Complex Collection issue

[Gretel]

Maybe this is complex only in my eyes. I am handling my 2nd collection case and cannot wait to get to the NTPI Level 1 seminars in November. But for now I hope someone with more experience than I have can help me out.

The installment agreement was accepted. Total tax debt and total debt is between $25,000 and $50,000. Irs filed lien. 3 years worth of tax returns are involved - 2005-2007. IRS previously filed substitute tax returns, so far only 2005 shows the actual tax return data.

This is what I like to get accomplished:

Asking for accepting the actual tax return data for 2006 & 2007. Will lower tax liability but not below $25,000.

Have my client pay down to get balance under $25,000 and request withdrawal of lien.

Request abatement of penalties for reasonable cause, which I believe my client qualifies for.

Request Collection Due Process Hearing in case IRS does not grant everything we ask for.

Is there a certain order of how to go about this? What are the chances of penalty relief if full outstanding amount is not paid (which at this time is impossible since still unknown).

[New York Enrolled Agent]

The installment agreement was accepted. Total tax debt and total debt is between $25,000 and $50,000. Irs filed lien. 3 years worth of tax returns are involved - 2005-2007. IRS previously filed substitute tax returns, so far only 2005 shows the actual tax return data.

Is there a certain order of how to go about this?

Gretel

I think your first step must be to get the IRS determination of the taxpayer's correct tax liability for the three years in questions.

Apparently from your post, the taxpayer ignored any 90-day letters and tax has now been assessed for all three years. You need to prepare the correct tax returns and request an audit reconsideration to have the current assessment be reduced to the correct liability. File the returns with the appropriate AFSR unit. Go to irs.gov/irm and there is an exhibit in part 4 found at 4.13.7-1 which shows the correct mailing address for reconsiderations. It will take some time to be worked but it will get done. §4.13 of the IRM gives all the details but basically, prepare the returns, write a cover letter requesting reconsideration and mail to the adress in the exhibit.

A CDP hearing is granted under certain circumstances. A taxpayer may request a CDP within 30 days of notification of the filing of a lien. I presume this was not done - you do have the option of filing a request for an equivalent hearing within a one year period of the lien being filed. Once a lien is filed, it is difficult to get the IRS to withdraw it but you can state your case at the EH.

Enjoy NTPI in New Mexico.

[Gretel]

Thanks, New York Enrolled Agent.

I should have said that all tax returns have been filed some months ago. This case actually involves tax returns going back further but there was no tax liability. Besides the two years in question all tax returns had been accepted as filed, but not all were done by me. Maybe they just need more time. IRS records show that they received tax returns.

So basically first asked for audit reconsideration, maybe call first to be sure this is not what they are working on anyway?

We are still within the time frame of requesting a CDP hearing.

I thought it would be good to send letter with check of some sort of amount to bring balance below $25,000 and ask for penalty abatement independent of audit reconsideration. Not a good idea? Better wait until tax returns are posted to records as desired?