A business owner in New York whose business was almost closed down by the IRS…
His wife had been diagnosed with cancer and while the family was going through the medical issues, his business fell behind with payroll taxes and was filing late. He owed the IRS about $60k and the state of New York about $25k. He was working with another company who had charged him a $4,500 initial fee. They had already asked him for more money and he hadn’t even finished paying the $4,500 yet. They were telling him that the IRS agent was a complete nightmare and the lowest he was willing to go on a payment plan was $3,000 per month, which the taxpayer couldn’t afford. His previous “tax resolution” company was also telling him that he had to accept the payment plan even though he couldn’t afford it or the Revenue Officer was going to shut his business. He was missing NY returns and as not eligible for a payment plan until they were filed, so I focused on the IRS case first. When I called the IRS, the agent told me that the prior rep had dumped hundreds of pages of documents on his desk with no explanation of the income and expenses and never explained why the bank accounts showed more income than the financial statement. He said that, due to the lack of explanation, he had used the income from the bank statements and the taxpayer’s claimed expenses to arrive at the payment amount. He also said that he told the prior representative that he either had to present an explanation or that he was going to move towards shutting the business.
The client sent me his bank information and I put it all in a format that would be easy for the IRS agent to understand. I asked questions about the discrepancies between the bank statements and the income I saw on those and the client’s claimed income. It turns out that there were some inter-company transfers and that the client had been using his personal credit card to add funds to keep the business afloat. Once these items were removed, the client showed a much lower ability to pay. I spent several hours going through the client’s statements line by line. I consolidated all of the information onto one sheet and made the information easy for the Revenue Officer to understand and drew his attention to the items that were not actual revenue items.
Based on the information I provided, the IRS officer agreed to a payment plan of $1,000 per month, which was $2,000 lower than his previous deal. More importantly, the client was able to keep his business.
Next, I had to deal with NY. The prior reps had told the client that the best they could negotiate with the state was a 20% ($5,000) down payment and a 12 month payment plan, which had monthly payments of $2,000. The client did not have sufficient funds for either the down payment or to make a $2,000 monthly payment. Again, I called the agent and was able to negotiate a down payment of 5% ($1,250) and a payment plan of $548 per month.
The numbers speak for themselves, but that is only half the story. My client’s wife was extremely ill with a relapse of the cancer that had caused the tax problems in the first place. By having a qualified representative in place, he has been able to remain current with his taxes, keep his business open, and focus on his wife and children instead of worrying about his taxes. Total fees: $2,750. The reason I was able to keep the fees so low is because I did the work up front to explain the documents to the IRS. The prior reps didn’t do anything. They asked the client to fill out the financial forms and to send bank statements. They took the same forms and bank statements and faxed them to the Revenue Officer. They charged the client $4,500 for that service, and were already telling him he was going to have to pay more for appeals. By making the information clear the first time, not only did we save the business, but we turned a “difficult” revenue officer who had been ready to close the business and had him agree to a payment plan in less than 10 days. That work completely avoided the legal fees for appeals.
Timber land broker paid only $2700 on $800,000 owed…
This taxpayer owed $800k to the IRS. He was a broker who arranged large deals for timber land. He might only do one deal every two or three years and would make hundreds of thousand of dollars when the deals closed.
Unfortunately, he always paid off the older tax years first, thereby accruing new liabilities every time he closed a deal. With the interest and penalties, he was never catching up.
First, we explained that paying the current year is more important than paying off older years. He needed to break the cycle of accruing new liabilities every time he closed a deal. Then, we submitted an Offer in Compromise on his behalf. The total Offer amount was about $2,700. The Offer was denied initially, but only because the examiner made errors in applying the regulations. We appealed, and on appeal the IRS accepted his Offer. He paid $2,700 on an $800,000 liability, so he paid only 0.34% of the total liability.
80+ year old woman failed to file her Social Security Forms incurred a $90K IRS penalty…
Eleanore hired me with an IRS liability of approximately $90,000, which consisted mostly of business taxes on forms 940, 941, and 1120. She is an 80+ year old woman who owns and operates a nursing home that she took over when her husband died. She was missing a few years of tax returns, and had been assessed a penalty by the IRS for failing to file her Social Security forms.
Upon thorough inspection of the taxpayer’s liabilities, it became apparent that there had been some serious miscalculations both by the taxpayer and by the IRS. Due to Eleanore having health issues of her own and the loss of some of the records in a flooded basement, the process of getting the information from the client was very time consuming and we had to reconstruct a lot of the information from bank records.
We filed amended returns to correct all of the mistakes and filed original returns on the missing periods. While all this was happening, the taxpayer had a Revenue Officer assigned and we worked closely with the Revenue Officer to stall any levies and buy the taxpayer enough time to get all the returns filed. We convinced the Revenue Officer to grant multiple holds on collection activities. I also filed a request for the waiver of the penalties associated with the SS forms.
Once all the returns were processed, the taxpayer’s liability had been reduced to $60,000 from $90,000. I then set up the Installment Agreement and got her formally protected from any further enforced collections. The initial penalty abatement request was granted as to two of the tax years, but was denied as to the other two. The balance went from $60,000 to $40,000. I filed appeals for the two years that were denied, and I was eventually successful in those appeals. The taxpayer’s final balance was reduced to approximately $3,000, which resulted in a total savings of over 95%. I did not charge Eleanore any additional funds to file the appeal, and solved the case for much less than she had been quoted by other firms.
An independent contractor for oil land purchases owed the IRS 102k…
Client worked as an independent contractor who did title reviews for oil land purchases in the Permian basin. He owed the IRS 102k and was not current with his taxes. I collected his financial information and bank statements, and initial results showed that he would be on a payment plan of about $1,500.
However, he was not taking advantage of all of his allowable expenses, most notably he was not taking out taxes to keep from accruing new liabilities. We got him straightened out with his estimated tax deposits, and suddenly his payment plan was much lower.
I was able to formalize a final payment plan of $25 per month on his debts. More importantly, the taxpayer was brought into compliance and will be able to avoid any future accruals. It’s important to note here that I was able to take money that would have had to be paid towards the old debts and shifted that money to pay on the current tax year, thereby avoiding future accruals and helping him qualify for a very low payment. Over the 10 years the IRS has to collect a debt, he will only have to pay them $3,000, so he is saving nearly $100k.
A woman injured on the job and denied claims by her employer…
The client owed $70,000 to the IRS. She accrued these liabilities because she had a really bad on the job accident and her employer tried to deny the claim for benefits.
She had to drain her IRA for medical and living expenses, generating large balances and penalties. We filed an Offer in compromise for her, with the Offer amount being $40. After negotiating with the offer examiner, we agreed to the original Offer terms and she paid only $40 to the IRS to settle the $70,000 debt. That is 0.06% of the debt.
The client later won a lawsuit against the employer and was able to receive a sizable judgment. Had I not previously settled her IRS debt, she would have had to pay the entire $70,000 to the IRS out of her proceeds.