An Offer in Compromise. The trick to filing an IRS-656.

I just finished another 656 [individual #offer_in_compromise where an amount is offered -- there are different types], and I thought I would share a couple of thoughts on what the heck this program (offer in compromise) is, and how to use the damn thing. First, for those code buffs out there, we're talking about 26 USC 7122. If you want to see all the nitty-gritty regarding rules and what the IRS can and cannot do, go there. Be sure to take a 5-hour energy burst, though, as the US Code makes War and Peace look downright exciting (no slight to Tolstoy, mind you).

For the rest of you out there, sit back and read this post. Follow the rules herein, and you should do just fine. Well, actually, depending on the complexity of your case, you could be completely mess things up. Definitely give us a call BEFORE filing anything, lest you find yourself without a house, and #IRS smiling all the way to the bank. Better to spend a few shekels on legal advice BEFORE losing the house, then after. This advice often falls on deaf ears...but hey, I can't blame you. I fancy myself an auto-mechanic, too. Not good, not good!

Alright, humor aside, let's start at the beginning. To complete an offer in compromise, you will need a couple of things. First, you need a computer. As you are reading this, I'll assume you have access to the Internet. Go to: http://irs.treasury.gov/oic_pre_qualifier/. This website is the "pre-qualifier" for an offer in compromise. It won't actually store any privacy information, so have no fear completing the fields. It will, however, allow you to play around with the numbers, and get an idea of what will be required for your "compromise." I suppose now is a good time to explain what a compromise is.

A compromise is an offer, made by the taxpayer, to the Government, for full and final settlement of all tax debts. A #compromise must be actual money and it (or partial payment of the #compromise) must be sent to the IRS when the offer is filed.

Note that the fields you complete on the website are essentially the same as those you will completed on the 433A (individual) and the 656 (individual). A couple of cavaets. We are NOT talking about business debts. That's a different discussion, and you absolutely have to speak to us before swimming into business waters. We are NOT talking about a hardship waiver. This post presumes you have an amount you can, in fact, pay towards the tax debt. There does exist an opportunity to pay nothing, but that is almost never excepted without extreme hardship -- again, you will need an attorney to help with that.

Three areas are critical to a 656 -- and working on the website link above will help you gather this information.

• First, you need to have your three most recent paystubs.
• Secondly, you need your three most recent bank statements.
• Thirdly, you will need an itemized list of your household and personal expenses.

With these items in hand, you have covered 90% of the questions you'll need for all forms (and the website!). Note, that if you have investment accounts, life insurance, 401K or retirement funds, etc., you'll need that information, too. Obviously, if you receive an annuity, or you have some business income (aha! Business items again...run, run!), then you'll need to gather a bit more documentation. For most folks, though -- the three biggies will get you through the vast majority of tax questions on the 433, 656, and website.

Surprisingly, the IRS has made this process relatively pain free. Once you have completed the website entry, you will be presented with a proposed amount for a compromise. Now, if you remember, a #compromise is something you offer the government. However, the #IRS does not need to accept it. To wit, using the number the IRS proposes has an excellent chance of being accepted by the government -- a really handy method of testing the waters prior to filing. No guarantees, of course, but a good chance.

Completing the 433 is a painful process, largely focused on budgets and assets. Be sure to have the three items outlined above. The process of completing a 433, and the considerations attendant to the process, can be found in a separate blog article on this site. There are some confusing aspects regarding adding and subtracting certain values on the form. The only thing to remember is that your primary bank account recevies a $1000 deduction (reducing the asset value of the saved money -- read the form carefully), and your personal vehicle gets $3450 deducted from the value (if any -- can never be less than 0. Read the form carefully).

The 656 form is not difficult and is, in fact, very short. Remember, if you are completing a business filing, you need to get the help of an attorney. However, as an individual filer, just complete the boxes as described on the form. The compromise amount can be split across a 20% deposit and 5 equal payments. Note -- DO NOT exceed five payments, or the amount goes up considerably.

If you are represented by an attorney, be sure to complete a power of attorney form, also. That's form 2848.

One last reminder -- be sure to claim anything over the 20% initial payment as a deposit. Otherwise, if you do not, the IRS will keep the entire amount sent in, even the amount above the 20% initial payment, if the government decides NOT to accept your offer. Be careful!

Do you have a question about an offer in compromise, or other tax matter? Give us a ring! Your first call is free, and we're glad to chat with you about how to settle your tax issues. 1-800-579-9864 or admin@hanoverlawpc.com.

Hanover Law, PC
Offices in Fairfax, VA and Washington, DC
www.hanoverlawpc.com		Lili O'connell, Esq. Abby Archer, Esq.
888 16th St., NW Ste 800 Washington, DC 20006	2751 Prosperity Ave, Ste 150 Fairfax, VA 22031	Sean R. Hanover, Esq. Stephen Salwierak, Esq.
1-800-579-9864	admin@hanoverlawpc.com	Charles Hatley, Esq.

Tax Liability and Divorce

So what happens when your love is shattered on the shoals of acrimonious divorce? Well, according to the tax man (aka Federal Government) -- not much. A joint tax liability waits for no man (or woman!), regardless of the current status of the divorce. Let me explain what this means, and then a few tricks to address the problem.

Okay -- here's the scenario. Wife and Husband have been married for five years. They created a joint basket business supplying eager underwater artists. The business was a success but the marriage was not. On the eve of the fifth anniversary, wife informs husband that the honeymoon is over, and serves him with a causes bellos for mensa et thoro in Virginia. All is progressing as these actions are want to do, with a large joint asset pool, including vehicles, an expensive home, and two kids. Then -- the unexpected happens.

In August of 2012, the IRS contacts the husband (nominal CEO of the basket business). They are being audited. The tax returns from 2007 - 2012 were filed jointly (1040) and include, primarily, the income from the business as the income for the couple. Additionally, although wife is listed as the only member of the basket weaving business, in fact the 1120S forms show husband as owning 49% (via K1's). The audit progresses, and it is determined there is a liability of $60,000.

Now, you would expect this debt (joint) to be considered a marital debt to be determined by the state court handling the divorce. However, the IRS is demanding payment NOW or levies will be had (now = August 2013), and the payment demanded is $60,000. Husband is no longer communicating with wife, and she has no way to get him to pay his part of this prior to the final merits hearing on the divorce, which is not scheduled for April 2014.

So, what options are out there to handle the impending debt? First, they need to be three months behind before the IRS starts rattling the lien-sabre. Interest will accrue, but nasty messages will be minimal.

The solution to this is to have the wife pay the IRS debt and then sue in state court to be re-paid...but what is husband is likely to be a no-show at the hearing, or has no money to pay?

Then the couple should file for a payment plan or reduction in the punishment amount from the IRS via a form 433A. This is a request for payment plan and abatement of collection operations. This will allow a payment plan to be implemented until a final judgment from the state judge may be had. Of course, both parties must sign. However, you can ask the court to enforce payment pendente lite or conversely require that the state court require the reticent party to agree to complete the 433A.

Interestingly, on a joint case were share with another law firm, one of their associates came up with a clever idea to get a home equity loan on the house to pay the tax debt, then sort out the home equity loan in the state court. That would work, too.

Finally, you can petition the IRS to split the tax liability by filing amended returns. This is the least palatable option as it causes significant disruption to the agreed on tax resolution.

What you must advice your client, however, is that the IRS does not care about his/her state divorce operations. A joint debt is joint and severable. Someone will pay, or both will get liens. Do not let on of the parties use a suicide-technique of just "sacrificing" themselves via tax lien to hurt the opposing party (i.e. do nothing just so that the parties will be hit with the liens). That is gross bad act, and warrants state court action to injoin. Need help with a tax or family matter? Give us a ring! We'll discuss your case for free on the phone. We have several VA, DC, and MD lawyers who have considerable experience in sorting out messy and complex litigation matters.

http://www.hanoverlawpc.com
703-402-2723

Sean R. Hanover, Esq.
Principal Attorney
The Hanover Law Firm is located in Washington, DC and Fairfax, VA. We practice
in both state and federal courts in VA, MD, and DC.

IRS Form 443 -- Help, I can't pay my taxes!

So what really happens when you are waaayyy behind in your taxes? You see those ads on TV that promise to reduce your debt -- "Call us! We'll handle the IRS for you!" How true are they? What is an offer in compromise, and what it the process for contactin the IRS Field Office? Can you do this without an attorney? Are they unfriendly!? Enter the IRS form 433A.

These are great questions! And, yes, you can do much of this without an attorney. This blog post will talk about what is required to "fix" deliquent taxes. Remember, an attorney (that would be Hanover Law, of course!) can really help sort through the mess and guide you in the process. However, believe it or not (gasp) -- the IRS is rather helpful in providing pointers and tips on how to move forward. The difference with an attorney is that we can often get help faster for you, and usually talk directly to the folks that make decisions on your case. More on that in a moment.

So is there a magic button? NO

If you owe taxes, you have a serious problem that must be resolved. The IRS will not hesitate to garnish your wages or place liens on your propert. However, it is often possible to schedule payment, or even place yourself in non-collectible status, based on your income. This process requires you complete an IRS form 433A.

A 433 form asks for information about assets and income, and is designed to let the IRS know all about your personal situation. If you filed jointly, you must also have your partner sign. There was, for some time, an interesting question as to how married, gay couples, would file 433's or other IRS documents that require married couples to jointly file various documents. However, that issue now seems to have resolved in favor of same-sex couples being treated as married couples as appropriate.

Be truthful! Avoid answering questions on the phone. If you request that an IRS representative contact you, you may be asked to complete the 433 on the phone. DO NOT DO THIS, as you are apt to make errors or mis-state amounts.

Also, it is important to remember that deferred payment plans, or "uncollectable status" does not remove the IRS debt! It is stilled owed, and will still continue to accrue interest. It will, however, stop liens and garnishments.

Need help with a tax matter? Give us a ring! We'll discuss your case for free on the phone. We have several VA, DC, and MD lawyers who have considerable experience in sorting out complex IRS matters.

http://www.hanoverlawpc.com
703-402-2723

Sean R. Hanover, Esq.
Principal Attorney
The Hanover Law Firm is located in Washington, DC and Fairfax, VA. We practice
in both state and federal courts in VA, MD, and DC.