OIC, Statute of Limitations

[geekgirldany]

I am working with a customer on several years of taxes owed. Actually posted about it awhile back http://www.thetaxbook.com/forums/showthread.php?t=9714

Starts with tax year 2000 and goes up to 2007. Tax year 2000 I have the account transcript. It shows "tax return filed - 07-02-2001 - $5,000." So I assumed the statue of limitations started on 07-02-01. Later on 05-19-2003 "additional tax asessed - $8,000". According to tax prac. hotline it was for a 1099-misc that was not reported on the original return. (I am rounding the figures up).

He is wanting to do a OIC but what I am looking at is that it might better that he rides out the Statue of Limitations on Tax Year 2000.

I know there is a statue that says " First is the statute of limitations set forth in IRC section 6501(a), which provides that the IRS has three years to assess an additional tax due.This rule has two major exceptions. The three-year statute is extended to six years in a case where the taxpayer has omitted more than 25% of gross income."

The above may not even apply because according to what the AGI is the additional tax in 2003 is not more than 25% of of AGI. I am not sure on gross income as I don't have the original return.

As I said I am just thinking that he might be better off paying what he can on the tax years he owes including 2000... while riding out the 2000 tax year statue of limitations until July 2011. Then make a offer on the other years still outstanding. I may be wrong but if I read correctly doing a OIC you have to waive the statue of limitations or agree to waive it for so long.

Would really appreciate some feedback and help on this.
Thank you

[erchess]

My Concern

is that the IRS also knows they face a ticking clock and that they may at any time garnish wages, levy financial accounts and put liens on properties. Surveys indicate that clients usually dislike such actions.

I realize that you are quite properly trying to do the best you can for your client. But look at things from the Government's perspective for a minute. Do you really think that the rules and the procedures are set up in such a way that your client can get away without paying his taxes when he has the means to pay as defined by the very much pro-IRS rules for determining what a taxpayer can pay?

[geekgirldany]

Yeah I understand what you are talking about. I don't know by what means they will go to get the money during the next two years. Certainly what you mentioned if not worse.

So far he doesn't have a job. He was in the construction industry. His wife is working though. They actually have no assets at all. A bank account in her name is really all they have. He is wanting to make a offer of $18,000 for all tax years. He borrowed the money from a relative. He owes $36,000 tax only does not include interest/penalties from 2000 to 2007. With 2000 being the largest amount owed. Not even sure a OIC would work.

Helps talking this through as I want to do the best for him.

[WhiteOleander]

I haven't done any OIC's. But, I'm not sure the IRS will accept an OIC that didn't include all taxes from all years. And, as I'm sure you know, the OIC tolls the statute of limitations while they consider it. One of the conditions for the OIC is that you remain current on all taxes. So, since that year is not paid, they would probably balk.

If they see you leave out that year, they will send the form to extend the statute for that year. If you refuse, they will use every tool they have to come after him.

[New York Enrolled Agent]

IStarts with tax year 2000 and goes up to 2007. Tax year 2000 I have the account transcript. It shows "tax return filed - 07-02-2001 - $5,000." So I assumed the statue of limitations started on 07-02-01. Later on 05-19-2003 "additional tax asessed - $8,000". According to tax prac. hotline it was for a 1099-misc that was not reported on the original return. (I am rounding the figures up).

Would really appreciate some feedback and help on this.
Thank you

It's always difficult to give an answer based on limited facts, but it seems you have TWO statutes running here. The first is on the $5K self assessed tax and the second is on the additional assessment of $8K. The IRS generally has 10 years to collect after tax is assessed. Each assessment creates a 10 year period. Sounds to me like the 5/19/13 is the date for the second assessment.

[geekgirldany]

Thank you all for responding. NYEA yeah that is what I was thinking also. I believe what I was thinking about the more than 25% gross income is something totally different and applies to the 3 year rule. You know I think you are right that there is two statues of limitation running.

White I wasn't going to submit an OIC unless it included all the years. Was trying to figure out a way to let the statue of limitation run out and him pay a little on the other years but just mailing payments no agreement.... but looks like there are two statues running and my idea won't work out.

Those that have done OICs, how long does it ususally take to get a final acceptance?

[joanmcq]

6 months to two years.

[DaveO]

I agree with NYEA on the statute running on the second assessment. Four years is a long time to wait out collections. Remember that a lien on real property will survive the expiration of the statute and will need to be dismissed separately.

As to the OIC it doesn't make sense to nt include all years since the amount due is based on collection potential not the amount of tax owed. I would figure at least a year to get one accepted.

[geekgirldany]

Thank you all for helping me. My first OIC as I am sure you can tell. Customer is thinking a couple of months to get an acceptance.

[geekgirldany]

I have another question concerning this OIC. I had the customer bring me bank statements for him and his wife. They are both from Mexico. His wife used her account to cash checks for relatives. She deposited the money then took it out to give to them. His account is showing no activity.

The tax liability is his from being self employed. The tax return was filed MFJ. I know that on the 433A, 3 months of bank statements, paystubs, and bills have to be submitted. His wife is the only working and pays all the bills out of her account. Husband is not working and no activity in his account.

My question is dealing with checks she is cashing for relatives. Would this not look like she is receiving money that could be put towards the debt? Also when this information is sent in could they also levy her bank account?

A good time to be working on this in the middle of tax season. I appreciate the help.

[geekgirldany]

Just a quick bump since I posted this late last night.

[DaveO]

Yes, that's exactly what that will look like to the IRS or worse they may call it money laundering. She may have to provide details of who she cashed checks for to the IRS.

[geekgirldany]

Thanks Dave. Yep I thought it would not look good. He did not want me to give them her bank account information. I think he was under the impression that I could just call the IRS and make an offer. I had to explain what a long process it is.

I am thinking he needs someone else to do this for him. To many things seem to keep popping up.

[Lion]

Account

Tell wife to use her account for only their own use from now on. Finish tax season. Then start on their OIC paperwork when you have more time and wife can produce three months of statements with no activity for others.

[geekgirldany]

I had not thought of that. Thanks for the suggestion.