Offer In Compromise

[Margie Best]

Good Morning,

I have a client located in CA who owes +/- 16K in taxes from 2011 - Just filed in 2018.  Following are the facts:

Social Security Administration has declared her as disabled (Bipolar and PTSD).  

She has a job working 10 hours a week from home - as that is all she can handle emotionally.

Her total monthly income is $1,650 (Including SSI).  

Owns the home she lives in with an estimated value of $105K.  She owes $15,000 to her sister (per signed promissory note)

No other assets.

She will be borrowing the money to pay IRS from her sister. 

I am looking for suggestions as to an amount she should offer.  She does not personally have the funds.  She is borrowing them from her sister.  

Thank you!

Margarita G. Best, EA

702-285-1959 - Voice/Text

702-425-1125 - Fax

   

[Mila R Hayes]

You might want to check out the OIC qualifier first.

[Margie Best]

I tried that - but the OIC qualifier does not take into account special circumstances.  When completing the documentation, we are submitting for Effective Tax Administration.

Margarita G. Best, EA

702-285-1959 - Voice/Text

702-425-1125 - Fax

   

On Thu, Sep 5, 2019 at 10:04 AM Mila R Hayes <lac...@earthlink.net> wrote:

You might want to check out the OIC qualifier first.

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[PHILIP STORRER]

Submit Form 656 (follow instructions) and if officially rejected Consider appealing the rejection: (Sounds like you need to talk to a real IRS OIC person not just the Prequalifier...

https://www.irs.gov/taxtopics/tc204

https://www.irs.gov/appeals/appeal-a-rejected-offer-in-compromise-online-self-help-tool-start

https://www.irs.gov/pub/irs-pdf/f13711.pdf

Phil 

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[PHILIP STORRER]

BTW the IRS generally asks of the TP "can you borrow the money" like form a relative...

[Margie Best]

Thank you.  I spoke with TAS who initially suggested we ask to put the outstanding balance in noncollectable status and just wait for the statute of limitations to run out.  I asked her about OIC and she suggested we move forward with the OIC and if it's rejected, then to contact TAS at that point and they would work with me on behalf of my client.

Just trying to come up with a reasonable amount to offer in an attempt to avoid the appeals process, but also without draining the relatives bank account.

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[Van Le]

Margarita:

I had a similar situation – client went blind and could no longer earn a living:

• Did not make any payment offer with application (Your client is on SSI = poor!!).
• Did not borrow anybody because already borrowed from so many people (e.g. sister)
• But because client has home – IRS froze collection but filed lien.

 

Client did not care because she is old, understood that one day government will pay part of her nursing home, lien home and probate it at her death.

IRS will collect if there is something left.

Sister will not be repaid because tax debt has priority + lien.       

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[Margie Best]

Thank you for sharing that information.  That is very discouraging.  I don't think the family cares if there is a lien placed on the home, they just can't sell it to pay the debt because then she would be homeless.  Do you recall what you filled out on the form as to why?  Was it based on Effective Tax Administration also?

Pretty certain we are going to offer $3,500.  Of the $16K owed, 6K is penalties and interest.

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[lacion]

I would offer $1000 and work heavy on the narrative. 

Sent from my Verizon, Samsung Galaxy smartphone

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[PHILIP STORRER]

Good stuff,

Van.. That's the bad news.. The IRS have the aurthority to place a lien on her house (IRC sec 6321) but they cannot levy (sieze as in take away) the house without a District Court order...(no district Court would do that in this case...As in Van's case, the lien just sits there til the house is sold...See section 6334(e) and Section 6334(a)(13)(B)...which follows: Sec 6334(e)(1) below after section 6334(a)(13)(B):

(13 Residences exempt in small deficiency cases and principal residences and certain business assets exempt in absence of certain approval or jeopardy

         (A)Residences in small deficiency cases If the amount of the levy does not exceed $5,000—

              (i) any real  property used as a residence by the  taxpayer; or

              (ii) any real property of the  taxpayer(other than real property which is rented) used by any other individual as a residence.

           (B) (ANY) Principal residences  (no matter the size of the deficiency) and certain business assets Except to the extent                                provided in subsection (e)—

             (i) the principal residence of the  taxpayer (within the meaning of section 121); and

             (ii)  tangible personal property or real property(other than real  property which is rented) used in the  trade or business of an                           individual  taxpayer.

  SECTION 6334(e):

(e)   Levy allowed on principal residences and certain business assets in certain circumstances

       (1)Principal residences

          (A)  Approval required

                A principal residence shall not be exempt from levy (under section 6334(a)(13)(B) if a judge or magistrate of a district court of                   the United States approves (in writing) (like a Court order)  such residence.

Hope this helps a bit ... you can appeal a lien under section 6320 (a) (3) "Information included with noticeThe notice required under paragraph (1) shall include in simpleandnontechnical terms—

(A)

the amount of unpaidtax;

(B)

the right of thepersonto request a hearing during the 30-day period beginning on the day after the 5-day period described in paragraph (2);

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[Margie Best]

This is all great information.  Thank you all for contributing!  

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[Philip Storrer]

Yes... all good.. I looked at a dozen or so Court Cases and the IRS/Treasury is successful in arguing for a levy (seizing) a principal residence when understandable vitiating facts are present like the taxpayer has plenty of money to pay... or the house is very valuable ... or the taxpayer is making payments and just doesn’t want to pay more...

Under these circumstances I don’t think I’d file an OIC ... i remember reading it extends the collection 10 year section 6502 statute... I’ll check on this 

Sent from my iPhone

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[PHILIP STORRER]

I could not find a code or reg authority for COL extension but this is in the IRM. Section 8.21.5.5.3(4):

(4) By signing the Form 656, the taxpayer waives the statutory period for assessment for periods included in the offer (See Form 656), beginning on the date the offer is deemed pending plus one additional year if the Internal Revenue Service rejects, returns, or terminates (due to the taxpayer’s death before acceptance) the offer or if the taxpayer withdraws the offer. Refer to IRM 5.8.10.8 , Effect of Previous Offers on Assessment Statute Expiration Date, to determine ASED suspension periods. The taxpayer cannot extend the CSED.

(5)TC 480 suspends the CSED...

The key is that a Form 656 is application for entering into a contract with the IRS to compromie the liability and one of the conditions on the From 656 ia an agreement to extend the section 6502 collection statute..

the right of the personto request a hearing during the 30-day period beginning on the day after the 5-day period described in paragraph (2);

[Margie Best]

Thank you Philip.  I saw the same thing in the IRM.  My client will be paying the OIC in full, so she is not concerned with extending the time to collect - and I have pulled all other transcripts to be certain she is caught up.  Since she is on SSI and very limited working hours, the concern is garnishment of her SSI and trying to prevent that from occurring.

May I ask why you would not file an OIC?

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[Philip Storrer]

Margie, 

Just thinking of the extension of the statute issue which is usually not the most ideal.. but it seems you have that under control..

Phil 

Sent from my iPhone

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[Lee T Reams]

Would a reverse mortgage solve the problem?

Lee Reams, EA

818-338-8700 x240

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[Margie Best]

I will certainly ask.  Thank you.

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[Mila R Hayes]

In the last 20 years, I have submitted 10 offers in compromise. Eight were accepted, one was withdrawn and one is now pending. I can say that the OIC rules established by the IRS are not cast in stone. What worked for my offers were the presentation of the facts surrounding the clients' financial situation, present condition in life, age, health and other significant factors, and how they were presented in the narrative. It's almost always the case that the IRS rep assigned to the OIC would read the narrative and almost certainly, if the taxpayer has clearly no assets, the decision to either accept or reject an offer would be based on the narrative. Even of there are assets, the offer can still be accepted, again, depending on how the narrative is presented.

[PHILIP STORRER]

Well said Mila, TY ...Experience is not only the best teacher ...With OIC's it's indispensable...

> On September 5, 2019 at 10:24 PM Mila R Hayes <lac...@earthlink.net> wrote:
>
>
> In the last 20 years, I have submitted 10 offers in compromise. Eight were accepted, one was withdrawn and one is now pending. I can say that the OIC rules established by the IRS are not cast in stone. What worked for my offers were the presentation of the facts surrounding the clients' financial situation, present condition in life, age, health and other significant factors, and how they were presented in the narrative. It's almost always the case that the IRS rep assigned to the OIC would read the narrative and almost certainly, if the taxpayer has clearly no assets, the decision to either accept or reject an offer would be based on the narrative. Even of there are assets, the offer can still be accepted, again, depending on how the narrative is presented.
>
>
>

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[Margie Best]

Mila, that is AWESOME guidance.  I thank you all so much for the input you have provide me.

 

 

Sent from Mail for Windows 10

 

From: PHILIP STORRER
Sent: Friday, September 6, 2019 8:25 AM
To: clientwh...@googlegroups.com
Subject: Re: [clientwhysconnect] Offer In Compromise

 

Well said Mila, TY ...Experience is not only the best teacher ...With OIC's it's indispensable...  

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[Mila R Hayes]

Thanks Marge. Thanks Phillip.

[Smith, Richard]

question for phil storrer. did u live in discovery bay and also teach at cal state hayward

Richard Smith & Associates
4030 Moorpark Ave., #245

San Jose, CA 95117
phone 408-446-5551
fax 408-446-5601
www.richardsmithtax.com

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[Gloria J Williams EA MBA]

Should try to just get her into CNC.  If client insist to go OIC, offer $ 500.  I had a similar case and was able to get into CNC and it took 4 years and the debt expired through stature.  We did have to do a Form 433 every 18 months but it was worth it to the client.

 

Gloria J. Williams , EA, MBA

Enrolled Agent, enrolled to practice before the IRS

PH: 951-809-8388; FAX: 866-733-9429

P O Box 5

Delaware, AR   72835

Past President of the Inland Empire Chapter of The  California Society of Enrolled Agents, a 501 C (6) non-profit.

CONFIDENTIALITY NOTICE: This email from Gloria J Williams, EA is for the sole use of the intended recipient and may contain confidential and privileged information. Any unauthorized review or use, including disclosure or distribution, is prohibited. If you are not the intended recipient, please contact the sender and destroy all copies of this email. *****Any tax advice included in this communication may not contain a full description of all relevant facts or a complete analysis of all relevant tax issues or authorities. This communication is solely for the intended recipient's benefit and may not be relied upon by any other person or entity. ***** 

 “Yesterday is history, tomorrow is a mystery, and today is a gift; that’s why they call it the present.”  By Eleanor Roosevelt.

Margarita G. Best, EA

 

702-285-1959 - Voice/Text

702-425-1125 - Fax

   

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