Several Years Owed, Installment Plan

[geekgirldany]

I have a new customer that owes on several years of taxes. He wants to get "straight" with the IRS.

The first thing I did was get a POA. I called Tax Prac. Hotline and was told by the lady to go back 10 years and redo the POA. I did and called back. I was told that 01,02,04 was in collections. The guy would not talk to me about it but instantly transferred me to the ACS department. I was then told they would not wait for me to fax the new POA. To give it time to get into the system. So that is where I am at right now.

I am doing his 06 and 07 returns. Includes personal and C-corp.

I have questions I hope you all can help me with:

1) Should I call back ACS and ask for a temporary hold on the account so I can get all the tax years completed? They have already submitted a lien letter for his bank account. He said there was no money in there for them to get. He works as subcontractor so no W-2.

2) It is my understanding that all tax returns need to be filed for them to even consider a installment agreement, is this correct?

3) C-Corp is closed, will the IRS combine the personal and corp in an installment agreement?

I would appreciate any feedback on this. The customer is Hispanic and his english is very limited. So it makes things a little more difficult. Just trying to get a good handle on this before I call the IRS back.

Thank you

[taxea]

Several Years Owed, Installment Plan

Yes, all returns that have not yet been filed must be filed before the IRS will talk IA or OIC.
I am quite surprised that the IRS would not allow you to fax the POA. My experience has been that while on the phone with them, the POA is faxed, they walk to the fax machine and come back to the phone.
The other option is fax it to the service center wait 72 hours and then call ACS. Be sure that you request income and account documents for each year that they have on file. You don't want to miss reporting any income that the IRS already knows about. And you want a record of the IRS accounting (in detail) for each year.
Yes, the IRS will, as a rule, give you 60 days to get all the returns in and then it takes them approx 6 weeks to input the returns into their computer. Once they are all recorded you can then work out a payment plan with them.
On the issue of the levy/lien on client's bank account. The first thing I would do is submit an installment agreement while all the rest of this is being worked out. Once the returns are submitted and posted the IA can be adjusted. The IRS is not likely to waive the bank levy without an IA in place.
My other recommendations would be to get a retainer from the client that will at least cover your fees for preparing all of the returns plus your handling of the additional issues before you do anything further.
I disagree with preparers that suggest pacing the filing of the returns. Take the returns to the local IRS office and get a receipt for them. You do this by making a copy of page one of each return. The IRS will date stamp each copy and you keep it in your client file.
Once you have the receipts call ACS and ask them to note on the file the date they were submitted and ask for a date you should call back to further discuss payments.

In the future if the IRS agent on the phone will not give you a fax number to send the POA to, end the call and call again. You almost never will be connected with the same agent and will probably get one that is more cooperative.

FYI...if you have not filed or sent the POA prior to phoning the IRS ask for their fax number and fax it to the agent you are speaking with. If you have fax the POA to the service center you must wait a minimum of 72 hours for it to be input into their computers.
taxea

[geekgirldany]

Thank you so much for responding! I have a couple of more questions:

I need to get account and income information for all the years he owes and the years I am preparing? I guess I ask for transcript?

Also from now on it appears that I will be working with the ACS on this and there is no need to call the tax prac. hotline?

On the POA, I use Efax and it takes about 5 minutes for the fax to get to them. The guy I talked to said the supervisors did not want them to wait around on the phone for faxes. I just said okay and hung up. Lately I seem to have a harder time working with people at the Tax Prac. Hotline and ACS than I use too.

Thank you again for taking the time to answer my post. You have helped me so much.

[ED SMITH]

You have a lot of issues here so let's take them one at a time, starting with your 1st posting.

1. Yes , you should call ACS back and don't use Efax. It is too slow.
Get yourself a cheap fax machine, at least for sending them.
Even if a POA has been submitted to Ogden or Memphis, they don't always get posted. Many times they have to resent.

Hint: don't punch in the phone number when prompted, and if you get someone that sounds surly or unfriendly, hang up and try again. There are at least 16 ACS call centers and some are better than others.

What you want to ask for is time to prepare the tax returns. You can usually get 60 days. If at the end of the 60 days, you still need more time, call back and and try to get another 2 weeks.

Once the returns are filed, you want to call ACS and get a processing hold. The time they allot may not be enough, so you will want call PPL near the end of the time allowed and see if they have been. If not call ACS and request more time.

As for the levy, bank levies are good for one day and are not continuous like wage levies. Another levy would have to be issued.
BTW, the IRS does NOT lift bank levies, except in extreme situations, like being evicted for non-payment of rent.

2. No installment agreement can be formalized until all returns are processed, because they won't know what the final assesed amount is.
Depending on the results, the tax payer could remain in ACS, be assigned an RO, or transferred to the Large Dollar unit.

However, in the meantime, the client can begin to make voluntary payments as a gesture of good will (buena voluntad - in Spanish), and tell ACS that is what he will do while you prepare his returns. If he offers to pay about $100/mo for every $1000 owed, that will go down well, but if not make sure he pays something.


3. Would need more info on the c-corp. If it is shut down and there are no assets, it could be an offer in compromise. If it is trust fund taxes, it can be much more difficult.

From the 2nd post-

Request from the PPL that they Fax you for the years involved:
1. Wage and income transcripts
2. Account transcripts -
Ask them to print and fax them to you rather than have them sent through TDS, because if there is any trouble with the transmission, they will be mailed which can take 1-2 weeks. Tell them it is urgent.

If you need corp information you will have to be transferred to the business line , or press 2 when prompted.
You would need a 2nd POA for the corp. You should have the income for the 1120 or S and the payroll taxes for forms 940 and 941 indicating the quarters requested.


Before the returns are processed have your client fill out a 433A (there is a Spanish version) and provide 3 months bank statements and a recent paycheck summary. Normally you would use 433F with ACS, but RO's and Large Large Dollar (over $100K) use the A. You can always fill in the F for him. That way you will be prepared when the time comes for an I/A.

Obviously this doesn't cover all the details and contingencies that could arise, but it should cover about 95% of most situations.

Hope this helps and good luck!
Ed

[taxea]

Fax machines are not expensive and you can get a fax/copier/scanner for under $200.
This will send your fax immediately. I have my fax line set up to my personal phone so I don't have to hang up in order to fax.

Whenever I do "compliance" work for a client this is what I do.
Ask the client how many years have not been filed.
Determine an estimate of your fee. My minimum for compliance is $2000 to $3000. plus the normal cost of preparing each return. I ask for a money order or cashiers check. My experience has been that if the client has not paid his taxes in the past he may not be able to pay you. You do not want to do all this work and then chase the client for your fees.

Once the client has paid the initial retainer that covers, at least the tax years that you will be preparing, and signed the poa you can proceed.

Have the client sign a POA for the years he hasn't filed. If he isn't sure go 10 years back. Fax the POA directly to the service center where the return is required to be filed.

Discuss payment amount and date for an IA. This monthly payment should be as large as he can afford and still be able to pay rent/mortgage, car payments, gas, utilities, food and clothing. Complete this for the client and have him send the first payment. (As I said before, I would have him take it to the local IRS office and get a receipt for it.) Be sure that he understands that if he doesn't make these payments on time, the IRS will pull the IA and proceed with their agenda.

Wait 72 hours before calling the IRS. When you have the receipt for the first IA payment, call the department on the most current letter received from the IRS.

Tell the IRS that:
1. you have been retained to bring the client into compliance.
2. your client has submitted and made the first payment on an IA
3. Ask for a full accounting (in detail) that shows separate liability, penalty and interest for each year and ask for transcripts of any returns the IRS has prepared.
4. Ask for all income statements for each year.
5. ask for a waiver of time (they will usually give 60 days).
6. ask if they will lift the bank levy and if they agree ask for a copy of the document for your file.

Now you prepare the returns. When the client signs the returns either you or he should take them to the local IRS office and obtain a receipt for them. If you haven't already obtained your fees for the work with the IRS, now is the time. At this point the returns are filed and an IA has been accepted.

You proceed further when the client pays the balance of the retainer.

The returns are probably going to lessen the tax liability. If the client was entitled to a refund for any years past the limit he will not get it back nor will it be considered as a payment of taxes due. The only thing it will do is lower his tax liability.

Call the IRS on the date they have given you, if you have not heard from them. This is the time that you ask for an updated accounting based on the returns that have been filed.
This is also the time that they will want a 433a or b (financial statement).

This statement must be as current as possible and must include income and expense statements as well as bank/credit card statements that prove the items claimed on the 433. The IRS will want a minimum of the past three months.

The only items that can be included on the 433 expenses are necessary for support items. No beer, videos, dining out, golf, sports activities etc.

Once submitted the IRS will take the income against the expense and tell you what they believe the client can pay monthly. At this time the IA will be adjusted by the IRS.

This is also the time for an offer in compromise if the client can pay the entire liability at once. Also if he can do so they may waive the penalties, however it is seldom that they waive the interest.

Well, haven't I just gone on and on. Email me if you have anything further.
taxea@hawaii.rr.com

[taxea]

Several Years Owed, Installment Plan

Hey Ed
Looks like we both took up this campaign at the same time. taxea

[ED SMITH]

to taxea

You must have been working on your post while I was posting mine.

I bought a refurbished fax machineone time for $50, but new fax/copier/printers can be had for less than $100 at Staples, Best Buy, etc.

Another suggestion I would make to geekgirldany is to go to the link below and get the Collection Financial standards for food/clothing/etc., housing, transportation and prescription drugs.

http://www.irs.gov/individuals/article/0,,id=96543,00.html

In the food/clothing category and prescriptions category I always max out the expenses whether the client has them or not. This will allow these categories to absorb a little of any overages in the other categories. If there are overages or unallowed expenses, such as credit card and unsecured loan payments, school tuition, life insurance other term, the service will allow one year to adjust for these.

[geekgirldany]

Thank you both so much for taking the time to post such detail on this situation. I am going to print this out tomorrow so I can read it better.

I do have a fax machine but it is on the same line as my business. I started using Efax so I could fax the POA to the IRS. But I did not know it took so long to send them. I never thought but I could call on my cellphone to the irs and leave my biz line open to fax.

I did get $1,000 paid in full. I told him this would be the cost for preparing two years of returns and helping him on the 1 year he owed. I did not know there were previous years. Next time I talk to him I will have to tell him the price will go up because of the previous years still owed. More time involved... I think this is going to take awhile anyways.

One thing that I know is going to be a potential problem is that right now where he is working... he is getting paid in cash. So this may make things difficult in trying to do an installment agreement. No documentation on him getting paid.

[taxea]

Several Years Owed, Installment Plan

Is he working as an employee or sole proprietor? Are you sure his social security number is valid? Was he working for the current employer in 2007? Did he get a 1099 or a W-2?

I would not do another thing until he pays you for all the returns that need to be done.

He needs to know that whether or not he gets a w-2 or 1099 or nothing from this current employer he needs to declare all of the cash income.

What type of business is he presently working for that he gets paid in cash? taxea

[geekgirldany]

In 2007 he had a C-Corp and the money went through there. He is still doing the same type of work which is pouring concrete footings, slabs, etc. Construction type work. He said he does not know if he will get a 1099 or not.

I am not 100% sure if the SS# is legit. I believe I can register at the SSA and check it. After I first posted this thread this weekend I now know I need to ask him to see it to make a copy. He said he went through getting his green card and the immigration stuff. Plus prior years were prepared using that number... doesn't mean anything though. He is now wanting me to help him with his wife immigration papers.... something I am not sure I should get involved with as I don't know nothing about it.

[JohnH]

This may be time for Kenny Rogers Accounting:

"You gotta know when to hold 'em, know when to fold 'em,
know when to walk away and know when to run."

[taxea]

I agree with Kenny Rogers too! I would have walked away from this one. Sounds like the guy paying his cash is treating him as a sole proprietor. Does he have a concrete truck? Is he responsible for getting the concrete to the job site? It still remains, cash or not, that he needs to declare all the income.
If you do payroll you can verify the SSN. If you just do taxes you can't through the SSN site, however, I would find a way to verify it before proceeding. Does the number start with a 9?
If you are not versed on immigration law don't take it on.taxea

[geekgirldany]

Yes it probably was not a good idea to take this on. Really did not know there would be this much to it. I thought it was one year and two years to file. I was soooo wrong.

I've printed out the information you provided and I will be calling the IRS tomorrow. Again I do appreciate you guys taking the time to post that information for me.

He is basically a subcontractor for this person he is working for now. Before when he had his C-Corp he had to find his own jobs. Now he works for one person. I told him at the first meeting it does not matter if he gets a 1099 at the end of the year or not he will have to report the income. I told him to have the guy he is working for to provide a stub or pay him with a check and make copies. He would need it for the installment agreement.

The SSN starts with a 6. I am going to ask for his card.

Yes I am not touching the immigration thing with a 10 foot pole. He told me I could make good money because I stay open later than the other places that do it. I told him I did not know one thing about it... I would try to find him a good lawyer. He asked me again though.

I think he knows he is in a mess. I believe the reason he wants things straighten out with the IRS is because of the immigration thing.

[JohnH]

In this area there are at least 3 different tabloids available at the restaurants which cater to Hispanic readers. Every one of them is filled with ads for Spanish-speaking lawyers who specialize in immigration. Have you wondered why he is repeatedly asking you to handle this when you keep insisting that you don't want to do it, especially since he can probably find a dozen lawyers who do this for a living any time he buys lunch?

[geekgirldany]

I guess I just thought he wanted me to do it because I am doing the taxes also. He says he knows of businesses that do this but it was hard for him to get off work. Most of them close by 5pm. He seem to be suggesting that I could get alot of customers if I offered to help with the immigration because I am opened later than most businesses.

He was recommended by a very good customer of mine. This customer has relatives that have also asked me to help them with the immigration stuff... as well as friends of his. I think they believe because I can do taxes I can do that also. All of them found someone else to help them with this.

This new customer that is so behind said there was an accountant in town that was doing this. I asked him if he was sure it wasn't a lawyer. He said no a "tax person".... but with the language barrier it might be a lawyer who prepares taxes.