Offer in Compromise

[zeros]

Have client that owes around 40K to the IRS that she incurred before she was married. She, currently, files MFS. She is on SS disability and has no probability of future employment. This would seem like a good candidate for a successfull Offer in Compromise. Agree? I assume this would be a form to be filled out and filed. Anybody have any experience in filing this?

[erchess]

Tax Relief

Reading between the lines I assume you are talking only about an OIC based on inability to pay and that there is not much doubt that she would have to pay the tax if she had lots of money and chose to fight it out in court.

You have stated her debt and given us an idea of her income. Her assets come into play as well. She will end up giving the IRS an amount equal to I believe 90% of the greater of ten years of income or the quick sale value of her assets in order to get the OIC based on inability to pay approved. I have never done one of these because I understand that they drag out often more than 18months at five to ten hours a week for the Professional and are thus quite expensive for the client especially if we want a large retainer up front.

If you do decide to pursue an OIC I would say it probably is something any of us could do successfully with help. The help I know of would be either Pit Bull Software or OIC Tax Planner, both of which you can find on the Web. There may be others as well. I'm not too familiar with either. P B work is stored on their website while OIC work is on your computer and PB has the option of letting you buy the right to work on just one client for a year but there is another fee if as would be expected the case runs over into the next year.

Something you might consider is getting her in Currently Not Collectable Status which is much simpler - there is a two page Form - and the only bad news is that every twelve to eighteen months the IRS will give the taxpayer I believe 30 days to do another statement. Of course when the debt becomes ten years old it disappears unless it is based on returns prepared by the service. I should note that the statement reflects expenses which have to be proven with receipts. I do these routinely with forms I download from the IRS. The form and instructions are self explanatory.

Either process insists that all prior returns be prepared and invites the taxpayer to file his or her own returns to replace ones prepared by the government.

[DaveO]

erchess is accurate in what he says. I would add that while her husband is not liable for the tax his income is figured in the support of the household. So if he has significant earnings they will expect more from her since they assume he is footing the household bills. If she has no seperate assets to speak of consider a bankruptcy filing which can discharge taxes older than 3 years.

I've done several of these and have had everyone I've submitted accepted although sometimes after some modifications. Follow the directions carefully, fill every blank and check every box. Have accurate valuations for assets with documentation on how you arrived at the numbers. You will have to consider his income in household support so prepare a worksheet documenting her contribution.

If you are able to get her in CNC status be aware that any filing of an OIC or Collection Due Process hearing will toll the collection statute.

[zeros]

Required to File Return?

Her only income is Social Security and she has no tax liability. Would she be required to file or is it a good idea to file in this situation?

[Gretel]

I don't think she needs to file. But before IRS even want's to look at OIC or CNC they either want to see that all tax returns have been filed or a good explanation why not.

I had a client who eventually was granted CNC with only disability income and we did not file any tax returns for years not required.

[DaveO]

I've got a CNC case now where the only income is SS and there are several unfiled tax returns some of which the service has filed SFR's on. We could file returns and knock the balance down but the taxpayer lacks records with which to prepare accurate returns or the income to pay for the work. She gets $185 per month in SS and lives with her daughter. While the letters from the IRS are scary there isn't much they can do. If I file the returns I reset the statute and start another cycle of collection activity. If she is lucky she will live long enough to see the statute expire.

[taxmom34]

Her only income is Social Security and she has no tax liability. Would she be required to file or is it a good idea to file in this situation?

are you sure about that? MFS some or all of social security would be taxable. she did live with husband, right?