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The REAL Truth About Offirs in Compromise

August 9, 2019

My colleague Steve Klitzner posted in his newsletter The Truth About Offers In Compromise where he discusses the realities regarding Offers In Compromise. He goes on to state "In the real world, people and businesses settle for less all the time.  So when they come to Steve with a tax problem, they want to know if they can make a deal with the IRS. Who would turn down $90,000 to resolve a $100,000 debt?  The IRS, that’s who."
 

On April 15, 2019 we posted Know Your Choices to Pay Your Tax Bill! - Part 2, where we discussed that an Offer in compromise (OIC) is an agreement between a taxpayer and IRS that settles the taxpayer's tax liabilities for less than the full amount owed.  Taxpayers who can fully pay the liabilities through an installment agreement or other means, won't qualify for an OIC in most cases. IRS says that to qualify for an OIC, the taxpayer must have filed all tax returns, made all required estimated tax payments for the current year, and made all required federal tax deposits for the current quarter if the taxpayer is a business owner with employees.
IRS may compromise a tax liability on any of the following grounds:

  1. Doubt as to liability. There must be a genuine dispute as to the existence of amount of the correct tax debt.
  2. Doubt as to collectibility. Such doubt exists in any case where the taxpayer's assets and income are less than the full amount of the tax liability.
  3. To promote effective tax administration. An offer may be accepted on this ground if: (a) collection in full of the tax owed could be achieved, but (b) requiring payment in full would either create an economic hardship, or would be unfair and inequitable because of exceptional circumstances. (Reg. § 301.7122-1(b))

To request an OIC, the taxpayer must apply using Form 656, Offer in Compromise. The taxpayer also must submit Form 433-A (OIC), Collection Information Statement for Wage Earners and Self-Employed Individuals, and/or Form 433-B (OIC), Collection Information Statement for Businesses.

A taxpayer submitting an OIC based on doubt as to liability must file a Form 656-L, Offer in Compromise (Doubt as to Liability), instead of Form 656 and Form 433-A (OIC) and/or Form 433-B (OIC).

The OIC application generally must be accompanied by a $186 application fee. However, the fee is waived for certain low income taxpayers or if the OIC is based on doubt as to liability. (Form 656-B, Notice 2006-68, 2006-31 IRB 105, Sec. 4.03)

Except with regard to offers filed by low-income taxpayers, or based only on doubt as to liability, an OIC must be accompanied by a nonrefundable payment that depends on how the taxpayer is offering to pay.
A taxpayer may propose to pay in a lump sum, i.e., an offer payable in five or fewer installments within five or fewer months after the offer is accepted. If such an offer is made, the taxpayer must include with the Form 656 a payment equal to 20% of the offer amount. This payment is required in addition to the $186 application fee.
A taxpayer may propose to make periodic payments, i.e., six or more monthly installments made within 24 months after the offer is accepted. When submitting a periodic payment offer, the taxpayer must include the first proposed installment payment along with the Form 656. This payment also is required in addition to the $186 application fee. (Code Sec. 7122(c)(1)).
Some people are just not eligible.  They own too much or earn too much.  For others, we can get an agreement where they pay as little as $100 to settle the entire debt. 
The IRS reported acceptance rate is 42%, but our success rate is better than that, because we only submit Offers for those who truly qualify for the program. 

Need a Real Offer in Compromise
To Settle Your IRS Taxes? 

Contact the Tax Lawyers at 
Marini & Associates, P.A.  
 
for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com or
Toll Free at 888-8TaxAid (888) 882-9243

 
 

 

Read more at: Tax Times blog

IRS To Cancel a 250,000 US Passports

August 8, 2019

On July 17, 2018 we posted Don't Be 1 of the 362,000 Americans Waiting To Have Their Passports Revoked Because They Owe Back Taxes!  where we discussed that the IRS issued Notice 2018-1 on January 16, 2018, which provides guidance for implementation of the new IRC 7345 and also discussed that the IRS webpage on Revocation or Denial of Passport in Case of Certain Unpaid Taxes contains the following alert:

 
 
Now IRS as indicated that at least 362,000 Americans have “seriously delinquent” overdue tax payments and will be denied passports or passport renewals if they do not pay the money they owe, The Wall Street Journal reports. 

Now as of August, the US Internal Revenue Service had started action to revoke the passports or residence rights of at least 260,000 US individuals.
 

The power to recommend passport revocation for serious tax defaulters was granted to the IRS under the Fixing America's Surface Transportation Act, signed into law in December 2015, but only brought into effect in February 2018. The Internal Revenue Service has stated it plans to use the power against US persons who owe more than USD51,000 in taxes and penalties.

However, first the IRS need to send the taxpayer either a Notice of Federal Tax Lien or a Notice of Intent to Levy. Taxpayers receiving either notice are entitled to appeal to a Collection Due Process hearing, to negotiate a resolution of this debt.

Second, the IRS can apply for a passport revocation or denial only if it first notifies the taxpayer of its intention, and allows 30 days for a response. It can go ahead with the application only if this request is ignored or not satisfactorily answered.

The IRS also uses Form CP508C  - Notice of Certification of Your Seriously Delinquent Federal Tax Debt to the State Department advising the taxpayer that:

We have certified to the State Department that your
tax debt is seriously delinquent.  


We show that you still owe > $51,000. 
This amount includes penalty and interest computed to
30 days from the date of this notice. 
 

Even then, the taxpayer can halt the revocation by agreeing to pay the tax in instalments, or by offering a compromise. And in the last resort, where revocation is granted, the State Department will not actually execute it until 90 days after the grant, giving the taxpayer time to resolve it.

Payment Of Taxes

If you can’t pay the full amount you owe, call 888 8TaxAid immediately to help you can make alternative payment arrangements such as an installment agreement or an offer in compromise to have your certification reversed. If you disagree with the tax amount or the certification was made in error, you should call 888 8TaxAid immediately! If you’ve already paid the tax debt, please send proof of that payment to the address on the Notice CP 508C.
 

 
If you recently filed your tax return for the current year and expect a refund, the IRS will apply the refund to the debt and if the refund is sufficient to satisfy your seriously delinquent tax debt, the account is considered fully paid. 

Passport Status

If your U.S. passport application is denied or your U.S. passport is revoked, the State Department will notify you in writing.  If you need your U.S. passport to keep your job, once your seriously delinquent tax debt is certified, you must fully pay the balance, or make an alternative payment arrangement to have your certification reversed.  

Once You’ve Resolved Your Tax Problem With The IRS,



The IRS Will Reverse The Certification Within 30 Days Of Resolution Of The Issue And Provide Notification To The State Department As Soon As Practicable.

______________________ 



WHO CAN AFFORD TO BE WITHOUT THEIR PASSPORT FOR AT LEAST 30 DAYS? 

Travel

If you’re leaving in a few days for international travel, need to resolve passport issues and have a pending application for a U.S. passport, you should call 888 8TaxAid immediately. If you already have a U.S. passport, you can use your passport until you’re notified by the State Department that it has been revoked. 
If your passport is cancelled or revoked, after you’re certified, you must resolve the tax debt by paying the debt in full, making alternative payment arrangements or showing that the certification is erroneous.
  
The IRS will reverse your certification within 30 days of the date the tax debt is resolved and provide notification to the State Department as soon as practicable.
WHO CAN AFFORD TO BE WITHOUT THEIR PASSPORT FOR
AT LEAST 30 DAYS? 
Those who discover they have not been in compliance with their US tax obligations, including filing of income tax returns or FBAR reports, may avail themselves of the IRS Streamlined Offshore Procedure, which does not include the draconian FBAR penalty for Non-US Domiciliary's.

If You Face This Problem, You Should Consult with Experienced Tax Attorneys, As There Are Several Ways Taxpayers Can Avoid Having the IRS Request That the State Department Revoke Your Passport. 

 

 Want To Keep Your US Passport?
 
 

Contact the Tax Lawyers at 
Marini & Associates, P.A.

 
 
for a FREE Tax Consultation Contact us at:
www.TaxAid.com or www.OVDPLaw.com or
Toll Free at 888-8TaxAid (888)882-9243.

Sources

Read more at: Tax Times blog

DC Hold That Boyle Applies to E-Filing!

August 7, 2019

On May 16, 2019 we posted E Filing Errors as Reasonable Cause? Not For Now!  where we discussed a recent US Court of Appeals for the Fifth Circuit decision, Haynes v. United States, No. 17-50816 (5th Cir. Jan. 29, 2019), indicates that many of those taxpayers will face uncertainty if their returns are late due to preparer errors or technological issues when electronically filed (e-filed). 
 
The court in Haynes declined to rule on whether the Supreme Court decision in United States v. Boyle, 469 US 241 (1985), applied to e-filing a tax return. The court instead remanded the case to resolve factual issues. 

To exacerbate this uncertainty or solidify the IRS' continue position that United States v. Boyle, 469 US 241 (1985), should be applied to not allow reasonable cause for taxpayers who rely on their accountant to e-file their return, unless they request proof of e-filing; the government notified the court that the IRS had refunded the late-filing penalty at issue, effectively mooting the case and leaving this issue unresolved.
 
Well now the District Court of Appeal for Tennessee has held in INTRESS v. U.S., 124 AFTR 2d 2019-XXXX, (DC TN), 08/02/2019, that Boyle does apply to electronic filings.
 

"It Appears That At Least until E-Filing Is Universally Mandatory, or Paper Filing Becomes Sufficiently Unwieldy, Boyle Continues to Apply."
This is just another example of how bad facts make bad law. In this case the taxpayer's tax preparer and bookkeeper was negligent when they failed to transmit the taxpayer's Form 4868. As discussed in Haynes, Boyle was cited for the proposition that an agent's act are imputed to its principal.
 
Since the tax preparer and bookkeeper in Interess was negligent, this negligent sould be imputed to the taxpayer preventing them from having reasonable cause to waive this late filing penalty.
 
It's my belief that that this decision is cumbersome at best and makes unnecessary conclusions regarding and/or ignoring technological changes between when Boyle was decided and its application to electronic filing now. 
 
I believe the taxpayer incorrectly plead this case as Boyle not applying, rather than the tax preparer and bookkeeper was not negligent, since the tax preparer and bookkeeper was negligent and this negligence would be imputed to the taxpayer resulting in their non-qualification for Reasonable Cause abatement.
 
For example, the court states that "Although the facts of Boyle in the instant case differ greatly, they share one fundamental similarity that is fatal to the plaintiff's position: taxpayers are not obligated to use tax preparation services." The court goes on the state that a taxpayer can hire a pay professional, not have the Paid Professional electronically file the return, but instead get a paper copy indicating that the return was Self Prepared.  
Really?
 
The court then goes on to disallow the taxpayer a First Time Penalty Abatement, by artificially adding a reasonable cause requirement ,which is not in the manual.
 
To qualify for the FTA waiver, a taxpayer must meet the following criteria:  

  • Filing compliance: Must have filed (or filed a valid extension for) all required returns and can’t have an outstanding request for a return from the IRS.
  • Payment compliance: Must have paid, or arranged to pay all tax due (can be in an installment agreement as long as the payments are current).
  • Clean penalty history: Has no prior penalties (except an estimated tax penalty) for the preceding three years. Note: If the taxpayer received reasonable cause relief in the past, they are still eligible for FTA.

I believe that a reasonable cause argument can still be made by differentiating Interess  from a taxpayer's case where the CPA/accountant was not negligent, i.e. transmitted the tax filing on time and did not receive notice of rejection, with the CPA/accountant's nonnegligent being attributed to the taxpayer principal and therefore allowing the taxpayer to sustain a reasonable cause argument.
 
The Current State Of The Law Has Not Kept Pace With Our Digital Economy.
 
 
 
At the center of this quandary is whether a taxpayer can have reasonable cause where he relies upon a third party to perform a ministerial act, like e-filing an original tax return. The answer we now know is NO. 
 
This negative response may thwart the efficiencies gained by technology.
Been Assessed a Late Filing Penalty For
An E-Filed Return?

 Contact the Tax Lawyers at 

Marini& Associates, P.A.  
 

 

for a FREE Tax HELP Contact Us at:
www.TaxAid.com or www.OVDPLaw.com 
or Toll Free at 888-8TaxAid (888) 882-9243  

Read more at: Tax Times blog

TIGTA Report Show Amended Tax Returns Still Prone to Fraudulent Refunds

August 6, 2019

The Internal Revenue Service hasn’t done enough to improve its procedures for reviewing amended tax returns to reduce erroneous and fraudulent tax refunds, according to a new report.

The report, from the Treasury Inspector General for Tax Administration, followed up on earlier reports by TIGTA that found risks of fraudulent and erroneous tax refunds from amended returns.

In the new report, TIGTA reviewed a valid sample of 235 of more than 1.1 million amended tax returns processed in 2017 and identified 33 (that is, 14 percent) questionable amended returns with refunds totaling $74,974.

Based on the results of the sample, TIGTA estimated the IRS issued nearly $359.9 million in potentially erroneous tax refunds claimed on 158,397 amended tax returns in 2017.

It forecast that the IRS could issue nearly $1.8 billion over the next five years. Of the 33 returns identified as questionable, 23 resulted from employee processing errors totaling $58,204 in potentially erroneous tax refunds.

Based on the results of the sample, TIGTA estimates the IRS issued nearly $279.4 million in potentially erroneous tax refunds claimed on 110,398 amended tax returns in 2017. It also forecast that the IRS could issue nearly $1.4 billion in potentially erroneous tax refunds claimed on amended tax returns over the next five years.

In previous reports, TIGTA has recommended:

  • that the IRS revise Form 1040 to allow taxpayers to amend their original tax return using that same form.
  • In addition, TIGTA had also recommended that the IRS expand electronic filing to include amended tax returns.

It estimated the IRS could potentially save more than $17 million in processing costs during fiscal year 2012 if it had allowed taxpayers to e-file their amended tax return.

The IRS disagreed with this recommendation at the time, but said it would consider the format and appearance of the Form 1040X to include more specific information related to changes to income in conjunction with the implementation of e-filing of amended returns.

In the new report, TIGTA recommended that

  • the IRS review the questionable amended tax returns it identified and implement adequate processes to identify and correct employee errors to reduce erroneous refunds.
  • It also suggested the IRS should request funding to expand electronic filing for the 2020 filing season.
  • TIGTA recommended the IRS update its internal processes to identify and review amended tax returns with claims for refundable credits that were denied during the original tax return processing,
  • as well as modify the Form 1040X to allow individuals to use the Identity Protection Personal Identification Number when filing an amended tax return.

IRS management agreed with five of TIGTA’s seven recommendations, but disagreed with one suggestion on the need to hold amended tax returns for processing until a taxpayer confirms their identity when they are a victim of identity theft. The IRS believes its current verification processes provide enough account protections.

“... In its current state, amended return processing is reliant on manual processes; however, we developed automated tools for our employees to use that replicate, to the greatest extent possible, the systemic checks and validations to which original returns are subjected.”

Have a Tax Problem?
 
Contact the Tax Lawyers at
Marini & Associates, P.A. 
 
 for a FREE Tax Consultation Contact US at
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888-8TaxAid (888 882-9243). 
 
 

 

Read more at: Tax Times blog

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