Have you heard the commercials on saving $ on tax liability?

[TAXNJ]

Has anyone dealt with potential clients who have heard the commercials stating, “we can save you lots of $ on tax liability owed” and the potential clients asks if you can do the same?

How would you handle the following?

SCENARIO:

• Potential client has three years of tax returns never filed and may owe tax liability (in addition to penalties & interest)
• Potential client has reasonable amount of assets and net worth
• Potential client about to receive an inheritance that would definitely cover any tax liability owed
• Potential client says if tax liability owed is $30,000 can you get it resolved to pay only $5000

NOTE: As you know, a number of firms that advertised “we can get your tax liability down to pennies on the dollars owed” either went out of business or brought to court for deceptive advertising.

[taxea]

The reason why some were brought to court is because their initial fee was about 6K and they did little or nothing for the client. The fee was not refundable.

[TAXNJ]

Yes but

The reason why some were brought to court is because their initial fee was about 6K and they did little or nothing for the client. The fee was not refundable.

How would you handle the following?

SCENARIO:

• Potential client has three years of tax returns never filed and may owe tax liability (in addition to penalties & interest)
• Potential client has reasonable amount of assets and net worth
• Potential client about to receive an inheritance that would definitely cover any tax liability owed
• Potential client says if tax liability owed is $30,000 can you get it resolved to pay only $5000

[DaveinTexas]

Get to work

1. Obtain a POA and a retainer to cover the POA and approx half of the total prep fees.
2. Look over the account transcripts and also order W&I transcripts to catch all reportable income so there are no surprises. Also check for past filing history (there may be more than 3 years to file).
3. Prepare the returns using the documents provided by the client and the IRS, making inquiries as you see fit.
4. Use your software to estimate late filing penalties, late payment penalties, interest, etc.
5. Consider using the FTA program to obtain abatement of penalties. If the non filing was due to the same underlying issue (dementia/alzheimers/severe depression, etc,) consider asking for the FTA for one year and then reasonable cause for the others. Be sure to Bill for this service too.
6. Collect the remaining fee upon completion.

Tell the client the "settle for $5,000" is probably not going to happen. If the client has sufficient equity in assets or future access to assets this must be disclosed and will most likely disqualify them as an Offer candidate. If the IRS can liquidate their savings and pay the outstanding balance in full, there is no negotiating involved.....pay the tax client.

it may not be a bad idea to have the client fill out a 433A so you have an idea of where they stand financially. They most likely won't need to hand it over to IRS if the principal balance is less than $50K but at least you would have an idea of where they stand. If you spot a home on the 433A with $100,000 in equity, the client should know the only negotiating they will be doing is setting up an IA with the IRS.

Tell the client not to file untimely in the future and make them aware of what filing late cost them (22.5% FTF penalty if only 5 months late....ouch!).

I always tell my clients to timely file no matter if they can pay or not. The IRS can put you in jail if you don't file but you won't go to jail if you owe them money (albeit, it might feel like jail owing the IRS!!)

Tell your client to be reasonable, expect to pay most or all of what they owe to the IRS and not to expect any miracles. Good luck!

[TAXNJ]

Impressive

1. Obtain a POA and a retainer to cover the POA and approx half of the total prep fees.
2. Look over the account transcripts and also order W&I transcripts to catch all reportable income so there are no surprises. Also check for past filing history (there may be more than 3 years to file).
3. Prepare the returns using the documents provided by the client and the IRS, making inquiries as you see fit.
4. Use your software to estimate late filing penalties, late payment penalties, interest, etc.
5. Consider using the FTA program to obtain abatement of penalties. If the non filing was due to the same underlying issue (dementia/alzheimers/severe depression, etc,) consider asking for the FTA for one year and then reasonable cause for the others. Be sure to Bill for this service too.
6. Collect the remaining fee upon completion.

Tell the client the "settle for $5,000" is probably not going to happen. If the client has sufficient equity in assets or future access to assets this must be disclosed and will most likely disqualify them as an Offer candidate. If the IRS can liquidate their savings and pay the outstanding balance in full, there is no negotiating involved.....pay the tax client.

it may not be a bad idea to have the client fill out a 433A so you have an idea of where they stand financially. They most likely won't need to hand it over to IRS if the principal balance is less than $50K but at least you would have an idea of where they stand. If you spot a home on the 433A with $100,000 in equity, the client should know the only negotiating they will be doing is setting up an IA with the IRS.

Tell the client not to file untimely in the future and make them aware of what filing late cost them (22.5% FTF penalty if only 5 months late....ouch!).

I always tell my clients to timely file no matter if they can pay or not. The IRS can put you in jail if you don't file but you won't go to jail if you owe them money (albeit, it might feel like jail owing the IRS!!)

Tell your client to be reasonable, expect to pay most or all of what they owe to the IRS and not to expect any miracles. Good luck!

Agree. Very impressive response. If anyone is looking for a Tax Advisor in Texas they should consider your services.

[DaveinTexas]

Aim to please

Agree. Very impressive response. If anyone is looking for a Tax Advisor in Texas they should consider your services.

I'm happy to help if I can.

[Roberts]

Yep, anyone can get their tax amount owed reduced with an offer in compromise. The problem is you have to be broke for it to be approved. The IRS isn't going to accept $.10 on the dollar if you have $250k in equity in your house. OIC seems like a great business, I'm just not overly comfortable dealing with people who are that irresponsible with their financial lives.

[DaveinTexas]

The problem with the business

Is the impeccably bad timing of the clients that need an Offer. I had a lady who owed $50K for returns in the past (401K withdrawals, etc). She went at least 3 years without seeking assistance. During this 3 year stint, she was a prime candidate (living with and off of family members).

By the time she came to me for help she was back to earning $70,000 a year and sharing rent with someone.

If someone is negligent with their finances and decision making overall, it does make it difficult to assist them with any sort of repayment plan that would lower their overall tax liability.

Just helped a gentleman obtain a reduced wage levy on a "promise" to pay me. The IRS was granting him only $300 every 2 weeks and I helped to release another $1200 a month so he could "eat". He hasn't paid a dime and I haven't heard from him since December. I know LG, I know.....Get a Retainer!!

[MDEA]

Tax liability

Turned a new leaf this year no calls to IRS with out a retainer. I have over $5000 owed for representation work and they do not come in to do their current returns.

[TAXNJ]

Paid preparer?

Is the impeccably bad timing of the clients that need an Offer. I had a lady who owed $50K for returns in the past (401K withdrawals, etc). She went at least 3 years without seeking assistance. During this 3 year stint, she was a prime candidate (living with and off of family members).

By the time she came to me for help she was back to earning $70,000 a year and sharing rent with someone.

If someone is negligent with their finances and decision making overall, it does make it difficult to assist them with any sort of repayment plan that would lower their overall tax liability.

Just helped a gentleman obtain a reduced wage levy on a "promise" to pay me. The IRS was granting him only $300 every 2 weeks and I helped to release another $1200 a month so he could "eat". He hasn't paid a dime and I haven't heard from him since December. I know LG, I know.....Get a Retainer!!

Turned a new leaf this year no calls to IRS with out a retainer. I have over $5000 owed for representation work and they do not come in to do their current returns.

If not paid. How would you correct the 1040 where you signed as "PAID PREPARER"?

What's the phrase? "Never sign anything that is not true"