Eric L. Green Eric is a partner with Green & Sklarz, LLC in - PDF document

8/7/2018 Resolving Tax Debts: Offers-in-Compromise, Installment Agreements and Uncollectable Status Eric L. Green, Esq. National Conference ELEVATE National Conference 2018 Anaheim Eric L. Green Eric is a partner with Green & Sklarz, LLC in Connecticut and New York The focus is civil and criminal taxpayer representation Has served as adjunct faculty at the University of Connecticut School of Law Author of the Accountant’s Guide to IRS Collection (www.TGPublish.com/shop) Founder of Tax Rep LLC – www.taxrepllc.com Columnist for the Journal of Tax Practice & Procedure & Forbes Weekly Tax Rep Podcast in ITunes: https://itunes.apple.com/us/podcast/podcasts-tax-rep- llc/id1276903945?mt=2 Past Chair of the Executive Committee of the Tax Section of the Connecticut Bar Association Fellow of the American College of Tax Counsel ELEVATE National Conference 2018 Anaheim 1

8/7/2018 Discussion Topics • The collection process • Collection alternatives • Financial guidelines • Installment agreements • Uncollectable Status • Offers-in-Compromise ELEVATE National Conference 2018 Anaheim The Collection Process • Assessment of the tax • Billing notice • Silent lien arises • Threat to levy • Final Notice of Intent to Levy (Right to a Hearing) • Levies served • Notice of Federal Tax Lien filed ELEVATE National Conference 2018 Anaheim 2

8/7/2018 The Statute of Limitations • IRS has 10 years to collect • From date of assessment • Stopping collection tolls the statute • OIC • CDP • Bankruptcy (+6) • Outside US for >6 months • Pending Installment Agreements ELEVATE National Conference 2018 Anaheim Keys to Remember • Resolving the matter requires knowledge of the process • Compliance! • Pull transcripts • Communicate with the IRS • Move aggressively to provide information • Propose a plan ELEVATE National Conference 2018 Anaheim 3

8/7/2018 Collection Alternatives Currently Installment NOT Currently Agreements Collectible NT collectible Offers in Bankruptcy Compromise ELEVATE National Conference 2018 Anaheim The Closely Guarded Secret? ELEVATE National Conference 2018 Anaheim 4

8/7/2018 It’s All about the Numbers! ELEVATE National Conference 2018 Anaheim Reasonable Collection Potential • Gross monthly income • Allowable expenses • Determine future income • Net equity in assets (QSV) • FI + NE = RCP ELEVATE National Conference 2018 Anaheim 5

8/7/2018 Financial Guidelines • Gross monthly income • Allowable v. actual expenses ELEVATE National Conference 2018 Anaheim National Standard: Food, Clothing Expense One Person Two People Three People Four People Food 334 646 742 888 Housekeeping 35 64 63 75 Supplies Apparel & 89 142 185 264 services Personal Care 38 69 71 75 Misc 151 281 323 392 Total $647 $1,202 $1,384 $1,694 ELEVATE National Conference 2018 Anaheim 6

8/7/2018 National Standard: Out of Pocket Out of Pocket Costs UNDER AGE 65 $52 65 AND OLDER $114 ELEVATE National Conference 2018 Anaheim National Standard: Auto/Public Public Transportation National $178 ELEVATE National Conference 2018 Anaheim 7

8/7/2018 National Standard: Auto/Public Ownership Costs One Car Two Cars National $497 $994 ELEVATE National Conference 2018 Anaheim Local Standards 8

8/7/2018 Practitioner Secret! 1‐year rule & 6‐year rules: IRM 5.14.1.4.1 (not if a partial pay) Financial Guidelines Expense Actual or Allowable Food, Clothing and Misc National Standard Housing and Utilities Lesser of Actual or Local Standard Automobile ‐ Ownership Lesser of Actual or National Standard Automobile ‐ Operating Local Standard Public Transportation National Standard Health Insurance Actual Out of Pocket Health Care Costs Higher of Actual or National Standard Court Ordered Payments Actual Child/Dependent care expenses Actual (must be necessary) Life Insurance Actual (must be reasonable) Current Year Taxes FIT, FICA or SE, SIT, Local Secured Debts Actual Delinquent State Taxes Percentage of State v. Federal Debt 9

8/7/2018 Installment Agreements • Streamlined • Individuals: 50K over 72 months* • Business: 25K over 24 months • Regular: Within statute • Partial pay: They’ll be back! ELEVATE National Conference 2018 Anaheim Streamlined Pilot Program • IRS tested a pilot program in 2017 - $100,000 over 84 months • So successful they extended it through September 2018 • https://www.irs.gov/businesses/small-businesses-self- employed/streamlined-processing-of-installment-agreements ELEVATE National Conference 2018 Anaheim 10

8/7/2018 Installment Agreements • No documents for a streamlined • Regular and Partial Pay ― CIS statements • 433-D when plan is approved • Direct debit • User Fees: $120 for new agreements, $50 for reinstated agreements and $52 for direct debit installment agreements ELEVATE National Conference 2018 Anaheim Offer in Compromise Three types of Offers: • Doubt as to liability • Doubt as to collectability • Effective Tax Administration 11

8/7/2018 Challenging the underlying liability Doubt as to Liability Not about ability to pay but if the taxpayer can prove they do not owe the money An ETA offer is an Offer where the taxpayer could full‐pay the liability but where, for public policy reasons, the IRS should agree to accept less than the full‐amount Very rarely given Effective Tax Administration Offers All ETA Offers are reviewed in Washington, DC 12

8/7/2018 Doubt as to Collectability • Most common Offer • Based upon the taxpayers inability to full pay the liability • It’s a request or the government to accept less than the full amount owed because of the taxpayer’s financial situation Offer in Compromise Lump Sum • Paid in 5 or fewer payments • Paid in more than 5 but less than 24 monthly payments Deferred • Payments must be made starting when the OIC is filed 13

8/7/2018 Offer in Compromise • $186 application fee • 20% deposit with a lump sum offered • Monthly payments with deferred offers start when the offer is filed and continue until accepted or rejected OIC Analysis • No OIC if can be full paid via an installment agreement • Income averaging • Dissipated assets ELEVATE National Conference 2018 Anaheim 14

8/7/2018 Additional $200 a month for operating an older vehicle IRM 5.8.5.20.3.5 Practitioner Secret! OIC Analysis • Future income collateral agreement • Low-income? • Qualified investments ELEVATE National Conference 2018 Anaheim 15

8/7/2018 Low-Income Certification (656 Page 2) ELEVATE National Conference 2018 Anaheim Way to Look at an OIC • Government seizes all the assets • Sells at 80% quick sale value • Pays off any loan ahead of its lien • Whatever is left is included in the offer ELEVATE National Conference 2018 Anaheim 16

8/7/2018 Way to Look at an OIC • Future income • 12 months for lump sum offers, 24 months for deferred offers) • If future income available will full pay within the CSED, no offer! ELEVATE National Conference 2018 Anaheim Case Study: Joe and Mary • Joe and Mary owe $187,000 in back income taxes from 2009 – 2014 • Joe is 45, Mary is 43 • Joe used to be self‐employed but is now a W‐2 employee • Joe earns $90,000 a year, Mary earns $48,000 a year • Lives in Nyack, New York (Rockland County) ELEVATE National Conference 2018 Anaheim 17

8/7/2018 Case Study: Joe and Mary • They have two sons, ages 17 and 14 • They owe the State of New York $28,000 and pay $500/mo ELEVATE National Conference 2018 Anaheim Joe and Mary: Assets • Home worth $280,000, mortgage of $197,000, $25,000 HE line used • 2014 Cadillac Escalade, no loan, worth $12,000 • 2014 Honda Accord, no loan, worth $4,500 • Mary has a pension worth $78,000 (defined benefit) • Checking account has $1,000, savings has $750 ELEVATE National Conference 2018 Anaheim 18

8/7/2018 Monthly Expenses • Mortgage ‐ $3,850 • Home Equity Line ‐ $175 • Utility Bills ‐ $675 • Auto Expense ‐ $1,000 • Health Insurance ‐ $695 • Union Dues  Mary $50, Joe $80 ELEVATE National Conference 2018 Anaheim Monthly Expenses • Disney Time share ‐ $375/mo • Credit Cards ‐ $200/mo min pmt • Summer day camp for kids ‐ $4,500 for both for the summer • Donations to the church ‐ $2,000 year ELEVATE National Conference 2018 Anaheim 19