Collection

[Gretel]

I need some advise since I never dealt with collections before.

Client owes IRS and State for several tax years but won't be able to pay, or at the most $50 a month to each. I will try for uncollectable status since only income now is disability with high medical expenses.

Correspondence received from IRS:

1. Asking for filing of return for year 2007 - filed last November - not processed yet by IRS
2. Asking for payment for return for year 2008 - I called the IRS but agent was unable to assist with my complex situation. I probably have to wait for the first official collection letter.

3 more years of tax returns have been filed recently hence not processed yet. No state tax returns have been filed yet..

I was hoping I could deal first with the IRS only for the total debt for all years. But I don't know if this is doable. Does anyone know? I am in the process of finalizing Form 433-A (I think this is the right form #, I am not close to my work place right now), which I will submit after the collection process has started.

How do the IRS and the State interrelate? Is it better to file the State tax returns before settlement with IRS is reached or to wait unless they bark?

Any inside is greatly appreciated.

[erchess]

Source of Info

Go to CPE DEPOT www.cpedepot.com. They charge $149 a year for all the web self study curses you can do in a year and they also have webinars at additional cost now that in at least some States CPAs have to do a certain amount of instructor guided CPE. You want the Tax Course with a title something like Helping Clients With Difficult Situations or some such. There is a number on the site you can call if you can't find what looks like the right course. It provides an overview of bankruptcy and when this does and does not end tax obligations, offers in compromise and installment agreements and arguably even enough information to let you do an OIC for a client It also makes clear that an OIC will not be accepted except in very specific situations. An installment agreement in which the debt will be paid in full in five years will routinely be accepted but one in which more time, up to the maximum of ten years, requires detailed proof of why this is all the taxpayer can pay.

I will tell you that no settlement can be accepted by the IRS until all Federal Returns have been filed and every State I know of has the same policy.

I do know that the IRS eventually gets around to sharing Federal Returns with the resident States but many States have other ways of finding people to contact and ask why they did not file

[Black Bart]

You can work with only IRS first.

...I was hoping I could deal first with the IRS only for the total debt for all years. But I don't know if this is doable. Does anyone know?...How do the IRS and the State interrelate? Is it better to file the State tax returns before settlement with IRS is reached or to wait unless they bark?

I've done it several times simply because the client didn't have the money to pay both of them at the same time. Making a settlement with the IRS did not cause the state to get after them, although sometimes later they did get letters asking them to file an old return or billing for a previously filed one. I believe those state letters were simply their "routine" billings and notices of non-filing that would have come about anyway and had nothing to do with the IRS action.

If the state has not started sending letters yet and the client is broke, I would let sleeping dogs lie until they DO start barking -- then you can deal with them.

[taxea]

Erchess...thanks for the site info...I checked it out the course you were thiniking of is
"Tax Resolution: Solving IRS Problems"

Yes you can combine the liability on all years for an IA and you will need the 433a. You can even call the preparer hotline and they will take the info over the phone. Taxpayer cannot owe over 25K or they will have to make enough of a payment to lower their liability to that amount or the IRS will not grant an IA.

You say the client can only make $50 payments. How did you determine this amount?

[drdino]

"Yes you can combine the liability on all years for an IA and you will need the 433a. You can even call the preparer hotline and they will take the info over the phone. Taxpayer cannot owe over 25K or they will have to make enough of a payment to lower their liability to that amount or the IRS will not grant an IA."



I respectfully disagree with this quote. I have a client right now with an installment agreement in the amount of $44000 and pays over $650 a month. We used form 433f and the agreement was accepted, with very minor resistance.

As for the state, New York worked very well with us, but I contacted them first. The state told me they receive info from the IRS within 6 months or so.

[drdino]

Actually

Do a search on this forum for installment agreements. There was a great post here a year or so ago on the procedure and it was very detailed. Included a timeline if I recall.



Here is the link.

http://www.thetaxbook.com/forums/showthread.php?t=9714&highlight=installment+agreement

[Gretel]

Thanks everyone. Start to see clearer now.

My clients owes over $40,000 to the IRS alone, penalties and interest not included, no way for IA, maybe OIC with $50/month.

I had to go back to 2000 with the filing to comply with the requirement that all tax returns need to be filed before the IRS even looks at Form 433-A. I have done a lot of research, just missing any practical experience.

Tax EA, when calculating the necessary living expenses, I used IRS instructions and limits. There is no wiggle room, his medical expenses will go up very likely and then he won't even be able to pay $50. I was wondering if it would help to include a statement from the doctor since he is in constant pain.

[DaveO]

Your goal should be to get currrently not collectible status for your client. Once you get CNC status they will monitor income and if it jumps enough for them to collect money they will. Otherwise you just run the collection statute down.