy of the article. Once I read it I will start researching IRS sites for anything that might support it. Let you know what I find. taxea

[Burke]

I have the article. In it he states "This unwritten rule applies to all installment agreement cases. Every collection agent knows about it. They are trained in it. Yet, they won't tell you about it. In some cases, if you ask about it, they'll deny it even exists." He does not explain how HE knows about it or why any auditor should feel compelled to apply it.
According to him the One-Year Rule disregards the National Standards (allowable expenses) for one year, using another criteria, but that often the IRS never comes back and readjusts the agreement, allowing the TP to continue that payment until the Statute of Limitations expires. I would assume he has used this technique succesfully in his past practice or he would not have written about it.

[taxea]

One-Year-Rule

Hi Bruce...would you be kind enough to email the article to taxea@hawaii.rr.com or fax it to 808-621-4505. thanks, taxea

[New York Enrolled Agent]

This thread is quite "interesting", if not spread all over the place.

It started with an installment SALE and is now an installment AGREEMENT.

It digressed a bit to designated (voluntary) payments which (Snags - I'm not sure if you wanted cites for this or the one-year rule) actually are supported by Rev Proc 2002-26, the IRM at 5.1.2.8 and the Courts.

But the most interesting part is the quote attributed to Mr. Moore: "This unwritten rule applies to all installment agreement cases. Every collection agent knows about it. They are trained in it."

So now we have an UNWRITTEN rule that ROs and ACS personnel are trained in. After training, some then deny it even exists. Sounds like a Bourne mystery. It seems to me that if it's not written, it's not a rule. Perhaps someone who read the article could tell us exactly what this rule says.

[Nashville]

Nyea

I am certain that Snag meant "installment agreement" although he stated "installment sales" in his original post. Nothing else in the thread or in the article itself has applied to installment "sale" issues.

Thanks for the cites, and appreciate your involvement in the thread.

[Burke]

So now we have an UNWRITTEN rule that ROs and ACS personnel are trained in. After training, some then deny it even exists. Sounds like a Bourne mystery. It seems to me that if it's not written, it's not a rule. Perhaps someone who read the article could tell us exactly what this rule says.

As I mentioned in my previous post, the One-Year Rule supposedly allows the agent negotiating the installment agreement to disregard (for one year) the IRS National Standards (which can be obtained from the IRS website) for the allowable monthly expenses of the TP. (When you complete Form 433, you list all the TP's monthly expenses.) The agent will have tendered an amount the TP must pay based on these Natl Standards, but you request the One-Year Rule, which in effect uses the TP's current -- documented, of course -- monthly expenses no matter how high they may be. Therefore, the installment agreement for the first year will be the difference between TP income and actual expenses, not the difference between TP income and Natl Standard expenses.