Knowledge Base 2017-04-11T22:23:02+00:00

KNOWLEDGE BASE

How does one know when the CSED begins and ends? Is this on the account transcript? 2017-04-11T22:23:03+00:00

The CSED information is on the transcripts. The collection period typically begins when the tax in question is assessed. The CSED date ends at the end of the collection statute. Keep in mind that several occurrences can extend the collection statute, pushing back the CSED date. If you call the IRS practitioner Priority Line (“PPL”) at (866) 860-4259 they can give you this information as well. However, you are always wise to verify and retain proof of this information in writing by obtaining the client’s account transcripts.

Is there a transcript code translator in the IRM? 2016-05-13T14:59:21+00:00

Our textbook The Ultimate Guide to Tax Resolution provides the descriptions relating to most if not all of the transcript codes.

Would you amend a tax return to use the 240 day rule? 2017-04-11T22:23:03+00:00

To amend a return add 240 ADDITIONAL days to the waiting period necessary to include tax liability in a bankruptcy so it would not make sense to amend a return for that reason. However, if your client had an IRS return audited and additional tax was assessed, you will probably want to amend the State return to include the additional State liability that will be assessed in the items that will be discharged. In either case you will have to wait at least 240 days from the date of assessment of the IRS audit to include the newly assessed IRS tax liability.

Is it correct that a tax lien will not be released via a bankruptcy? 2016-05-13T14:58:14+00:00

That is true but you can request the lien be removed post bankruptcy; usually negotiating a compromised payoff amount.

If there is a pending bankruptcy filed by a client, would you suggest entering them into an installment agreement prior to the filing? 2017-04-11T22:23:03+00:00

Filing a bankruptcy (“BK”) prevents the IRS from collecting against your client for the period the BK is pending plus 30 days. You should only enter them into an installment agreement prior to a BK if there is substantial time for the IRS to collect (i.e. years) before the BK can be filed.

Is it correct that one cannot discharge taxes when there the IRS has assessed tax bases upon having prepared a Substitute for Return (“SFR”)? 2016-05-13T14:57:21+00:00

You should consult a bankruptcy attorney for a definitive answer but there has been cases in which taxes assessed from an SFR where not dischargeable.

Can a bankruptcy filing discharge taxes encompassed within an installment agreement if date requirements met? 2016-05-13T14:56:44+00:00

Yes

What do you do when the client’s retainer runs out, they refuse to pay you more and you are still on the Power of Attorney (“POA”)? 2017-04-11T22:23:03+00:00

Stop work. Then wait to see if the client changes their mind and decides to pay you. If not you may revoke the POA. If there is no impending activity we typically wait up to 6 months unless the client requests we do so sooner.

If the IRS does not receive my Power of Attorney (“POA”) will they advise to send it again? 2017-04-11T22:23:03+00:00

The IRS will not know to advise resending a Power of Attorney unless (1) you contact them to discuss a client or (2) you send a Power of Attorney that is incorrect, incomplete, or does not encompass a broad enough spectrum. If any of the above occur the IRS will ask for an updated Power of Attorney re-signed and dated by the client.

Will the IRS allow you to complete a power of attorney covering future years? 2016-05-13T14:54:20+00:00

Yes. Typically the IRS can span a few years forward.

Does a taxpayer representative need a separate CAF number for each client they represent in front of the IRS? 2016-05-13T14:53:51+00:00

No. A single CAF must be obtained by a representative (one per representative) prior to speaking with the IRS. The number assigned is representative-specific and will stay with the representative as long as he or she remains in practice.

Can an Offer in Compromise be submitted to remove payroll tax liability? 2016-05-13T14:53:07+00:00

Yes. Either the company can submit an in-business Offer in Compromise if they remain in business (these are difficult to get accepted) or the individual/s assessed Civil Penalty stemming from the unpaid payroll taxes may submit individual offers.

I know Currently-Non-Collectable (“CNC”) status is a solution for income tax liability, but does it also apply to payroll tax liabilities? 2016-05-13T14:52:48+00:00

Yes. CNC status may be obtained by a business and/or individual with liability stemming from payroll taxes.

A corporation owes payroll tax liability of approximately $100,000 for periods spanning from 2003 through 2010. During discussions with the IRS the Trust Fund portion of the liability was assessed personally under the responsible person’s social security number. When if at all does the 10-year collection period begin? 2016-05-13T14:52:26+00:00

The IRS 10-year collection statute begins when a liability is assessed. This holds true for the Trust Fund Recover Penalty as well.

Wouldn’t a company’s board of directors be considered liable for unpaid payroll taxes if they were on the board at the time the related tax was due? 2017-04-11T22:23:03+00:00

A board member would not be liable (considered a “responsible person”) unless the board member directly participated in the decision not to pay the payroll taxes or if the board member knowing that payroll taxes were owed, directed the company to pay other items in lieu of paying the payroll taxes.

Would a signor on a company’s bank signature card that became a signor after the tax was owed be liable for previously accrued payroll tax (assume payroll taxes were paid current for new payroll starting from the date the signor signed the card to present)? 2017-04-11T22:23:03+00:00

The new signor would not be responsible in theory; however, in practice if the IRS summons the bank signature card and the new signor’s name exists, he or she may have to show via a 4180 interview that they were not a responsible person. This should be easy to prove but lack of defending oneself could lead to a Civil Penalty assessment.

Is Currently Non Collectable (“CNC”) status an applicable solution when the taxpayer is faced with a Civil Penalty stemming from a Trust Fund Recovery Penalty? 2016-05-13T14:51:24+00:00

Yes, The taxpayer may enter into CNC status for liability stemming from a trust fund penalty assessed.

If you have a client with outstanding payroll obligations stemming from either their corporation or their sole proprietorship, what is the best way to reduce their tax obligation? 2016-05-13T14:51:01+00:00

The answer to this question depends on the circumstances. Assuming the business is no longer in operation, you should wait until the Trust Fund Recovery Penalty (“TFRP”) has been assessed to the “Responsible Person/s” in the form of Civil Penalty and negotiate either an installment agreement or Offer in Compromise based not upon what is owed but rather how much the taxpayer’s are able to pay. If the business was a sole proprietorship, the entire liability will be assessed to the individual rather than just the Civil Penalty portion.

If my client qualifies for Currently Non Collectable (“CNC”) status, would that keep the trust fund penalty from being assessed (assuming my client is considered a “responsible person”) to my client? 2017-04-11T22:23:03+00:00

The answer is no. The Trust Fund Recovery Penalty (“TFRP”) will be assessed as a Civil Penalty prior to the IRS commencing any collection activity against the responsible person(s). The Client would request CNC status during the collection process and not before. If your client is determined to qualify, they will be placed into CNC status for up to a 2 years at which time the IRS will re-evaluate their financial standing. That is to say, CNC status is a temporary state used to postpone collection activity and cannot be used to eliminate exposure to tax liability.

Does the IRS accept Offers in Compromise (“OIC”) for liability stemming from payroll taxes? Assuming the answer is ‘yes’, do they use the same criteria as is used income tax liability? Also is an OIC stemming from payroll tax as likely to be accepted? 2017-04-11T22:23:03+00:00

Yes, the IRS accepts Offers in Compromise stemming from payroll tax liability. Yes they use the same criteria assuming the offer is based upon doubt as to collectability. The likelihood of an offer being accepted is not determined by the source of the liability unless issues such as fraud are involved.

Assuming the Trust Fund Recovery Penalty (“TFRP”) has not yet been assessed, are outstanding payroll taxes able to be negotiated as part of an installment agreement? 2017-04-11T22:23:03+00:00

The answer is yes assuming the business is still in operation. You would negotiate an installment agreement on behalf of the business entity and ask for the individuals to be excluded under IRS IRM “Status 63″. If the business entity is no longer operating your client would be best served waiting for the personal assessments to occur. In this latter instance your client may have to make interim voluntary payments.

A client of mine had a person (President) in charge of payroll who did not pay taxes and my client was subsequently charged the trust fund penalty. The employee portions have since been paid and the President has since left the company. Who is responsible? 2017-04-11T22:23:03+00:00

The company (if it is still operating) is responsible. Beyond that it depends on who was considered a “Responsible Person” via a 4180 interview. If the IRS knew that the president (who since left) made the decision not to pay the tax, he or should would likely be held responsible. In addition, unless they were able to prove that they were not responsible and had no way of knowing the taxes were not being paid, the Shareholders/Owners of the company as well as the signatories on the bank signature card would be considered and most likely be held responsible. It is important to vigorously defend your client in a 4180 interview if you believe they should not be held responsible.

How does the 10 year collection statute work on the trust fund penalty? 2016-05-13T14:48:50+00:00

The 10-year statute of limitations on collection applies to an individual’s Civil Penalty stemming from the Trust Fund Recovery Penalty (“TFRP”) in the same manner as it does for income taxes. Keep in mind that the IRS can “passively” collect beyond the statute if they filed a perfected tax lien.

Is Status 63 good for all tax issues or just payroll taxes? 2016-05-13T14:48:29+00:00

Status 63 refers to requesting that the IRS not collect the Trust Fund (Civil Penalty) portion of payroll tax liability from the “Responsible Persons” when they have entered into an installment agreement with the Company. This is applicable for payroll taxes but I would not hesitate to ask for it in other cases (such as business entity income taxes) as many IRS representatives are not familiar with this IRM procedure.

The Revenue Officer assigned to my client’s case claims he has documentation he will use to assess my client as a “Responsible Person”. I have requested copies of the documentation but thus far he is unwilling or is at least stalling in sending me copies. How can I compel the IRS representative to send this information to me? 2017-04-11T22:23:03+00:00

Typically the Revenue Officer will make his or her decision based upon information provided at a 4180 interview. Other evidence may include a bank signature card or paychecks with your client’s signature on the signatory line. This could have been provided by your client or another person that worked for the company for which your Client worked. Once the assessment becomes final, you should be sent paperwork stating on what basis your client was assessed. If you disagree, you have 60 days to appeal the assessment.

If Trust Fund Recovery Penalty (“TFRP”) is assessed to a previous president and there is doubt as to whether he was a responsible person and willful; and the Corporation recently filed for bankruptcy, what should be done? 2017-04-11T22:23:03+00:00

If the TFRP was assessed to the previous president he most likely received correspondence from the IRS requesting a 4180 interview to determine if he was responsible for not paying the payroll taxes and the IRS determined he was responsible. Either the past president ignored or did not receive the notice (we have a current client with this issue) or he appeared at the interview and was deemed responsible. In either case he can appeal the TFRP assessment up to 60 days at which time the assessment becomes final. Assuming you are representing the past president, you can resolve his issues either by entering him into an installment agreement or submitting an offer in compromise. If you have evidence that he should not have been responsible, you can submit an offer in compromise doubt as to liability (which we are submitting with the client mentioned above). With regard to the bankruptcy, it will have no affect on the TFRP assessment. I does however remove a source to collect the Trust Fund portion of the liability that the past president is now responsible for paying. If the company is out of business it also eliminates the ability to request Status 63.

How does the 10 year collection statute work on the trust fund penalty? 2016-05-13T14:46:40+00:00

The 10-year statute of limitations on collection applies to an individual’s Civil Penalty stemming from the Trust Fund Recovery Penalty (“TFRP”) in the same manner as it does for income taxes. Keep in mind that the IRS can “passively” collect beyond the statute if they filed a perfected tax lien.

If Trust Fund Recovery Penalty (“TFRP”) is assessed to a previous president and there is doubt as to whether he was a responsible person and willful; and the Corporation recently filed for bankruptcy, what should be done? 2017-04-11T22:23:03+00:00

If the TFRP was assessed to the previous president he most likely received correspondence from the IRS requesting a 4180 interview to determine if he was responsible for not paying the payroll taxes and the IRS determined he was responsible. Either the past president ignored or did not receive the notice (we have a current client with this issue) or he appeared at the interview and was deemed responsible. In either case he can appeal the TFRP assessment up to 60 days at which time the assessment becomes final. Assuming you are representing the past president, you can resolve his issues either by entering him into an installment agreement or submitting an offer in compromise. If you have evidence that he should not have been responsible, you can submit an offer in compromise doubt as to liability (which we are submitting with the client mentioned above). With regard to the bankruptcy, it will have no affect on the TFRP assessment. I does however remove a source to collect the Trust Fund portion of the liability that the past president is now responsible for paying. If the company is out of business it also eliminates the ability to request Status 63.

Do you include upcoming Obamacare/HCA penalties and/or Health Insurance cost for MDI? 2016-05-13T14:45:50+00:00

Health insurance premiums are allowable and should be included in both installment agreements and offers in compromise. As for the ACA penalties, I would include them and see if the IRS fights you on this. It remains to be seen whether they will allow the expense or not.

How should I advise and represent a client who came to me and indicated that he has an offshore account, did not report on any tax returns and did not file FBAR reports? Right now I am referring these people to an attorney, but would like to represent them myself if possible. How does amnesty work right now and how much of a penalty must be paid? 2017-04-11T22:23:03+00:00

The IRS currently is offering the Offshore Voluntary Disclosure Program (“OVDP”) that began in January 2012. However, the IRS has reserved the right to end the program at any time. For that reason, we urge you to review the IRS OVDP page (see http://www.irs.gov/uac/2012-Offshore-Voluntary-Disclosure-Program) as well as the Frequently Asked Questions page (see http://www.irs.gov/Individuals/International-Taxpayers/Offshore-Voluntary-Disclosure-Program-Frequently-Asked-Questions-and-Answers-2012-Revised), and review the pages to determine whether or not you are comfortable in dealing with the requirements/issues noted on the IRS website. The potential penalties are substantial and will ultimately depend on each taxpayer’s specific circumstances. We can say from experience that the issues involved in reporting foreign activities are often highly technical. Bottom line, it is definitely possible to represent clients, but unless you are very familiar with areas such as Controlled Foreign Corporations, Passive Foreign Investment Companies, Source of Income (i.e., foreign vs. US), Foreign Currency gain/loss characterization, and the like, it is probably best to seek qualified outside help.

We didn’t cover anything with penalty abatement today (not that I was expecting it according to the agenda) and I wanted to see if you offered any suggestions on penalty abatement for late filing. I have a client that had five years of 1120S returns (single shareholder) that needed to be filed recently to get him back into compliance. Beyond the obvious, is there something out there that can be applied to help abate the late filing penalties for S-Corps? I know about “reasonable cause”, but the client doesn’t really have a good reason for not filing. Obviously Rev Proc 84-35 does not apply from what I understand because this is not a partnership. We discussed dissolving the company and starting over to make the penalties go away, but I do not want to participate in something to be considered as fraud. The business is small only shows a profit of $15K to $30K over the five years so the penalties are pretty tough in comparison to the income (around $10K or so over the five years). Any suggestions outside of the obvious are definitely appreciated. Thank you. 2016-05-13T14:44:50+00:00

In terms of requesting abatement of penalties for non-filing for 5 consecutive years is an uphill battle and other than “dumb luck” the request will be denied. In and of itself starting over is not committing fraud but without having all of the details I cannot provide guidance in this case. Keep in mind that the shareholders of the S-corp will be assessed penalties individually which will not disappear if the corporation is dissolved.

Is it possible to have penalties removed? 2016-05-13T14:44:27+00:00

Yes. There are various reasons used to request abatement for reasonable cause but the most commonly accepted method is to request a First Time Penalty Abatement (“FTPA”) based upon IRS rules.

If using national standards shows that a taxpayer’s monthly disposable income (“MDI”) is zero, can an offer in compromise be submitted if the offer is made using money gifted from family and friends? 2016-05-13T14:43:54+00:00

Yes and no. Yes the taxpayer can obtain the funds from family or friends. When we submit an offer, we usually state that the money being used to pay the offer was borrowed from family friends, and not gifted. This information is entered in the section on the form where the IRS asks for the source of funds.

If your actual housing and utility expense is lower than the IRS standard can you still use the higher IRS standard? 2016-05-13T14:43:32+00:00

The IRS allows the lower of actual vs IRS standard for housing and utility expense . If you do not have substantiation to justify the maximum, you may be request that the standard be used but our success rate attempting this has been very limited.

What standards do you use if taxpayer lives outside of the United States? 2016-05-13T14:41:36+00:00

There are no international standards. The IRS IRM states “…standards are not available for international taxpayers or the U.S. Territories, except for housing and utilities in Puerto Rico. In the absence of standardized figures for foreign countries, a fair and consistent approach should be applied to what is allowed as living expenses for international taxpayers.” When possible, it may make sense to use a “high rent” area such as Los Angeles or New York and make the argument that the taxpayer is paying comparable or higher amounts overseas.

Is additional income recognized when all or part of one’s tax liability is forgiven? 2016-05-13T14:41:11+00:00

In terms of cancellation of debt (“COD”) income the answer is no. But if the terms of an offer in compromise are not fully met (including staying in compliance for a 5-year period subsequent to the offer) the balance of the compromised liability will be reinstated.

How do you determine the fees you charge to prepare an installment agreement or an Offer in Compromise? 2017-04-11T22:23:03+00:00

Typically our fees are based upon our standard hourly rates. Keep in mind that it may be difficult to extract information from tax resolution clients so charging on a fixed fee basis may be risky. Streamlined installment agreements typically begin at around $1,800 and offers may be over $10,000 depending on their complexity.

Does the IRS determine allowable expenses on a monthly basis? 2016-05-13T14:38:22+00:00

Yes

Does the IRS consider the taxpayer’s ability to pay as of the time they are contacted to negotiate or their ability to pay in the future? 2016-05-13T14:28:27+00:00

The answer to this question is both. The IRS will allow an installment payment amount based upon the taxpayer’s current ability to pay. If the taxpayers financial picture indicate he or she will have the opportunity to earn more going forward, the IRS will revisit the installment agreement payment amount in the future. If the taxpayer is submitting an Offer in Compromise, the IRS may require a higher offer amount or require a collateral agreement with respect to the taxpayer’s earnings that is tied to the offer.

Can you include Social Security and Medicare withholding reflected in one’s paycheck as an allowable expense toward current taxes being paid? 2016-05-13T14:27:43+00:00

Yes. Both Social Security and Medicare withholding are allowed.

Are there situations where the IRS would accept greater than the national and local standard or is this a hard maximum that they will not budge upon? 2016-05-13T14:24:24+00:00

For purposes of an installment agreement, the IRS will often allow higher than their standards. For an Offer in Compromise there are situations where the standards may be exceeded. They typically will allow higher than the out-of-pocket medical expense allowance if the higher amount can be substantiated. Be prepared to make the argument that there is a reason for exceeding the standards as it will be questioned. Also, put a letter with the offer so that it is not returned as non-processable.

A husband and wife are currently in an installment agreement. The husband lost his job and the wife was told she has liver cancer. They filed bankruptcy in 2012. Is there a chance to avoid paying the back taxes they owe? The amount owed is currently $24,000 stemming from liabilities from 2010 and before. 2016-05-13T14:24:03+00:00

Assuming the couple has few assets or can liquidate their assets to make a partial payment, it makes sense for the couple to submit an Offer in Compromise. Based upon the information given, the couple has little or no income which will bode well to having an offer accepted will allow them to pay substantially less than the full amount owed.

Does submitting a request for an installment agreement legally ‘fix’ the taxpayer’s liability owed or can the liability later be argued? 2016-05-24T10:41:53+00:00
The tax liability can be “argued” or more appropriately collected upon as long as the statute of limitations on collection (10 years for the IRS) is still open. If the amount of the installment payment is less than necessary to full-pay the liability over the collection statute (known as claiming “hardship”), the IRS will most like revisit the taxpayer’s ability to pay via a collection information statement every 1-2 years.
If on the other hand, an Offer in Compromise is accepted and the taxpayer remains in compliance for 5 years following the offer, the liability is considered paid in full.
The are a few exceptions to these rules including a collateral agreement in which the taxpayer may have to pay more if they have the potential to earn substantially more and meet certain thresholds.
With regard to an Offer in Compromise, does the client have to pay the full amount if it is accepted by the IRS? 2017-04-11T22:23:04+00:00

Absolutely. When you submit an offer on behalf of a client you specify how the client will pay. A lump sum offer must be paid within 5 months of acceptance of the offer.

Why would the IRS accept an Offer in Compromise (“OIC”) based upon 12 months disposable income payments and not what you could pay over 5 or 10 years? 2016-05-13T14:22:43+00:00

This is a good question. The answer is that the taxpayer has to be in a difficult situation that warrants accepting a relatively low amount. If the taxpayer has a large portion of the statute on collection remaining or appears to be able to earn substantially over the remaining term of the statute, the offer will probably rejected. The best candidates are older, sick or dying, and living on social security. That being said, there are numerous other circumstances that warrant submitting an offer.

Must a taxpayer be current on all income tax returns before filing an Offer in Compromise (“OIC”) covering prior year returns? 2016-05-13T14:22:17+00:00

Yes. An offer will not be considered unless the taxpayer is in current compliance. This includes filing all tax returns to date and being current with the current year tax payments

If my client is a self-employed individual that has no assets and zero disposable income, can I submit a $0 Offer in Compromise (“OIC”)? 2016-05-13T14:21:55+00:00

Usually a taxpayer has at least a few assets (i.e. furniture, auto, etc.). In cases where a $0 offer may be warranted we opt to submit a very low dollar offer (i.e. $500-$1000).

I have a client that mentioned they were part of the fresh start program. Are they still eligible for an Offer in Compromise (“OIC”)? 2016-05-13T14:21:31+00:00

Yes. Officially the “Fresh Start” program has ended but most of the changes implemented during the program still exist including relaxed rules necessary to qualify for an OIC.

How did you compute the amount to pay on an Offer in Compromise? 2016-05-13T14:19:29+00:00

The offer amount is calculated by multiplying 12 times the taxpayer’s monthly disposable income (“MDI” – take-home pay minus necessary and reasonable living expenses per IRS National and Local Standards) plus the quick-sale value of the taxpayer’s assets.

Due to the 2-year timeline prescribed to deem an Offer in Compromise accepted or rejected, is it necessary to get the applicant into Currently-Non-Collectable (“CNC”) status during the process? 2016-05-13T14:19:04+00:00

This is not necessary because a pending offer tolls (freezes) collection. However, you may want to contact the Revenue Officer assigned to the case (or Automated Collections ACS) and notify them that an offer has been submitted and ask that a hold be placed on collection activity until the offer is deemed processable.

Does the Offer in Compromise (“OIC”) program apply to business clients as well as individuals? 2017-04-11T22:23:04+00:00

Yes an OIC can apply to a business client but “in-business” offers are very hard to get accepted. There are usually more effective ways to deal with business clients.

Do you work on for a fixed fee or do you charge by the hour to prepare an Offer in Compromise (“OIC”)? 2016-05-13T14:13:36+00:00

We very rarely work for a fixed fee when preparing an OIC and when we do so we are very specific about the limitations described in our scope of work.

Do you prepare your Offers in Compromises manually or do you use a software program? 2016-05-13T14:10:46+00:00

We do not use preparation software for offers. Each offer has intricacies that will be overlooked if using “out-of-the-box” software.

Can you offer any tips for getting the IRS to allow additional collection standard expenses for a child not claimed as a dependent on a tax return but living 100% of the time in the household? In my client’s case child support is reported as income for purposes of their Offer in Compromise (“OIC”) but living expenses (i.e. food, housing, out of pocket medical) are not allowed for the child unless he or she is claimed as a dependent. According the divorce agreement, the non custodial parent is allowed the tax exemption. The custodial parent is the one with the tax issue. 2017-04-11T22:23:04+00:00

As you mention the IRS will allow the expenses for the client’s child if they are claimed as a dependent on the client’s tax return and will typically not if the child is claimed as someone else’s dependent. If this were my client I would have my client see if the ex-spouse would allow the child to be claimed on the client’s return until the offer is pending (the client could reimburse the spouse for any tax savings he or she is foregoing). If the spouse is unwilling I would still include the child in the offer and use receipts, etc. to argue the point.

Can a married taxpayer file an Offer in Compromise (“OIC”) without including their spouse assuming their spouse has separate assets? 2016-05-13T14:09:59+00:00

Yes. Typically the spouse’s separate assets do not count toward the offer but the combined household income would for purposes of preparing the 433A-OIC.

Are the TV ads claiming you can “settle $1 million for $5,000 legitimate? 2016-05-13T14:08:57+00:00

Those commercials are suspect but we have settled liabilities for over $4 million for less than $5,000 and many lesser amounts using the IRS Offer in Compromise program.

When submitting an Offer in Compromise do you need to submit both a Form 656 and a Form 433-A OIC? 2016-05-13T14:08:23+00:00

Yes. One is a worksheet (Form 433-A OIC) and the other (Form 656) is the offer application

Can an Offer in Compromise be submitted to remove payroll tax liability? 2016-05-13T14:07:49+00:00

Yes. Either the company can submit an in-business Offer in Compromise if they remain in business (these are difficult to get accepted) or the individual/s assessed Civil Penalty stemming from the unpaid payroll taxes may submit individual offers.

As a registered tax return preparer (“RTRP”) and not a CPA, am I allowed to submit a OIC? 2016-05-13T14:07:04+00:00

RTRP’s are not authorized to represent taxpayers (see IRS IRM Section 5.8.3.18 “…Individuals who are not authorized to practice before the IRS with respect to a collection matter (such as unenrolled return preparers and registered tax return preparers) may accompany taxpayers to meetings with a completed Form 8821…”) however they can accompany taxpayers to meetings if they have completed an IRS form 8821.

For an offer in compromise in which the taxpayers are married but file separately and have all their assets separate (for instance the house and cars are not in both names), should I include all household income and assets in the offer? Can some or all of the income and assets be separated out? 2016-05-13T14:06:43+00:00

This depends on who is liable for the unpaid tax included in the offer. Assuming that only one spouse is liable such as in a liability that stems from unpaid taxes prior to marriage or the assessment Trust Fund Recover Penalty (“TFRP”), you would combine income if the taxpayers’ income pays for joint expenses and exclude the non-liable spouses assets if they are separate property or 1/2 of the joint assets if you are in one of the 9 community property States.

Can you provide formula of what makes up an offer in compromise amount? 2016-05-13T14:06:18+00:00

The most commonly used formula is 12 times monthly disposable income plus quick sale value of assets. For alternatives, overviews and detailed case study refer to our textbook The Ultimate Guide to Tax Resolution.

If a taxpayer files for bankruptcy while their OIC is under consideration, does that nullify the OIC application? 2016-05-13T14:05:58+00:00

Yes. No offer will be accepted if the taxpayer files for or is already in bankruptcy proceedings when their offer has been submitted and is under consideration.

Can you appeal a rejected appeal of an Offer In Compromise? 2016-05-13T14:05:34+00:00

Yes. See: If you submitted an appeal of an Offer In Compromise and it gets rejected where do you go?

If you submitted an appeal of an Offer In Compromise and it gets rejected where do you go? 2017-04-11T22:23:04+00:00

Assuming your client’s offer in compromise was rejected by the IRS Offer Specialist assigned to their case, you have a few options as follows moving up the chain in seniority. You can appeal to the Specialist’s direct supervisor, the Group Manager. If you are unsuccessful you can request to argue your position to the Group Manager’s supervisor who is typically a Settlement Officer. If necessary you can also reach out to IRS counsel. Keep in mind that to appeal at any level takes a significant amount of time and resources. If you plan on doing so make sure you are VERY confident that you have a strong argument to support your client’s position. Otherwise the path of least resistance and maybe the better choice may be to enter into a low-dollar installment agreement or placing your client into Currently-Non-Collectable (“CNC”) status and let the statute of limitations on collection run out. In the case of income taxes, bankruptcy may be an option.

If using national standards shows that a taxpayer’s monthly disposable income (“MDI”) is zero, can an offer in compromise be submitted if the offer is made using money gifted from family and friends? 2016-05-13T14:04:28+00:00

Yes and no. Yes the taxpayer can obtain the funds from family or friends. When we submit an offer, we usually state that the money being used to pay the offer was borrowed from family friends, and not gifted. This information is entered in the section on the form where the IRS asks for the source of funds.

What percentage of offers in compromise are accepted compared to offers in comprise submitted for the clients of the speaker. All of this sounds good, but is the success rate at least 50% or more? 2017-04-11T22:23:04+00:00

Since we carefully analyze the applicant’s numbers before submitting an offer, our acceptance rate is higher than 90%. Keep in mind that vetting offers very closely yields this high percentage. In addition we are aggressive in the appeals process when it becomes necessary. Luckily this is not very often. We find that most offers are negotiated prior to acceptance. That is, the IRS usually counter offers with a number higher than our initial requested amount. The IRS’s counter-offer is usually reasonable and is in turn accepted by our client.

Is the IRS 10-year statute of limitations for collection on hold while OIC is under consideration? 2016-05-13T14:03:39+00:00

Yes. The statute tolls (freezes) for the time the offer is under consideration plus 180 days plus 30 days for the rejection appeal period (IRM 5.1.19.3 (01-01-2006)).

For an offer in compromise submitted by self-employed stockbroker, will the IRS include the value of his book of business? 2016-05-13T14:03:09+00:00

Assuming the stockbroker is conducting his business on a cash basis, the IRS will most likely not look into the value of his or her book of business directly, however; they may consider the value with respect to the ability to earn going forward. The argument against considering the “value” of the book might be that the IRS cannot value a service business having little or no assets when the source of the taxpayer’s income is the service business and was used to calculate monthly disposable income (“MDI”).

Please clarify whether the 20% offer payment submitted with the filing of the OIC is refundable. 2016-05-13T14:02:10+00:00

The 20% deposit you include with an offer in compromise submission is not refundable. The deposit will be applied to prior year taxes, penalties and interest if the offer is rejected.

Isn’t an Offer in Compromise “always” a better choice? 2017-04-11T22:23:04+00:00

An offer in compromise may seem like the “obvious” choice but this is not always the case. Assuming the client qualifies for an offer there are still other questions that must be answered before deciding to proceed. One is “Does the prize justify the price?” Offers are expensive to prepare when compared to the costs of preparing an installment agreement. If the taxpayer is nearing the end of the collection statute, it may make more sense to enter them into Currently Non Collectable (“CNC”) status, a low dollar installment agreement or a partial pay installment agreement in lieu of an offer.

What is the premise of value used for the business when making an offer in compromise? 2016-05-13T14:01:03+00:00

This area is always a “sticking point”. The only thing the IRS will accept is an appraisal from an independent appraiser using IRS methodology. This is same methodology used by estate planning appraisers. Read…expensive.

If an OIC is being submitted both on behalf of an individual and their related business entity (in this case an S-Corporation), does the taxpayer need to file two forms 656 or will one do? 2016-05-13T14:00:35+00:00

Assuming the corporation is still in business, two separate offers in compromise must be submitted. Keep in mind that it is difficult to have an in-business offer accepted. If the corporation is closed and all necessary paperwork has been filed, a business offer is most often not necessary and only one 656 will need to be prepared.

What standards do you use if taxpayer lives outside of the United States? 2016-05-13T13:59:59+00:00

There are no international standards. The IRS IRM states “…standards are not available for international taxpayers or the U.S. Territories, except for housing and utilities in Puerto Rico. In the absence of standardized figures for foreign countries, a fair and consistent approach should be applied to what is allowed as living expenses for international taxpayers.” When possible, it may make sense to use a “high rent” area such as Los Angeles or New York and make the argument that the taxpayer is paying comparable or higher amounts overseas.

Is additional income recognized when all or part of one’s tax liability is forgiven? 2016-05-13T13:59:36+00:00

In terms of cancellation of debt (“COD”) income the answer is no. But if the terms of an offer in compromise are not fully met (including staying in compliance for a 5-year period subsequent to the offer) the balance of the compromised liability will be reinstated.

How do you determine the fees you charge to prepare an installment agreement or an Offer in Compromise? 2017-04-11T22:23:04+00:00

Typically our fees are based upon our standard hourly rates. Keep in mind that it may be difficult to extract information from tax resolution clients so charging on a fixed fee basis may be risky. Streamlined installment agreements typically begin at around $1,800 and offers may be over $10,000 depending on their complexity.

Does the IRS determine allowable expenses on a monthly basis? 2016-05-13T13:58:42+00:00

Yes

Does the IRS consider the taxpayer’s ability to pay as of the time they are contacted to negotiate or their ability to pay in the future? 2016-05-13T13:58:12+00:00

The answer to this question is both. The IRS will allow an installment payment amount based upon the taxpayer’s current ability to pay. If the taxpayers financial picture indicate he or she will have the opportunity to earn more going forward, the IRS will revisit the installment agreement payment amount in the future. If the taxpayer is submitting an Offer in Compromise, the IRS may require a higher offer amount or require a collateral agreement with respect to the taxpayer’s earnings that is tied to the offer.

Can you include Social Security and Medicare withholding reflected in one’s paycheck as an allowable expense toward current taxes being paid? 2016-05-13T13:57:52+00:00

Yes. Both Social Security and Medicare withholding are allowed.

Are there situations where the IRS would accept greater than the national and local standard or is this a hard maximum that they will not budge upon? 2016-05-13T13:57:01+00:00

For purposes of an installment agreement, the IRS will often allow higher than their standards. For an Offer in Compromise there are situations where the standards may be exceeded. They typically will allow higher than the out-of-pocket medical expense allowance if the higher amount can be substantiated. Be prepared to make the argument that there is a reason for exceeding the standards as it will be questioned. Also, put a letter with the offer so that it is not returned as non-processable.

Can a bankruptcy filing discharge taxes encompassed within an installment agreement if date requirements met? 2016-05-13T13:56:10+00:00

Yes. A husband and wife are currently in an installment agreement. The husband lost his job and the wife was told she has liver cancer. They filed bankruptcy in 2012. Is there a chance to avoid paying the back taxes they owe? The amount owed is currently $24,000 stemming from liabilities from 2010 and before.
Assuming the couple has few assets or can liquidate their assets to make a partial payment, it makes sense for the couple to submit an Offer in Compromise. Based upon the information given, the couple has little or no income which will bode well to having an offer accepted will allow them to pay substantially less than the full amount owed.

There was just a case stating that an installment agreement tolls the statute of limitations on collection. Please discuss. 2016-05-13T13:54:52+00:00

This is not correct. The outcome of the case found that if a hold on collection is placed while an installment agreement request is pending, that time will be added to the 10-year statute. A few articles were written stating that an installment agreement tolls the statute but they were misspoken.

Should an IRS Form 433-A (Collection Information Statement) and an IRS Form 9465 (Request for Installment Agreement) be filed together? 2017-04-11T22:23:04+00:00

To be clear, the forms referenced in this question are submitted as part of a request for an installment agreement and not officially “filed”. Typically you complete an IRS Form 433-A when your client’s case has been assigned to a Revenue Officer (“RO”). In most of these cases you will negotiate directly with the RO and they will not require a 9465. A 9465 is more often used when requesting a streamlined installment agreement. That being said, the 9465 is a simple form to complete and therefore there is no harm in having it ready. You should also, prior to contacting the RO complete an IRS Form 433-D (Installment Agreement form) setting up automatic payments assuming you come to an agreement with the IRS. This may save an extra call which can take save you time and your client from paying additional fees.

If taxpayer has no personal bank account but is a sole shareholder in an S-Corporation, would the taxpayer be required to list the Corporate bank account/s? 2016-05-13T13:53:54+00:00

The taxpayer is a shareholder in the corporation they will likely need to provide business information via IRS Form 433-B. In said form, the taxpayer will be required to list bank account information.

I know Currently-Non-Collectable (“CNC”) status is a solution for income tax liability, but does it also apply to payroll tax liabilities? 2016-05-13T13:53:28+00:00

Yes. CNC status may be obtained by a business and/or individual with liability stemming from payroll taxes.

I have a client who submitted a streamlined installment agreement to the IRS which was rejected on the basis that the IRS felt she could afford to full-pay the full $2,700 she owed. What can be done in this type of situation where the client does not have the money to full-their liability? 2017-04-11T22:23:04+00:00

If your client owes $2,700 chances are she is assigned to automated collections. Unless she is a “repeat offender” the IRS should have no issue entering her into a streamlined installment agreement. I would hang up the phone and call back to speak with someone else. That being said it will take some time to do either a streamlined installment agreement or a hardship installment agreement. Based upon the low amount owing, if you take this case and need to claim hardship (or even a streamlined installment agreement), you will most likely be working for very little money.

How do you change the amount your client is paying on an existing installment agreement? 2017-04-11T22:23:04+00:00

You should contact the IRS (either Automated Collections or the Revenue Officer assigned to your client’s case depending on the circumstances) and submit a revised 433A or 433F. Be sure to explain the change in circumstances justifying the submission of the revised form or explain how and why the form was completed incorrectly on the first attempt.

Does the time a person is in an installment agreement with the IRS toll the collection statute? 2016-05-13T13:50:11+00:00

An installment agreement does not toll the collection statute.

Does the IRS consider a taxpayer’s assets when negotiating an installment agreement? 2016-05-13T13:49:45+00:00

The IRS typically does not include the value of assets when determining an installment agreement payment amount. However, if the taxpayer has substantial assets the IRS may require they be liquidated to pay down the liability which if not done may affect whether a requested installment payment amount is accepted.

Are concurrent installment agreements permissible for more than one tax year? 2016-05-13T13:49:17+00:00

No. An installment agreement can encompass several years but if new years or newly discovered liabilities become evident, a new single installment agreement covering all items must be created.

Who should I call at the IRS to request a streamlined installment agreement? 2016-05-13T13:48:45+00:00

You should call the IRS practitioner Priority Line (“PPL”) at (866) 860-4259. Be sure to have an Installment Agreement Request (IRS form 9465) completed before you call. This will increase the chance of completing the request quickly.

If a client is deemed noncollectable, will the issue be revisited at a later date by IRS? 2017-04-11T22:23:04+00:00

If a client is deemed to be noncollectable (CNC status) it will usually be revisited within 2 years.

What are the effects on a taxpayer of a 1099-C issued by IRS and what remedies are allowed? 2016-05-13T13:47:18+00:00

The answer to this question depends on the circumstances. There are options allowing a taxpayer to exclude the cancellation of debt (“COD”) income including proof that the taxpayer was insolvent at the time the debt was cancelled but it needs to be looked at on a case-by-case basis. If the COD income cannot be excluded, you can resolve the taxpayer’s issues by entering them into an installment agreement or Offer in Compromise.

How do you notify the IRS when their 10-year statute of limitations on collection has passed? 2016-05-13T13:46:59+00:00

Typically you do not. If you think the statute has run or is close to running, you should obtain the taxpayer’s transcripts to verify that collection activity should cease. If the IRS continues to collect, you should contact them via the IRS Practitioner Priority Line (“PPL”) at (866) 860-4259 and discuss the issue. There may be something extending the statute such as a waiver signed by the taxpayer. Otherwise your notice should cease collections.

How do you determine equity in house? 2016-05-13T13:46:27+00:00

You would use the appraised value less mortgage/s owed for installment agreements and 80% of appraised value less mortgage/s owed for offers in compromise. You can most often use an online website such as Zillow to find the appraised value.

How do you address a tax matter in which married spouses file separately? In this case they both owe back taxes from returns filed separately; however, assets held jointly. 2016-05-13T13:45:58+00:00

This is an interesting question and as is often the case, there is more than one answer. If the spouses reside in the same residence you typically will include their income, expense, asset and liability information together on one form. If they reside at different locations you should weigh the benefits and downsides to claiming two sets of expenses. The issue here is proving that they need to live at two different locations. If this can be done it may substantially increase the expense to income ratio. More often than not however you will combine the MFS information for collection purposes.

Is there anywhere we can go to find reasonable expense ratios by industry? 2016-05-13T13:45:18+00:00

As far as we are aware there is nothing provided in this arena directly from the taxing agencies. You can always do an internet search and find information but the results may vary and may not be reliable.

Please clarify the concept of “Tolling the Statute” with regard to installment agreements and offers in compromise. 2016-05-13T13:44:46+00:00

An offer in compromise tolls (“freezes”) the IRS 10-year statute of limitations on collection (see Is the IRS 10-year statute of limitations for collection on hold while OIC is under consideration?) Items relating to a installment agreement (“IA”) such as the period an IA is under consideration if a hold on collection has been issued may toll the statute, but an installment agreement in and of itself does not.

Do you include upcoming Obamacare/HCA penalties and/or Health Insurance cost for Monthly Disposable Income (“MDI”)? 2016-05-13T13:44:24+00:00

Health insurance premiums are allowable and should be included in both installment agreements and offers in compromise. As for the Affordable Care Act (“ACA”) penalties, I would include them and see if the IRS fights you on this. It remains to be seen whether they will allow the expense or not.

Where do you have the revenue officer transfer a client’s case to buy time? 2017-04-11T22:23:04+00:00

It is our preference to have a Revenue Officer handling a client’s case as opposed to automated collections. When possible we request that a client’s case be transferred to local Revenue Officer. We also ask for this when a client’s case has been assigned to a Revenue Officer that is not geographically desirable. What I mean by this is I would rather have a Revenue Officer in New York or Los Angeles as the standards of living are much higher in these areas as compared to say, the Midwest. This typically equate to larger allowances for living expenses. And yes, transferring a case to a local Revenue Officer typically allows additional time to pass before the case is made active again.

Should I get the client to sign the Collection Information Statement (IRS form 433F) before contacting IRS? 2017-04-11T22:23:04+00:00

Yes. In many instances the IRS representative (assuming the taxpayer is in automated collections) will take the information over the phone. In those instances it is not necessary but if they request that the form be faxed over or mailed in, a signature is required. And better be safe than cause delays in reaching a resolution. If you are submitting a 433A or 433B on behalf of a client, their case has usually been assigned to a Revenue Officer and the RO will request that the information be sent to them which requires a signature.

Does Currently Non-Collectable (“CNC”) status just suspend any collection action until some future time at which the IRS requests updated financials (via a form 433)? 2016-05-13T13:42:52+00:00

Yes, CNC status typically lasts up to 2 years at which time the IRS may ask for updated financials. Sometimes the time period is less and sometimes the IRS does not follow up. The latter is a rare occurrence.

If I am preparing a tax return to replace an IRS substitute for return (“SFR”) will my new returns automatically be accepted? Is there a special process to submit these types of tax returns? Do they need to be marked in a special manner? 2016-05-13T13:41:35+00:00

Like any other type of tax return replacements for SFR’s are not automatically accepted but assuming they were prepared properly, you should not have any issues. These types of returns do not have to be “marked” in any special way but they should be mailed to the IRS SFR Unit and not the standard mailing address.

When I obtain a new client, I complete an IRS Power of Attorney (form 2848) so I can obtain a record of their account and if applicable obtain their reported wage and income information. I am not sure which years to put on the 2848 to determine what they owe and which years are unfiled. 2017-04-11T22:23:04+00:00

To be safe, you should span more years than you think are necessary. For example if your client states they are unfiled or owe from 2006, you should begin earlier and span to at least a year past the current year. For example in this case you may put 2003 through 2016 on the form. This would cover everything that is still within the 10 year statute and a few additional years in case there are unfiled returns or new issues arise in the future.

How do you prepare tax returns without direct proof of expenses? 2017-04-11T22:23:04+00:00

There are various ways to do this. The best way without having actual invoices and statements is to recreate a client’s books from bank and credit card statements. In today’s technical age most of the transactions on these statements list the payee as well as the amount and date of transaction. In addition it is fairly easy to request copies of checks from the bank. Assuming you have a cooperative client, this can be a relatively painless process.

My client is a delinquent taxpayer with 10 years of unfiled tax returns. If I advise them to file less than all 10 years delinquent tax returns will doing so create an ethical and/or malpractice liability issue for us and what is our exposure to Criminal Investigation (“CI”)? 2017-04-11T22:23:04+00:00

I do not think that advising your client to prepare only a portion of unfiled tax returns creates any additional exposure to you as a preparer. It certainly should not cause exposure to the IRS CI. The fact is that there is no statute of limitations for someone who has not filed. Would you consider going back 20 or 30 years and if so would you be able to obtain accurate information to do so?

Would you amend a tax return to use the 240 day rule? 2017-04-11T22:23:04+00:00

To amend a return adds 240 ADDITIONAL days to the waiting period necessary to include tax liability in a bankruptcy so it would not make sense to amend a return for that reason. However, if your client had an IRS return audited and additional tax was assessed, you will probably want to amend the State return to include the additional State liability that will be assessed in the items that will be discharged. In either case you will have to wait at least 240 days from the date of assessment of the IRS audit to include the newly assessed IRS tax liability.

How do you respond to IRS when they want client to extend the statute of limitations period? 2017-04-11T22:23:04+00:00

If you are referring to the collection statute we instruct our clients not to sign a waiver. If you are talking about audit and not collections. Typically you do not have a lot of choice in the matter. If you do not extend the assessment period the IRS will disallow the deductions in question and issue a 30 day letter.

I am an EA and a bookkeeper. I categorize expenses as a bookkeeper for one of my clients. I do not and will not prepare her taxes. She owns 30 rental properties and has instructed me to include some expenses that I know are not allowable tax deductions. She also does not capitalize certain expenses as should be the case but rather expenses them in the period in which they were incurred. I have brought these errors to her attention. From what I know (I do not have access to review her prior years tax returns), her tax liability is zero every year. Am I culpable for including inappropriate expenses on reports I send to her tax preparer? Can I, as the bookkeeper following my client’s instructions, be held accountable? 2017-04-11T22:23:04+00:00

This is a tough question to answer. You are an enrolled agent so you are trained to “know better”. That may be the real issue here. As you already know the ultimate responsibility is on the taxpayer. You should at the very least indicate in writing to the preparer and copy the client that you are unsure of the categorizations of the expenses in question and indicate that you have brought this to the attention of the taxpayer. The preparer should review the issues with the client. A more practical concern over the direct action the taxing agency may take, is the issue that may arise with the client if and when she gets audited; resulting in additional assessments and is looking for someone to blame. In short, it does not seem worth your exposure to liability from any source when compared to the amount of profit you can generate from the bookkeeping work.

A taxpayer knows that they owe 5-years back taxes stemming in part from an audit of three of the 5 years. The balance owing is high and every subsequent year’s tax refund is hold due to the balances owing. The taxpayers are in financial hardship and have not received correspondence indicating final assessments or collection letters of any type. Do they need to wait for some type of notification prior to proceeding with the submission of an offer in compromise or can they proceed now? 2016-05-13T13:37:51+00:00

If the original tax amounts as well as the FINAL tax audit assessments have posted the taxpayer can proceed with the submission of an offer in compromise. This information can be discovered by obtaining the taxpayer’s most current tax account transcripts. The taxpayer does not need to wait for additional correspondences such as collection letters.

Can you explain how a taxpayer utilizes an offer in compromise doubt as to liability in lieu of an audit reconsideration? I have a new client that was audited for 2012 and 2013. I was going to request an audit reconsideration, but would like to know how the OIC doubt as to liability would work? 2016-05-13T13:37:22+00:00

Effectively it is an audit re-consideration. You typically option the OIC doubt as to liability if all other appeal paths have been exhausted. For example if the 30 day and 90 day letters have been issued and the assessments are considered “final”. If this is not the case, a traditional audit reconsideration is the path of least resistance.

A taxpayer was audited for a year in which they received a 1099 showing $176,000 in income. The tax preparer representing the taxpayer did not supply supporting documentation for the deductions shown on the return and dies before the audit starts. What can the taxpayer do if the documentation is not available and the audit is closed without deductions? 2016-05-13T13:36:54+00:00

If an audit becomes final including having exhausted all “official” channels of appeal; and the taxpayer failed to provide documentation supporting to either lower an assessment of tax liability or eliminate an assessment of tax liability (i.e. by providing proof of deductions or substantiating non-income deposits), the taxpayer may still have options. In many cases, especially when the taxpayer was not at fault for not providing documents, the taxpayer may file an Offer in Compromise (“OIC”); Doubt as to Liability which in effect allows for an audit reconsideration. If the appeals period is still open but is getting nowhere with the Revenue Agent or appeals officer, the taxpayer may file a petition in US tax court. In your particular example, the fact that the tax preparer representing the taxpayer died during the audit should support the taxpayers claim of inability to submit documents and make the process of reopening the audit via an OIC easier. If the documentation is unavailable the taxpayer should use secondary documentation such as bank statements and credit card statements to support their defense. In addition a spreadsheet should be provided to summarize the various expense accounts.

What do the acronyms CAP and CDP stand for? 2016-05-13T13:36:02+00:00

These terms both refer to types of appeal.  CAP stands for Collection Appeals Process and CDP stands for Collection Due Process.

Can you appeal a rejected appeal of an Offer In Compromise? 2016-05-13T13:35:41+00:00

Yes.  See: If you submitted an appeal of an Offer In Compromise and it gets rejected where do you go?

If you submitted an appeal of an Offer In Compromise and it gets rejected where do you go? 2017-04-11T22:23:04+00:00

Assuming your client’s offer in compromise was rejected by the IRS Offer Specialist assigned to their case, you have a few options as follows moving up the chain in seniority.  You can appeal to the Specialist’s direct supervisor, the Group Manager.  If you are unsuccessful you can request to argue your position to the Group Manager’s supervisor who is typically a Settlement Officer.  If necessary you can also reach out to IRS counsel.  Keep in mind that to appeal at any level takes a significant amount of time and resources.  If you plan on doing so make sure you are VERY confident that you have a strong argument to support your client’s position.  Otherwise the path of least resistance and maybe the better choice may be to enter into a low-dollar installment agreement or placing your client into Currently-Non-Collectable (“CNC”) status and let the statute of limitations on collection run out.

Is the IRS 10-year statute of limitations for collection on hold while OIC is under consideration? 2016-05-13T13:33:30+00:00

Yes.  The statute tolls (freezes) for the time the offer is under consideration plus 180 days plus 30 days for the rejection appeal period (IRM 5.1.19.3  (01-01-2006))

Can you explain how a taxpayer utilizes an offer in compromise doubt as to liability in lieu of an audit reconsideration?  I have a new client that was audited for 2012 and 2013.  I was going to request an audit reconsideration, but would like to know how the OIC doubt as to liability would work? 2016-05-13T13:31:52+00:00

Effectively it is an audit re-consideration.  You typically option the OIC doubt as to liability if all other appeal paths have been exhausted.  For example if the 30 day and 90 day letters have been issued and the assessments are considered “final”.  If this is not the case, a traditional audit reconsideration is the path of least resistance.

A taxpayer was audited for a year in which they received a 1099 showing $176,000 in income.  The tax preparer representing the taxpayer did not supply supporting documentation for the deductions shown on the return and dies before the audit starts.  What can the taxpayer do if the documentation is not available and the audit is closed without deductions? 2016-05-13T13:31:22+00:00

If an audit becomes final including having exhausted all “official” channels of appeal; and the taxpayer failed to provide documentation supporting to either lower an assessment of tax liability or eliminate an assessment of tax liability (i.e. by providing proof of deductions or substantiating non-income deposits), the taxpayer may still have options.  In many cases, especially when the taxpayer was not at fault for not providing documents, the taxpayer may file an Offer in Compromise (“OIC”); Doubt as to Liability which in effect allows for an audit reconsideration.  If the appeals period is still open but is getting nowhere with the Revenue Agent or appeals officer, the taxpayer may file a petition in US tax court.  In your particular example, the fact that the tax preparer representing the taxpayer died during the audit should support the taxpayer’s claim of inability to submit documents and make the process of reopening the audit via an OIC easier.  If they documentation is unavailable the taxpayer should use secondary documentation such as bank statements and credit card statements to support their defense.  In addition a spreadsheet should be provided to summarize the various expense accounts.

I left a legal firm that was involved with what I consider be was an abusive tax scheme involving several doctors. I was told that the IRS challenged the scheme in court and to my surprise lost the case. Will the IRS go back and appeal the case as it most likely involves many millions of dollars? 2016-05-13T13:31:01+00:00

It is impossible to guess at what motivates the IRS.  They can appeal any ruling so it remains to be seen.

Is there a time frame for paying tax?  Does a taxpayer have to pay after 11 years if they do not have the means to pay? 2016-05-13T13:29:50+00:00

Assuming you are referring to the IRS, the statute of limitations for “active” collection is 10 years from the date of assessment.  By “active” we mean the IRS will come after taxpayer directly.  After 10 years  the IRS cannot continue to do so but may, if previously filed continue to renew a tax lien on which they may collect upon if the taxpayer sells the property or item on which the lien was placed.  If the taxpayer does not have the means to pay for 10+ years from the date of assessment and has no assets attached to a lien, they will not have to pay.

Where do I find the standards for other areas of the country? 2016-05-13T13:29:30+00:00

You can find the IRS National and Local Standards for all of the US on our Professional’s Portal at https://www.taxresolutioninstitute.org/forms-library/

What does “tolling the statute of limitations” mean? 2016-05-13T13:28:25+00:00

Tolling means freezing which in effect extends the statute of limitations.

Is the statute of limitations on Collection 10 years? 2016-05-13T13:27:58+00:00

The statute of limitations on collection by the IRS is 10 years.  It is important to keep in mind however that several items including filing a rejected Offer in Compromise, taxpayer waivers, appeals, holds on collection and bankruptcy may extend the statute.

If a client is deemed un-collectable (CNC Status), will the issue be revisited at a later date by IRS? 2017-04-11T22:23:04+00:00

If a client is deemed to be un-collectable (CNC status) it will usually be revisited within 2 years.

Do accounts receivable clients of a delinquent taxpayer have a legal liability to pay IRS?  Can IRS come after them if they do not pay the amount they owe the delinquent taxpayer to IRS? 2017-04-11T22:23:04+00:00

It is up to the courts to determine if the “client” has a legal liability to pay the IRS assuming their alternative is to pay nothing.  However if the “client” receives an IRS 3rd-party levy and proceeds to pay the taxpayer, the IRS may come after the “Client” for the amount paid up to the liability stated on the levy.

What are the effects on a taxpayer of a 1099-C issued by IRS and what remedies are allowed? 2016-05-13T13:25:57+00:00

The answer to this question depends on the circumstances.  There are options allowing a taxpayer to exclude the cancellation of debt (“COD”) income including proof that the taxpayer was insolvent at the time the debt was cancelled but it needs to be looked at on a case-by-case basis.  If the COD income cannot be excluded, you can resolve the taxpayer’s issues by entering them into an installment agreement or Offer in Compromise.

Assuming a person is insolvent, can the IRS disallow negative equity on items that would otherwise offset the value of other assets? 2016-05-13T13:25:32+00:00

Yes you may be solvent for collection purposes and not for tax purposes under section 108.

How do you respond to IRS when they want client to extend the statute of limitations period? 2017-04-11T22:23:04+00:00

If you are referring to the collection statute we instruct our clients not to sign a waiver.  If you are talking about audit and not collections. Typically you do not have a lot of choice in the matter.  If you do not extend the assessment period the IRS will disallow the deductions in question and issue a 30 day letter.

If a client received a notice that they have a tax liability but has yet to pay anything, does the 10 years still apply? 2016-05-13T13:24:50+00:00

Yes.  For the IRS, the 10-year statute is based upon the date of assessment and is not related to payment.

When I obtain a new client, I complete an IRS Power of Attorney (form 2848) so I can obtain a record of their account and if applicable obtain their reported wage and income information. I am not sure which years to put on the 2848 to determine what they owe and which years are unfiled. 2017-04-11T22:23:04+00:00

To be safe, you should span more years than you think are necessary. For example if your client states they are unfiled or owe from 2006, you should begin earlier and span to at least a year past the current year. For example in this case you may put 2003 through 2016 on the form. This would cover everything that is still within the 10 year statute and a few additional years in case there are unfiled returns or new issues arise in the future.

What issues may arise having clients pay their fees over an extended period of time? 2017-04-11T22:23:05+00:00

May of the clients with these types of issues do not pay their bills in general.  If you are going to accept a payment plan it is ideal to have payments stay ahead of billings.  If your client is unable to stay in front of the work with payments, you should at least have a set payment plan and payments should be processed automatically (i.e. ACH payments).  If you rely on your client to be able to pay, you will find they fall behind almost every time.  And once again,  If you resolve your client’s problem, you drop to the bottom of their payables list like a lead weight.

What is best way to generate tax resolution income for a EA with little to no experience? 2016-05-13T12:54:47+00:00

The key to success in performing resolution work is to understand both the process and the “system”.  Your goal should be to try to work within your comfort level but this may be difficult for someone without experience.  Just beginning in this profession will limit the scope of work that you should and will want to perform.  For beginners we recommend doing streamlined installment agreements and simple installment agreements involving 433’s (typically 433F’s).  If you are having trouble in those areas, we can assist you.  If more complex work comes across your desk you should either refer the work out or have someone with a great deal of experience with the type of work you are faced with assist you.  The Tax Resolution Institute can help you at both of these levels.

Do you recommend accepting credit card payments from tax resolution clients? 2016-05-13T12:54:24+00:00

We accept credit cards and recommend accepting them as an option.  That being said we prefer ACH electronic payments over credit cards because they are more reliable and it is harder to file unsubstantiated disputes.

Can I get rich from practicing tax resolution?   I am all in! 2016-05-13T12:54:04+00:00

“Rich” is subjective.  You have the ability to earn a substantial amount of revenue practicing in this area.  For example, a single qualified professional can earn well over $500,000 per year practicing in this area full-time.

Do you recommend marketing on the web? 2017-04-11T22:23:05+00:00

We recommend having a website.  This is a relatively inexpensive way to create a broad presence.  Be honest about what services you can provide and be careful not to make promises in writing that you cannot fulfill.  Keep in mind that even though people searching for these types of services are emotional, they typically can spot the difference between what is realistic and empty promises.  If you are considering paying for online marketing be sure you are earning enough in revenue from online sales to warrant the expense.  Several of the “big” tax resolution companies no longer exist because the ratio of what they spent in advertising and marketing  was too high relative to their sales over time.  Grow at a pace that (1) makes financial sense and (2) with which you are comfortable.

How do you handle obtaining payment from previous client’s whose work is complete and whose Power of Attorney is still in effect; when the Revenue Officer (“RO”) assigned to their case calls you to address new issues?  Assume the client agrees to pay but is dragging their feet. 2017-04-11T22:23:05+00:00

First tell the Revenue Officer (“RO”) that you must contact your client to discuss whatever the new issue is that he or she has brought to your attention.  Assuming your client has not paid you for the new work (a promise to pay is not enough), call the RO back and indicate that you have not been paid and therefore are not representing the taxpayer until the retainer is received.  Tell your client that you informed the RO that work has stopped until you are paid.  If your client is serious about resolving the new issue, they will find a way to pay you.  If not you can revoke your Power of Attorney.

Do you stop work if a client does not replenish their retainer or falls being on their payments to you? 2017-04-11T22:23:05+00:00

Depending on the reliability and past payment history of the client, we may stop work.  It is important to know that many people with these types of issues do not pay their bills including to the government.  If you resolve a client’s problem, you drop to the bottom of their payables list like a lead weight.

Would you suggest starting a separate company to add this line of work, (for liability purposes), or do it from within an existing CPA firm? Does it matter ? Does a “wall of separation” need to be set up like when adding Financial Advisory services? 2017-04-11T22:23:05+00:00

I do not believe it is necessary to have a separate entity to handle this type of work. I personally flow tax resolution referrals originating from networking to my CPA practice,SST CPAS and leads/referrals I receive from internet marketing flow to The Tax Resolution Institute. Keep in mind that I am doing this for business purposes and not for liability reasons.

You stated not to do this work for a fixed fee.  Is it possible to give the client a fixed fee based on a certain set of hours with a disclaimer in the engagement letter stating if the engagement lasts over a certain # of hours, then we will bill at our hourly rate? 2017-04-11T22:23:05+00:00

The answer is easy and implements common logic.  If a potential client is willing to sign an engagement letter that sets forth a maximum number of hours that SHOULD resolve their case, you can use an open-ended agreement with a defacto fixed fee.  Assuming the client is reasonable and responsive in a timely fashion, both parties will be satisfied and job will most likely be completed for the estimated price.  As is often the case, a client will be unresponsive or slow in providing information which adds more work time and increases fees.  It is for this reason that I prefer not to work on a fixed fee basis.  If you choose to work for a fixed fee, be careful to ensure that your engagement letter is very specific about what you are and are not including and have caveats to address client’s that are difficult to work with.

Should I complete a Collection Information Statement (IRS form 433F) in an interview session with my client or should I send the client the form to fill out? 2017-04-11T22:23:05+00:00

This is a good question and both options have their merits.  If you request the information in an interview it should be done solely to gauge the client’s current financial standing.  This can be a valuable opportunity to make sure your client has their ducks in a row in terms of substantiation to back up the information in the form.  On the other hand we prefer that the client provides a preliminary version of the form in writing once they have looked at their financial situation based upon their backup.  The information included in the latter case is usually more accurate.  In either case the client never provides fully accurate information and the form must be redone to reflect all applicable information in the best light possible for the client.

A corporation owes payroll tax liability of approximately $100,000 for periods spanning from 2003 through 2010.  During discussions with the IRS the Trust Fund portion of the liability was assessed personally under the responsible person’s social security number.  When if at all does the 10-year collection period begin? 2016-05-13T12:48:28+00:00

The IRS 10-year collection statute begins when a liability is assessed.  This holds true for the Trust Fund Recover Penalty as well.

How much can you charge for an Offer in Compromise (“OIC”)? 2016-05-13T14:20:56+00:00

The majority of offers range from $7,000 to $10,000

How did you compute the amount to pay on an Offer in Compromise? 2016-05-13T12:47:34+00:00

The offer amount is calculated by multiplying 12 times the taxpayer’s monthly disposable income (“MDI” – take-home pay minus necessary and reasonable living expenses per IRS National and Local Standards) plus the quick-sale value of the taxpayer’s assets.

Do you work on for a fixed fee or do you charge by the hour to prepare an Offer in Compromise (“OIC”)? 2016-05-13T12:46:22+00:00

We very rarely work for a fixed fee when preparing an OIC and when we do so we are very specific about the limitations described in our scope of work.

Do you prepare your Offers in Compromises manually or do you use a software program? 2016-05-13T12:45:42+00:00

We do not use preparation software for offers.  Each offer has intricacies that will be overlooked if using “out-of-the-box” software.

Are the TV ads claiming you can “settle $1 million for $5,000 legitimate? 2016-05-13T12:45:18+00:00

Those commercials are suspect but we have settled liabilities for over $4 million for less than $5,000 and many lesser amounts using the  IRS Offer in Compromise program.

How do you determine the fees you charge to prepare an installment agreement or an Offer in Compromise? 2017-04-11T22:23:05+00:00

Typically our fees are based upon our standard hourly rates.  Keep in mind that it may be difficult to extract information from tax resolution clients so charging on a fixed fee basis may be risky.  Streamlined installment agreements typically begin at around $1,800 and offers may be over $10,000 depending on their complexity.

Does the IRS determine allowable expenses on a monthly basis? 2016-05-13T12:43:29+00:00

Yes

Should an IRS Form 433-A (Collection Information Statement) and an IRS Form 9465 (Request for Installment Agreement) be filed together? 2017-04-11T22:23:05+00:00

To be clear, the forms referenced in this question are submitted as part of a request for an installment agreement and not officially “filed”.  Typically you complete an IRS Form 433-A when your client’s case has been assigned to a Revenue Officer (“RO”).   In most of these cases you will negotiate directly with the RO and they will not require a 9465.  A 9465 is more often used when requesting a streamlined installment agreement.  That being said, the 9465 is a simple form to complete and therefore there is no harm in having it ready.  You should also, prior to contacting the RO complete an IRS Form 433-D (Installment Agreement form) setting up automatic payments assuming you come to an agreement with the IRS.   This may save an extra call which can take save you time and your client from paying additional fees.

Who should I call at the IRS to request a streamlined installment agreement? 2016-05-13T12:41:42+00:00

You should call the IRS practitioner Priority Line (“PPL”) at (866) 860-4259.  Be sure to have an Installment Agreement Request (IRS form 9465) completed before you call.  This will increase the chance of completing the request quickly.

Is there a time frame for paying tax?  Does a taxpayer have to pay after 11 years if they do not have the means to pay. 2016-05-13T12:41:12+00:00

Assuming you are referring to the IRS, the statute of limitations for “active” collection is 10 years from the date of assessment. By “active” we mean the IRS will come after taxpayer directly. After 10 years the IRS cannot continue to do so but may, if previously filed continue to renew a tax lien on which they may collect upon if the taxpayer sells the property or item on which the lien was placed. If the taxpayer does not have the means to pay for 10+ years from the date of assessment and has no assets attached to a lien, they will not have to pay.

If the IRS does not receive my Power of Attorney (“POA”) will they advise to send it again? 2017-04-11T22:23:05+00:00

The IRS will not know to advise resending a Power of Attorney unless (1) you contact them to discuss a client or (2) you send a Power of Attorney that is incorrect, incomplete, or does not encompass a broad enough spectrum.  If any of the above occur the IRS will ask for an updated Power of Attorney re-signed and dated by the client.

Will the IRS allow you to complete a power of attorney covering future years? 2016-05-13T12:38:14+00:00

Yes.  Typically the IRS can span a few years forward.

Does a taxpayer representative need a separate CAF number for each client they represent in front of the IRS? 2016-05-13T12:36:02+00:00

No. A single CAF must be obtained by a representative (one per representative) prior to speaking with the IRS. The number assigned is representative-specific and will stay with the representative as long as he or she remains in practice.

If a client received a notice that they have a tax liability but has yet to pay anything, does the 10 years still apply? 2016-05-13T12:35:26+00:00

Yes. For the IRS, the 10-year statute is based upon the date of assessment and is not related to payment.

How do you respond to IRS when they want client to extend the statute of limitations period? 2017-04-11T22:23:05+00:00

If you are referring to the collection statute we instruct our clients not to sign a waiver. If you are talking about audit and not collections. Typically you do not have a lot of choice in the matter. If you do not extend the assessment period the IRS will disallow the deductions in question and issue a 30 day letter.

Does an EA need to send you their PTIN in order for the IRS to provide CPE credit? 2016-05-13T12:32:02+00:00

Yes. In order to get credit on the IRS approved Kinsail website we need a PTIN number, full name and designation (i.e. EA)

What do you do when the client’s retainer runs out, they refuse to pay you more and you are still on the Power of Attorney (“POA”)? 2017-04-11T22:23:05+00:00

Stop work. Then wait to see if the client changes their mind and decides to pay you. If not you may revoke the POA. If there is no impending activity we typically wait up to 6 months unless the client requests we do so sooner.

How much do you refund the fee if taxpayer change his/her mind in the middle of the process? 2017-04-11T22:23:05+00:00

We do not offer refunds for clients who change their minds.

How do I get CPE credit as an enrolled agent (“EA”)? 2016-05-13T12:07:49+00:00

In order to get credit as an Enrolled Agent on the IRS approved Kinsail website we need a PTIN number, full name and designation (i.e. EA)

How do I market a new resolution practice? 2017-04-11T22:23:05+00:00

This is a complex question that would take days if not weeks to teach.  That being said here are a few tips to help you get started.  If you prepare tax returns, look toward your existing clients.  Chances are they do not have unfiled returns but you never know.  If your client is a company or an individual that had a company with employees, there may be payroll tax issues (see Payroll Tax section for more information).  This is a good place to start.  Next see if your clients have unpaid income or payroll taxes.  The chances of having unpaid taxes for existing clients is higher than unfiled returns.  Preparing a streamlined installment agreement is “low hanging fruit” that allows you to resolve a client’s issues and earn substantial revenue for relatively easy work.  Once you have completed a few cases for existing clients, you can branch out and seek outside clients that may need more complex solutions.  An effective way for anyone practicing in this area to gain clients is to engage in business networking.  By doing so you have the opportunity to meet other individuals and professionals who have clients with tax issues.   Be sure to meet CPA’s.  It may seem counter-intuitive but they are a great source for this type of work.

What are your typical fees for resolution work? 2017-04-11T22:23:05+00:00

Our fees vary based upon the work being completed. We typically charge on an hourly basis to ensure that a client’s lack of responsiveness or organization does not become our issue. If a client is organized and responds timely a streamlined installment agreement can be completed for in 3 – 4 hours, a hardship installment agreement in 10 – 15 hours and an Offer in Compromise in 18 – 25 hours. Once again, be careful charging a fixed amount as much of what you need to submit is not in your control until you have acquired the information from the client.

I charge between $260 – $290 for a streamlined installment agreement and can’t imagine charging more.  How to you justify charging more? 2017-04-11T22:23:05+00:00

Based upon the amount you charge, we would need to complete the work necessary to request and process the agreement in less than 1 hour.  Keep in mind that submitting an installment agreement request is not just a matter of picking up the phone and asking.  First you must complete the paperwork.  This typically includes completing an IRS Form 9465 (installment agreement request) and/or an IRS Form 433D (direct debit installment agreement form).  While neither of these forms are particularly difficult to complete, they both require you to gather information from the client which takes time.  When you are ready to contact the IRS, you must make sure that the returns have posted and the liability has been assessed.  This either involves pulling the transcripts which takes additional time or gambling that the returns have indeed posted and calling the IRS.  If the returns have not yet posted you will need to spend more time redoing the process over again.  None of the items listed above account for the additional time you spent to meet with the client and discuss the matter or matters that necessitated them needing an installment agreement in the first place.  At the price you charge you are giving your services away.  Do not underestimate the value of your time or the service you provide.

Do you need a special certification to provide tax resolution? 2016-05-13T12:03:23+00:00

You do not however I recommend that you attend our certificate program to become proficient in the subject. By doing so you not only learn how to practice properly and effectively but also earn CPE credit. Our Tax Resolution Specialist certificate is not required but highly recommended.

If I have a potential client and need assistance, how do I work with you to handle the case? 2017-04-11T22:23:05+00:00

We offer a three-tiered program, We can (1) provide “back office” assistance via consultation services you get as a subscriber to our Professional’s Portal, (2) work together with you and your client to resolve their tax matter or (3) you may refer the case to us if you are not qualified or comfortable with the matter at hand.

As a registered tax return preparer (“RTRP”) and not a CPA, am I allowed to submit a OIC? 2016-05-13T12:02:10+00:00

RTRP’s are not authorized to represent taxpayers (see IRS IRM Section 5.8.3.18 “…Individuals who are not authorized to practice before the IRS with respect to a collection matter (such as unenrolled return preparers and registered tax return preparers) may accompany taxpayers to meetings with a completed Form 8821…”) however they can accompany taxpayers to meetings if they have completed an IRS form 8821.

Will IRS allow you to complete a power of attorney covering future years? 2016-05-13T12:01:22+00:00

Yes. Typically the IRS can span a few years forward.

What do you do when the client’s retainer runs out, they refuse to pay you more and you are still on the Power of Attorney (“POA”)? 2017-04-11T22:23:05+00:00

Stop work. Then wait to see if the client changes their mind and decides to pay you. If not you may revoke the POA. If there is no impending activity we typically wait up to 6 months unless the client requests we do so sooner.

How much do you refund the fee if taxpayer change his/her mind in the middle of the process? 2017-04-11T22:23:05+00:00

We do not offer refunds for clients who change their minds.

How do I get CPE credit as an enrolled agent? 2016-05-13T11:59:15+00:00

In order to get credit as an Enrolled Agent on the IRS approved Kinsail website we need a PTIN number, full name and designation (i.e. EA).

Does an EA need to send you their PTIN in order for the IRS to provide CPE credit? 2016-05-13T11:58:49+00:00

Yes. In order to get credit on the IRS approved Kinsail website we need a PTIN number, full name and designation (i.e. EA).

Does a taxpayer representative need a separate CAF number for each client they represent in front of the IRS? 2016-05-13T11:58:29+00:00

No. A single CAF must be obtained by a representative (one per representative) prior to speaking with the IRS. The number assigned is representative-specific and will stay with the representative as long as he or she remains in practice.

Do you need a special certification to provide tax resolution? 2016-05-13T11:58:03+00:00

You do not however I recommend that you attend our certificate program to become proficient in the subject. By doing so you not only learn how to practice properly and effectively but also earn CPE credit. Our Tax Resolution Specialist certificate is not required but highly recommended.

How do I receive confirmation of my continuing education credits? 2016-05-13T11:57:22+00:00

You should receive your completion certificate via email. If you are an Enrolled Agent, your course information gets submitted directly to the IRS assuming they indicated they are an EA and provided their full name and PTIN number.

Do you provide continuing education credits for Certified Financial Planners? 2016-05-13T11:57:02+00:00

No.

“If I took a course that qualifies for a digital copy of the textbook The Ultimate Guide to Tax Resolution, what should I do to request my copy? “ 2016-05-13T11:56:21+00:00

Request a copy via email. You can send your request to [email protected]

Is the textbook included with the price of the full-day webcast? 2016-05-13T11:53:22+00:00

Yes.

If the IRS does not receive my Power of Attorney (“POA”) will they advise to send it again? 2017-04-11T22:23:09+00:00

The IRS will not know to advise re-sending a Power of Attorney unless (1) you contact them to discuss a client or (2) you send a Power of Attorney that is incorrect, incomplete, or does not encompass a broad enough spectrum. If any of the above occur the IRS will ask for an updated Power of Attorney re-signed and dated by the client.

What are your typical fees for resolution work? 2017-04-11T22:23:09+00:00

Our fees vary based upon the work being completed. We typically charge on an hourly basis to ensure that a client’s lack of responsiveness or organization does not become our issue. If a client is organized and responds timely a streamlined installment agreement can be completed for in 3 – 4 hours, a hardship installment agreement in 10 – 15 hours and an Offer in Compromise in 18 – 25 hours. Once again, be careful charging a fixed amount as much of what you need to submit is not in your control until you have acquired the information from the client.

If I have a potential client and need assistance, how do I work with you to handle the case? 2017-04-11T22:23:09+00:00

We offer a three-tiered program, We can (1) provide “back office” assistance via consultation services you get as a subscriber to our Subscription Packages, (2) work together with you and your client to resolve their tax matter or (3) you may refer the case to us if you are not qualified or comfortable with the matter at hand.