Lien Notice, OIC

[geekgirldany]

Hi everyone. Some of you may have remembered me posting about a customer that owed a considerable amount in payroll taxes for two years. He is a monthly payroll/bookkeeping customer.

Well he got a Notice of Federal Tax Lien from the IRS filed with the clerk of courts. From my understanding he has 30 days to request a hearing with the appeals court. But I can get a POA and work the Revenue Agent before filiing the request.

He wants to do a OIC. The amount owed is around $100,000. Includes penalty and interest. I was doing research I think anything over $50,000 has to take a longer route of getting approved...I maybe wrong on that. He said that he might could get the money he originally owed (payroll taxes only) and not pay the interest and penalty. I told him he would alteast owe the interest. I told him a better bet would be an installment agreement. He said he could never pay it off doing that way because interest and penalities contiue to acrue. He thinks he can just make a offer to them, of course it is much harder than that.

I have never done a OIC but did alot of research on it. I know from what many of you say it is hard to get one accepted. I feel like he should do an installment agreement and then try to pay it off in full at a later time. At this time it does not appear that there are any Trust Fund Recovery penailties on it.

I would appreciate any advice you guys have on this. Would like to talk it out.
Thank you for reading

[Snaggletoof]

Installment Agreement

The guy thinks the IRS will take less just to get if over and done with. Nope. They will take less only if the guy is destitute and will never have much income in the future. If he is still in business for himself this is going to be a hard sell - I doubt the IRS will accept an offer in compromise.

You hear a lot about OICs and they make good topics for case studies and conversations amongst tax preparers such as ourselves. But if you look behind the sensationalism you will find only true paupers qualify. Not only must they have nothing, they must also show no possible hope of ever having anything.

Do the best you can for an installment agreement. He won't like it and will probably go to Roni Deutsch or J K Harris -- if so, just let him go. Remember the One Year Rule we discussed on the board a couple weeks ago -- NYEA gave some very decent cites.

[geekgirldany]

Thank so much Snag. I printed out that thread. I had forgot about that. Was kinda sick when that was discussed.

I've tried for several years to get him on installment agreement. He has mentioned several times about JK Harris and other types like that. I explained how they worked but he was welcomed to go to them if he like. I think the installment payment is the only way to go. An OIC would really be impossible. He is still in business.

You know I think what brought about the lien is because he has got behind in his payroll taxes again. It seemed like everything was fine as long as he was on time. He would get a letter at the end of year showing what he owed but nothing else. He is behind about 4 payments.

[outwest]

My advice..

It sounds like he can pay the original tax, 1st step would be to do that and get the recent late deposits made and caught up. Be sure a specify in writing the application of the payments to the tax liability and none to the penalties and interest. Once I'm working with a revenue officer, I like to hand deliver.

Next, request abatement of the penalties. (interest can't be abated) Read the IRM section on penalty abatement for reasonable cause. It may not sound good for your client, but you never get anything without asking and I've had some surprising approvals. Paying the taxes seems to put the abatement request in a better light.

If the abatement request is denied (likely) ask for a manager reconsideration/ appeal. Sometimes a second look will get at least a partial abatement. Have a answer in place for how and when the interest will be paid.

Once all this is done, maybe a OIC is in line. However, the IRS must consider the collection potential over the 10 year statue so unless he's nearly bankrupt, not much chance of help there.

GET A RETAINER!!!! I'd start at $3,000 cause you are going to really work on this.

Oh yeah, if the client agrees and has the money for the taxes, see if you can get a collection hold to pause the process. But for this much money, I want to see the $$ before I ask. Don't want the IRS to think you are just stalling.

[geekgirldany]

Thanks so much for responding! Great information. So you are recommending dealing with the Revenue Officer directly? Take payment of taxes only (no interest or penalty).... then work on from there?

It is around $70,000 taxes only that he owes. Not sure he can come up with it but I will see.

I was thinking around $3,000 also as that seems what many charge. I am not sure he is willing to pay me that though. I might be wrong but several years ago I got a good recommendation to someone to resolve this and he would not go because they wanted $3,000. That was 5 years ago. I am going to ask that much. From what you and others say it is quite a job.

Thank you again for posting.

[Corduroy Frog]

Attitude

GeekGirl, I would collect enough advance. You don't have to get the entire
$3000 up front, but get enough that you won't be behind in getting
your money. Probably why he hasn't engaged J K Harris because they
will get thousands up front before dealing with him.

This guy is a businessman, and sounds like he has a God-complex.
Too important for the government. Too important for accountants. Probably
runs his company the same way.

Dealing with this kind of attitude can be worse than dealing with the IRS.
At least you have a better-than-50% chance of dealing with someone who
will help.

Amazing how these guys are everywhere. In my town and yours. And also some
really great people too - in my town and yours.

[geekgirldany]

Yeah I will get atleast 50% upfront. I do the bookkeeping and payroll for this customer weekly for over 10 years. So he is a longtime customer. I've had a few money discussions with him regarding my services. He has always paid me though.

I believe he is a good person. I guess I want to see the good in everyone. The reason he owes the payroll tax is because he kept his employees on when he should have laid them off. Good for his employees not for him. I think he just stuck his head in the sand about what he owes. He told me he just tried not to think about. He has heart problems and tries to keep his stress down.

Yes there are alot of good people around here

[Jiggers]

Fees

[QUOTE=geekgirldany;69981]Yeah I will get atleast 50% upfront. I do the bookkeeping and payroll for this customer weekly for over 10 years. So he is a longtime customer. I've had a few money discussions with him regarding my services. He has always paid me though.
QUOTE]

The fact that he owes the IRS and wants YOU to figure out a way not to pay the full amount should be a warning to get your full $3,000 deposit up front.

If he will stiff the IRS, he will stiff you.

Been there, done that with long time ex-friend and ex-client!

[New York Enrolled Agent]

Well he got a Notice of Federal Tax Lien from the IRS filed with the clerk of courts. From my understanding he has 30 days to request a hearing with the appeals court. But I can get a POA and work the Revenue Agent before filiing the request.

Small clarifications to your post.

The IRS filed the lien with the County Clerk in the county where the taxpayer resides. After filing the lien, the IRS within five business days must give notice to the taxpayer and offer the taxpayer the ability to request a Collection Due Process hearing. By statute, the taxpayer has 30 days and if the request is timely, the taxpayer would have rights to a Tax Court review in the event that hearing officer "abused his/her discretion" and sustained the filing of the lien. After 30 days, the taxpayer can request an equivalent hearing but has no right to a Tax Court review.

One purpose of the CDP hearing is to allow the taxpayer the ability to offer "collection alternatives" such as an OIC or an IA. I would give serious thought to filing the Form 12153 and request the hearing. Would give you an opportunity to perhaps go for a partial pay IA.

[Black Bart]

Just a thought,

but isn't there something now about having to send in 20% of the amount due (can somebody confirm that?) with the OIC app before they'll consider it?

Since he owes $100K, then such a substantial upfront payment with no assurance of acceptance might change his mind about doing it. I'd make it real clear to him that there are no guarantees (if that 20% figure is right).

[DaveO]

Had a similar case a couple of years ago. T/P owed about $150k about $80k in taxes and the rest p&i. The owners had too much in assets to qualify for an OIC. We offered the IRS the trust fund taxes less the P&I which they of course refused. We warned that they were headed to bankruptcy court but of couse they didn't care. Once the bankruptcy was filed we went to the IRS attorney and offered to pay the taxes only, again reminding him that the P&I would not survive the bankruptcy. This time they saw it our way. The owners found the money somewhere to pay the taxes and the P&I was discharged along with the rest of the unsecured debt.

Had the IRS accepted our first offer the bankruptcy could have been avoided and the other unsecured creditors would have at least gotten somehing.

[geekgirldany]

Jiggers, thank you. When it comes to money any kind of relationship you have with a customer will change. I am considering that it may be best that he go to someone else.

NewYork, you are are correct. I was going to talk to the Revenue Agent first before filling the request for hearing form. I wanted to get a feeling of how it may go. I believe I read you can work with the Agent and if an agreement is reach they can dismiss the hearing and the collection action be put on hold.

Bart, yep it is 20% down and $125 filing fee. So about $18,000 down.

Dave, thanks so much for posting your experience with an OIC. I hope he can get this worked out.

Thank you guys so much for taking the time to post. I really do appreciate it.

[geekgirldany]

Just a little update. Thought some might be interested.
This week he received a call from a "tax lien specialists" company. Similar to JK. He asked my opinion on them.

The tax specialists had sent him some information. Over the phone told him that they could remove the penalities and have him only pay interest on the amount he owes. How much to do all this...$6,000. Customer says he is willing to pay this if they can get the penalities removed.

I reviewed the information sent. I told him from my research that a request can be made to remove penalties but it often will not happen. I also said that he could setup a installment agreement himself. Explained what they would need and how they would come up with the payment amount. He then said that this company told him they could get a lower amount than the IRS would come up with (probably one year rule) and that the IRS would rather deal with them than the taxpayer.

I pointed out to him in the information sent by the company that the $6,000 was an estimate, no guarantee on penalty removal, and the "testimonials" which included actual letters from the IRS regarding installment agreements approved were showing that they were still paying penalty and interest.

I told the customer to do what he wanted. My suggestion is to get someone local to work with. He said he would do it himself.

Just interesting to see what these JK Harris type companies really offer.

[joanmcq]

They don't offer ANYTHING!

[joanmcq]

They don't offer ANYTHING! But they couch their come-ons in a way that the taxpayer hears what they want to hear. We all know how that one goes. You have as good a chance as those guys in gettting the penalty removed.