Custom Search

20 September 2008

RE: [taxchat] Delinquency penalty / please help

I have settled some cases using Offers in Compromise for small amounts compared to the amount owed, but I screen each case very carefully.  Out of the hundreds of people I have talked with over the past 10 years who wanted OIC’s, I’ve put only a few into the program.  None of the others would have qualified.  The firms that advertise aggressively typically simply do the paperwork without screening the client to see if they qualify, and justify their fees by telling the client something like: “You wanted to do an OIC.  I processed it for you so I’ve done my job.  It’s not my fault that the IRS didn’t accept it”.  This is, of course, after the client has paid them thousands of dollars expecting that the case would be settled for a fraction of what they owe.  The largest firm in the OIC business, JK Harris, was sued in a class action by former clients, and has to put 6 million dollars into a fund to repay the fees it collected.

 

Without my knowledge I had one client come in to my office after they had visited a local Harris rep and paid them $1500 to do an OIC.  The client owed 18K (husband and wife).  They had a combined income of over 100K and about a quarter of a million equity in their home, and they were expecting that the IRS was going to compromise with them.  I asked to see the paperwork the Harris rep gave them analyzing their prospects for the OIC.  After one glance I told them that on the face of it, it shows that they don’t qualify.  I told them to go right straight back to the Harris rep and tell him that they had talked with their tax advisor, and to tell the rep that they wouldn’t qualify for the OIC, and to demand their money back.  Fortunately, they got the money back.

 

I had another client, a good client, who asked me about doing an OIC.  I told him he wouldn’t qualify.  He apparently didn’t believe me, so he hired one of the most expensive law firms in the Twin Cities with the purpose of having them do the OIC.  The attorney they assigned the case to had never worked an OIC, so he started calling me for help.  I told him right away they wouldn’t qualify for the OIC.  He was smart (this was a top law firm) and caught on quickly, but by that time my client had probably paid him a substantial retainer, and of course, was paying me to educate him in the process.  The client wound up selling one of his houses and full paid, which is what I had told him he would have to do when he first asked me about it.

 

I could go on and on…  It’s amazing how gullible people are when they see the ads on TV about settling for “pennies on the dollar”.  If word ever got out that you could fail to pay your taxes and the IRS would let you off easily under any circumstances, who would pay their taxes.  The OIC program is good for a very select group of people, typically who are broke with no assets.  I get some clients in that situation.  In that case we will do the OIC.  It’s usually a relative who pays my fees and the amount of the offer.  Sometimes if they don’t have a “guardian angel” who can pay for them, I refer them to the University of Minnesota law clinic.  Students, under the supervision of attorneys, process the OIC’s for free.

John Stevens, EA
Stevens Tax & Accounting, Inc., dba Equi-Tax
1870 - 50th St. E., Suite 8
Inver Grove Heights, MN 55077
651-773-5000
FAX 651-457-4529
equitax@unique-software.com
www.equitax.net

 

From: taxchat@yahoogroups.com [mailto:taxchat@yahoogroups.com] On Behalf Of Debbie Breedlove
Sent: 09/19/2008 7:19 PM
To: taxchat@yahoogroups.com
Subject: Re: [taxchat] Delinquency penalty / please help

 

And sometimes they do pay cents on the dollar...99 cents!!  Hardly worth the trouble, and the fees they are charged.

 

I'd tell him to go ahead and call them.  That's the only way he'll learn the truth.  Otherwise he'll think you're just lying to him.  He sounds like he'll end up being a real PITA anyway. 

 

It sounds like the bookkeeper story may be a lie, or a phony excuse at best.  How can you not notice $135K of income missing on your return?

 

Debbie B.

 

 

From: JoJo Zawawi

Sent: Friday, September 19, 2008 1:25 PM

Subject: RE: [taxchat] Delinquency penalty / please help

 

Tell him, Yes, they pay cents on the dollar, IF they owed $100,000 for 10 years' back taxes and only make $15,000 a year and have no assets, so the IRS could only expect to collect $25 a month from them until eternity expires.

 

Those things are such a PITA.

 

JoJo

................................................................................................................

 

 

 

-----Original Message-----
From: taxchat@yahoogroups.com [mailto:taxchat@yahoogroups.com]On Behalf Of Cris Kelly
Sent: Friday, September 19, 2008 11:18 AM
To: taxchat@yahoogroups.com
Subject: RE: [taxchat] Delinquency penalty / please help

Ok his response is going to be – What about those ads I see on TV (He already brought this topic up), where people pay cents on the dollar.

Any suggestions on how to handle that

Cris

From: taxchat@yahoogroups.com [mailto:taxchat@yahoogroups.com] On Behalf Of John Stevens, Equi-Tax
Sent: Friday, September 19, 2008 11:06 AM
To: taxchat@yahoogroups.com
Subject: RE: [taxchat] Delinquency penalty / please help

Cris,

Your client appears to be fairly high income if he fails to include such large amounts in his returns.  High income people in general are not good candidates for OIC’s.

John Stevens, EA
Stevens Tax & Accounting, Inc., dba Equi-Tax
1870 - 50th St. E., Suite 8
Inver Grove Heights, MN 55077
651-773-5000
FAX 651-457-4529
equitax@unique-software.com
www.equitax.net

 

From: taxchat@yahoogroups.com [mailto:taxchat@yahoogroups.com] On Behalf Of Cris Kelly
Sent: 09/19/2008 12:08 PM
To: taxchat@yahoogroups.com
Subject: RE: [taxchat] Delinquency penalty / please help

The penalty turns out to be 25% exactly – however, I didn’t see that number on the paperwork only the 20%,

The consensus seems to be that I won’t be able to get any of the penalties/interested abated, what do you think my chances will be with an OIC?

Thanks for the help,

Cris

From: taxchat@yahoogroups.com [mailto:taxchat@yahoogroups.com] On Behalf Of Arnold M. Socol
Sent: Friday, September 19, 2008 9:31 AM
To: taxchat@yahoogroups.com
Subject: Re: [taxchat] Delinquency penalty / please help

That's not the 20% penalty - its just straight late paying penalty, if that's any help

Arnie

----- Original Message -----

Sent: 09/19/2008 10:31 AM

Subject: RE: [taxchat] Delinquency penalty / please help

I wouldn’t be too optimistic about getting the penalty removed.  I went to appeals earlier this year to try to get an accuracy penalty removed for a client because a W-2 was inadvertently omitted.  It wasn’t the client’s fault.  Appeals said that client had an obligation to review the return for accuracy, so he didn’t have reasonable cause for abatement of the penalty.

John Stevens, EA
Stevens Tax & Accounting, Inc., dba Equi-Tax
1870 - 50th St. E., Suite 8
Inver Grove Heights, MN 55077
651-773-5000
FAX 651-457-4529
equitax@unique-software.com
www.equitax.net






From: taxchat@yahoogroups.com [mailto:taxchat@yahoogroups.com] On Behalf Of Benita Myers
Sent: 09/18/2008 8:37 PM
To: taxchat@yahoogroups.com
Subject: Re: [taxchat] Delinquency penalty / please help

Cris, sounds like they have smacked him with the substantial understatement penalty and that penalty is 20%...Stiff penalty, he needs reasonable cause to get out of it...It does not sound like he has one...

2008/9/18 Cris Kelly <ckelship@yahoo.com>

Hi

I have a client that under-reported income in both 04 & 05.  The 04 amount not reported was large over $135,000 and the amount for 05 was under $20,000.

The situation is that he had a bookkeeper (not an EA or CPA) doing his books and preparing his tax returns.  He never checked up on things and he signed whatever the bookkeeper told him to.

The amounts were put into the company, they were posted as owner investment instead of income. 

The amount of penalty is almost $20,000 and they are charging him interest over $17,000.

Does anyone think that I have any hope in getting the numbers reduced?  While the errors were technically his fault and all he can say is that he was stupid, but he is trying to fix things. 

Any suggestions would be appreciated.

'

Thanks,

Cris

No virus found in this outgoing message.
Checked by AVG.
Version: 7.5.524 / Virus Database: 270.6.21/1677 - Release Date: 9/17/2008 5:07 PM




--
Benita Myers, Enrolled Agent
Office and Fax: 916-691-6715

IRS Circular 230 Disclosure: Unless expressly stated otherwise in this transmission, any tax advice contained herein, forwarded with or attached to this message was not and is not intended to be used, nor may it be relied upon or used, by any taxpayer for the purpose of (1) the avoidance of any tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions, or (2) promoting, marketing or recommending to another party any tax transaction or tax-related matters that may be addressed herein.


 

No virus found in this incoming message.
Checked by AVG.
Version: 7.5.524 / Virus Database: 270.7.0/1679 - Release Date: 9/18/2008 5:03 PM

No virus found in this outgoing message.
Checked by AVG.
Version: 7.5.524 / Virus Database: 270.7.0/1679 - Release Date: 9/18/2008 5:03 PM

No virus found in this incoming message.
Checked by AVG.
Version: 7.5.524 / Virus Database: 270.7.0/1679 - Release Date: 9/18/2008 5:03 PM

 

No virus found in this outgoing message.
Checked by AVG.
Version: 7.5.524 / Virus Database: 270.7.0/1679 - Release Date: 9/18/2008 5:03 PM

__._,_.___

IRS Circular 230 Disclosure: Unless expressly stated otherwise in this transmission, any tax advice contained herein, forwarded with or attached to this message was not and is not intended to be used, nor may it be relied upon or used, by any taxpayer for the purpose of (1) the avoidance of any tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions, or (2) promoting, marketing or recommending to another party any tax transaction or tax-related matters that may be addressed herein.



Your email settings: Individual Email|Traditional
Change settings via the Web (Yahoo! ID required)
Change settings via email: Switch delivery to Daily Digest | Switch to Fully Featured
Visit Your Group | Yahoo! Groups Terms of Use | Unsubscribe

__,_._,___
Custom Search