several year non-filer, when to file 9465

[kathyc2]

Please excuse my lack of knowledge on this subject. I generally don't take on people who have not filed for a long time, but this is a long time acquaintance and just trying to help out.

- Income is all from W-2, small 1099, and 1099R for most years. Beginning sometime in 2011, FIT stopped being withheld from wages.
- Last filed year is 2008.
- 2009-2011 amounts due are smaller, 700, 200, and 1800 respectively.
- IRS has not sent notices of deficiencies for these years.
- At this point, 2012 is the only year notice received. CP22A showing tax of 5K plus another 2K of penalties and interest.
- 2013 and 2014 balance due in the 4K range.
- 2015 will also show a balance due around 4K.
- She will not be able to come up w/ the 4K for 2015 by 4/15/16. Because of this, my thinking is to wait until 2015 can be filed, and then do 9465 for 2012-2015.
- Do I e-file the 2015 return? Paper file 2012-2015 and mail all w/ 9465? Is it safe to assume that if 2009-11 notices have not been issued, that they will continue to be disregarded?

[mastertaxguy]

Late filer/non filer

A. Get a retainer up front (before you go any further on this) for at least 3 years of returns at your current rates +25% (there is more work for you); it is not your fault the TP hasn't filed: don't make it yours by cutting your fees. Be sure to have a written engagement letter.
B. Your post doesn't indicate why all of a sudden the TP got religion. Might be a factor if there is some other things TP hasn't disclosed, like IRS contacts, State tax contacts (if any).
C. Consider obtaining from IRS W-2 (wage and earnings) transcripts and account transcripts for all the years at issue; compare those figures with the information the TP have provided. You can get those via fax same day in most cases, as you probably know. IRS may have done SFR's which would either be reflected in account transcripts or return transcripts.
D. Is there any indication the TP has health/mental competency issues? Sometimes we ask the TP to provide a contact person likely to know of TP's whereabouts.
E. As for installments, if the TP can't pay the taxes due how is TP going to pay the installment fees? Better, in my view, to apply the installment fees to the taxes owed.
F. Posting only for myself, I advise TP's in such situations not to do installments: just make "installment payments" informally and save the set up fees. My office would, after getting paid/retainer, prepare for TP to sign and mail those returns that cannot be efiled, and e-file those than can be e-filed, giving TP vouchers for each year to mail in with whatever payments TP can make. IRS will then send out bills, separate for each year; at that point, assuming an OIC is not a likely alternative, TP can make whatever payments they can specifying the oldest balances due first.
G. Keep in mind an installment agreement generally requires the TP to be current in subsequent years which may be difficult.
H. Often, our office has such TP's complete a collection statement or form 433-A or B (as the matter requires) so we have a better handle on the TP's overall situation.
I. Did I mention get a retainer up front? And a engagement letter? If not, I just did.

[kathyc2]

A. Get a retainer up front (before you go any further on this) for at least 3 years of returns at your current rates +25% (there is more work for you); it is not your fault the TP hasn't filed: don't make it yours by cutting your fees. Be sure to have a written engagement letter.
B. Your post doesn't indicate why all of a sudden the TP got religion. Might be a factor if there is some other things TP hasn't disclosed, like IRS contacts, State tax contacts (if any).
C. Consider obtaining from IRS W-2 (wage and earnings) transcripts and account transcripts for all the years at issue; compare those figures with the information the TP have provided. You can get those via fax same day in most cases, as you probably know. IRS may have done SFR's which would either be reflected in account transcripts or return transcripts.
D. Is there any indication the TP has health/mental competency issues? Sometimes we ask the TP to provide a contact person likely to know of TP's whereabouts.
E. As for installments, if the TP can't pay the taxes due how is TP going to pay the installment fees? Better, in my view, to apply the installment fees to the taxes owed.
F. Posting only for myself, I advise TP's in such situations not to do installments: just make "installment payments" informally and save the set up fees. My office would, after getting paid/retainer, prepare for TP to sign and mail those returns that cannot be efiled, and e-file those than can be e-filed, giving TP vouchers for each year to mail in with whatever payments TP can make. IRS will then send out bills, separate for each year; at that point, assuming an OIC is not a likely alternative, TP can make whatever payments they can specifying the oldest balances due first.
G. Keep in mind an installment agreement generally requires the TP to be current in subsequent years which may be difficult.
H. Often, our office has such TP's complete a collection statement or form 433-A or B (as the matter requires) so we have a better handle on the TP's overall situation.
I. Did I mention get a retainer up front? And a engagement letter? If not, I just did.

I'm doing this at no charge, so a retainer is not an issue.
Already have transcripts in hand.
A 9465 will be filed to fend off further collection efforts and take advantage of the lower penalty rates.

I'm looking for input on if the 2009-11 returns are still open for collection and the best way to send missing returns/9465 in to have the best chance of them being correctly entered in IRS system.

[mastertaxguy]

2009-11 returns open for collection

1. If returns were not filed, as you state in your original post, absent something not present in your scenario they are open to collection.
2. SEE TTB 15-3 (upper right column) [2015 tax year edition].
3. Good luck.

[taxea]

1. Have TP make voluntary payments and be sure to include a memo on the check that indicates which tax year the payment is for along with SSN. Start paying on most current return first. Reasons: If you don't tell them what year is being paid they will post to the oldest year first. Also the SOL on collection is 10 years. It sometimes works out that the older tax due years get wiped out if not paid by the end date.
2. Mail the returns that don't qualify for for efiling in separate envelopes via certified mail. Have TP give you a copy of the notification that the return has been received. Efile the returns that qualify.
3. Contact the IRS and ask them to put a note on her file that you are bringing her into compliance and she is making voluntary monthly payments until all returns have been filed. At that time you will discuss with her a formal IA.
Note: Once they start receiving the returns they will start sending notices to the TP and a copy to you.
4. Wait at least 8 weeks after all the returns have been filed then get a new accounting for all years. Using the total amount due you are now ready to consider submitting a formal IA.
5. Have TP fill out F 433f. Use this to determine what she is able to pay monthly. You can also use this to set up the IA via phone. The IRS will tell you what they will accept as a monthly payment. It is also used to prove the TP may qualify for CNC (uncollectible status). Include State monthly payments on the form.
Now is the time to consider a formal IA. If it is submitted TP can make payments through IRS site. Be sure that the TP continues to pay the most current year until paid off, then the next most current year.
Hope this helps....if you have more questions you can email me.

[taxea]

A. n't pay the taxes due how is TP going to pay the installment fees? Better, in my view, to apply the installment fees to the taxes owed.
F. Posting only for myself, I advise TP's in such situations not to do installments: just make "installment payments" informally and save the set up fees. My office would, after getting paid/retainer, prepare for TP to sign and mail those returns that cannot be efiled, and e-file those than can be e-filed, giving TP vouchers for each year to mail in with whatever payments TP can make. IRS will then send out bills, separate for each year; at that point, assuming an OIC is not a likely alternative, TP can make whatever payments they can specifying the oldest balances due first.
G. Keep in mind an installment agreement generally requires the TP to be current in subsequent years which may be difficult.
H. Often, our office has such TP's complete a collection statement or form 433-A or B (as the matter requires) so we have a better handle on the TP's overall situation.
.

MTG- doesn't a formal IA keep the IRS from constantly sending notices? I have found that they send a current accounting yearly and I think it is every two years that they want an updated 433f.
I have my clients pay through the IRS website. That way I don't have to issue vouchers and the payment is made for the year the TP indicates.
the 433f a/b could also prove that the TP qualifies for CNC.
Lastly, why do you have them pay the oldest first? Just curious cause I do it just the opposite in hopes of the older return SOL will wipe out the return before the TP gets to paying it.

[kathyc2]

1. 5. Have TP fill out F 433f. Use this to determine what she is able to pay monthly. You can also use this to set up the IA via phone. The IRS will tell you what they will accept as a monthly payment. It is also used to prove the TP may qualify for CNC (uncollectible status). Include State monthly payments on the form.
Now is the time to consider a formal IA. If it is submitted TP can make payments through IRS site. Be sure that the TP continues to pay the most current year until paid off, then the next most current year.
Hope this helps....if you have more questions you can email me.

She has very moderate income and at an age where it's not realistic to be able to increase it. I can come up with a pretty good estimate of monthly expenses, she rents, has already cashed out all 401K accounts and doubtful that her vehicle value is over the 3,450 exclusion. I'm coming up with a remaining monthly income of around 200. So, if she can pay the 2,400 in 5 months, that's all she would need to pay on a 20K tax debt? That's crazy.

[mastertaxguy]

Paying first or earliest year taxes due?

MTG- doesn't a formal IA keep the IRS from constantly sending notices? I have found that they send a current accounting yearly and I think it is every two years that they want an updated 433f.
I have my clients pay through the IRS website. That way I don't have to issue vouchers and the payment is made for the year the TP indicates.
the 433f a/b could also prove that the TP qualifies for CNC.
Lastly, why do you have them pay the oldest first? Just curious cause I do it just the opposite in hopes of the older return SOL will wipe out the return before the TP gets to paying it.

1. Interest rate. At the moment, it is usually higher for past years but every situation is different. Perhaps you have experienced better "luck" on older SOL issues than I.

2. Under the scenario given, the Statute of Limitations will be 10 years ( think) from the date the return(s) are filed and taxes assessed as no returns have been filed. (Which might raise another question: maybe IRS has already determined, on an SFR, that there is no balance due????)

3. I don't like Installment agreements unless absolutely necessary since a future year balance due that isn't paid often causes the Service to set aside the installment agreement. They will still file a lien probably.

4. It may not be an issue in the given scenario, but often there are state tax bills and I find states more likely to be aggressive on collections of overdue/late filed taxes due. IRS thinks taxes are just money. If the choice is paying the State, or paying IRS, generally I prefer to have the TP pay the state to get them out of the way the tax amounts, of course, are a possible increased itemized deduction in the year of payment.

[TaxGuyBill]

She has very moderate income and at an age where it's not realistic to be able to increase it. I can come up with a pretty good estimate of monthly expenses, she rents, has already cashed out all 401K accounts and doubtful that her vehicle value is over the 3,450 exclusion. I'm coming up with a remaining monthly income of around 200. So, if she can pay the 2,400 in 5 months, that's all she would need to pay on a 20K tax debt? That's crazy.

If you are trying for an Offer In Compromise, that could be the case. Yes, it is crazy, but that might be how it works. If you do an Offer in Compromise, ABSOLUTELY file the older tax returns first to include them in the Offer.

https://www.irs.gov/pub/irs-pdf/f656b.pdf

https://www.irs.gov/Individuals/Offer-in-Compromise-1

I haven't used it before, but I've heard that Pit Bull Tax can be a helpful software if you are not very familiar with submitting an Offer In Compromise.

[kathyc2]

If you are trying for an Offer In Compromise, that could be the case. Yes, it is crazy, but that might be how it works. If you do an Offer in Compromise, ABSOLUTELY file the older tax returns first to include them in the Offer.

https://www.irs.gov/pub/irs-pdf/f656b.pdf

https://www.irs.gov/Individuals/Offer-in-Compromise-1

I haven't used it before, but I've heard that Pit Bull Tax can be a helpful software if you are not very familiar with submitting an Offer In Compromise.

I got some better numbers from her rather than my rough calculations and it looks like the OIC will be ~8K. She's fortunate in that she has a family member who will likely loan her the amount to get it taken care of.

I'm missing a piece of info for 2014 return, but other years are printed. I should have her mail all them in now and e-file 2015 ASAP?

She got a 30 day reprieve on 2012 notice until 1/17. Should she call them and let them know that returns have been sent and ask for a further reprieve for time to be in the system? If she were to take the returns to local office would they give her a receipt of submission? After 6 weeks or so should she contact them to make sure they are all in system b4 filing the OIC?

Thanks to everyone for all your help on this!

[DaveinTexas]

Just my 2 cents

Waiting on the oldest year to expire due to the SOL will take some time, especially if these returns were filed late. The earliest SOL might be 2009, which would expire no earlier than 2020 (10 years after the assessment date if we assume it was assessed in 2010) and that balance is only $700, then $200 for 2011. Small potatoes.

I would recommend first taking care of the current year (2016). Your client needs to formulate a plan to stop this bleeding; I.E. start making estimated tax payments (which will reduce their Reasonable Collection Potential).

My advice, if you really want to help this friend, is to not prepare the 9465 but rather, just file the 2015 return as soon as you can. Then, you should obtain a Power of Attorney and just call the IRS. You will want to have handy a completed 433F if the past year assessments are already in Automated Collection (ACS) or you will be spinning your wheels. The reason your client will want a plan for 2016 is because your client must be compliant with current year estimated payments to qualify for any installment agreement so setting one up without a clear plan for 2016 is moot.

Just my 2 cents, spend it....wisely.

[kathyc2]

I would recommend first taking care of the current year (2016). Your client needs to formulate a plan to stop this bleeding; I.E. start making estimated tax payments (which will reduce their Reasonable Collection Potential).

The FIT withholding from paychecks stopped sometime in 2011. She has a little sideline job w/ a 1099 but 95% of income is W-2. She filed W4 w/ HR after we talked and they will be withholding going forward.

She knows she's screwed up her finances and is taking responsibility and not blaming anyone. I'm also big on personal responsibility but can't help thinking that IF the IRS would have started by sending delinquency notices in 2010 or so for the $700 2009 shortage, it would have never gotten this bad.

[Lion]

Efile the three open years so you know they were accepted.

[taxea]

1. Interest rate. At the moment, it is usually higher for past years but every situation is different. Perhaps you have experienced better "luck" on older SOL issues than I.

2. Under the scenario given, the Statute of Limitations will be 10 years ( think) from the date the return(s) are filed and taxes assessed as no returns have been filed. (Which might raise another question: maybe IRS has already determined, on an SFR, that there is no balance due????)

3. I don't like Installment agreements unless absolutely necessary since a future year balance due that isn't paid often causes the Service to set aside the installment agreement. They will still file a lien probably.

4. It may not be an issue in the given scenario, but often there are state tax bills and I find states more likely to be aggressive on collections of overdue/late filed taxes due. IRS thinks taxes are just money. If the choice is paying the State, or paying IRS, generally I prefer to have the TP pay the state to get them out of the way the tax amounts, of course, are a possible increased itemized deduction in the year of payment.

1. thats why I have TP pay most current yr debt first...it leaves the possibility that the older return SOL will run out before it gets paid.
2. I pay no attention to SFR's because the IRS doesn't notify the TP if they have done one that ends up in the TP's favor and they are based on MFS tax rates with no deductions or dependents considered.
3. I do them because they don't toll (change) the collection SOL and it stops the IRS from sending computerized notices every 30, 60 or 90 days.
4. I agree, especially with Hawaii state, that is why I tend to work out an IA with the state first and include it on the 433f.

Thanks for your response. It helps in procedural decision making to understand the reasoning of why other Pros do things the way they do.

[taxea]

She has very moderate income and at an age where it's not realistic to be able to increase it. I can come up with a pretty good estimate of monthly expenses, she rents, has already cashed out all 401K accounts and doubtful that her vehicle value is over the 3,450 exclusion. I'm coming up with a remaining monthly income of around 200. So, if she can pay the 2,400 in 5 months, that's all she would need to pay on a 20K tax debt? That's crazy.

You say a remaining monthly income of 200. Is that based on what the IRS says she can take as expenses? Or what she actually has as expenses? you need to look at IRS Collection Standards to determine the expenses she is allowed each month.