Month: March 2013

Since our main office is located in Connecticut we have a fairly good pulse of what is happening in the local IRS Connecticut Collection offices. This article will discuss what is going on with the IRS collections update, and what any taxpayer that has a tax problem should do about it, as most other states are facing similar circumstances.

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Early on in our tax resolution law practice we learned that state tax negotiations were more difficult than working with the IRS. I recall our first foray with the  Georgia Department of Revenue. I submitted an offer in compromise that I know the IRS would have easily accepted. Georgia flat-out rejected it. Moreover, Georgia, instead of giving our elderly client a break, thought it better to levy his pension! 

Likewise, in our home state of Connecticut, the Connecticut Department of Revenue Services (DRS) has always been more aggressive in its tax collections, including criminal prosecutions for the failure to pay Sales & Use tax. We have been in court more than once in an effort (fortunately successful) to keep our clients out of jail.

There's also a difference in fees. US Tax court charges $60 to file suit. A state like Connecticut's tax court charges $350. So why is it so much more difficult to negotiate between the IRS and state revenue agencies? There are several potential theories.

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Congratulations! You settled your IRS tax debt. Or did you? Well, not so quick. Did you get an IRS Offer in Compromise acceptance letter? Before you celebrate, read on to find out if your Offer in Compromise was actually accepted.

Time to relax? Hold on. Don't believe the clouds are gone until you see it in writing.

Stanley Harbaugh (name changed) is one such taxpayer who reached an agreement with an IRS employeeto settle his tax debt. He called the IRS to negotiate his Offer in Compromise, and was told he would pay $225 a month for 36 months. Yet, after this was done and he paid the IRS this amount in full, the IRS still tried to collect more money from him. Why did this happen?

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When you owe back taxes to the IRS and you can't afford to pay it back in full, the most critical aspect of your case is: How much can you truly afford to pay back? In order to determine the amount you can afford to pay, the IRS uses two calculations. One is the income and assets you have available to pay. The other is what expenses the IRS will allow. A taxpayer who owes money to the IRS can use necessary expenses, may be allowed conditional expenses, and may even be allowed miscellaneous expenses.

To illustrate the point, a US tax court case demonstrates that just because something is necessary to a taxpayer, does not mean that that IRS will feel the same way.

In George Thompson v. Commissioner, the taxpayer claimed two expenses that should be "allowed expenses." One was his monthly tithe (or donation) to his church, the other, his college expenses for his children. Claiming these expenses would reduce the amount he would ultimately pay back to the IRS through a partial payment installment agreement. On his Form 433a he included both expenses, and wanted the IRS to reduce his monthly payment by the amount of these expenses. 

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