We recently had a client who settled with the IRS for $500. Total savings on your IRS tax bill in the amount of $199,500 doesn’t happen very often. However, this particular taxpayer owed a large liability stemming from an old corporation he was involved in. He also doesn’t have much in the way of assets or income. The IRS tax assessed was in the neighborhood of $200,000 at one point in time. The business owed closer to $400,000 in IRS tax liability. The liability he owed was civil penalties stemming from employment taxes accrued in his old business. For those of you not familiar with civil penalties or the trust fund recovery process it is a process the IRS uses to assess a penalty for the accrual of employment taxes in a corporation. The IRS looks at willful and responsible parties and makes a determination as to who should be responsible for paying back the trust fund portion of the liability. Meaning the employment taxes withheld from employee’s paychecks. Our client had gone through the process of the interview, the assessment of tax, and ultimately the closing of the business. He had been dealing with his tax liability for years prior to coming to Highland Tax Group, Inc.
To start the offer in compromise process we reviewed form 433-A OIC. OIC stands for Offer In Compromise. The 433-A OIC determined our client did not have any excess income, as well as any equity in assets. Therefore, we came up with a flat offer amount. Once the offer was submitted, it’s a waiting game. The IRS can take up to 1 year to review an offer in compromise. We were patient. And once the offer was assigned to a caseworker, our negotiation process began.
At first the IRS came back and wanted a touch under $10,000 to accept the Offer In Compromise we had filed. The IRS was disallowing a few expenses including our fee, our client’s alimony payments, his truck payment, and a few other expenses. They calculated he could pay just under $10,000. We came back, prior to the IRS issued deadline, and submitted back up documentation for all expenses we claimed (as we had done with the filing of the offer in compromise). The IRS finally agreed with our original figure of $500 and submitted the case to review.
Once the case was reviewed we had another battle to encounter. A collateral agreement was entered into due to the taxpayers ability to continue working. The collateral agreement in this case asked for any income the taxpayer makes (Adjusted Gross Income) above $80,000 and below $90,000 he is deemed to pay 10% of his earnings in 2014. The following year the percentage goes up to 15% and the AGI falls between $90,000 and $100,000. Each tier increases as the years go by for a period of 5 years. The beauty of the deal is the taxpayer pays alimony. Alimony is an above the line deduction thus lowering his total income to arrive at adjusted gross income. The taxpayer will more than likely not need to worry about the collateral agreement because his AGI totals less than $10,000 each year due to his very high alimony payments.
The taxpayer was more than thrilled with our results and has agreed to be a reference as well as submit a testimonial. Testimonial coming soon! If you have IRS tax issues, can’t pay the IRS back, and feel you may qualify for an offer in compromise, call us immediately at 720-398-6088. Or visit our website at www.htg2020.wpengine.com. We would be more than happy to help!