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CGCPA
CGCPA, CPA
Category: Finance
Satisfied Customers: 3738
Experience:  40+ years experience in taxes and financial planning
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I received some very poor assistance from the accountant who

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I received some very poor assistance from the accountant who has been handling my tax returns since I became an independent contractor in 2005. My husband and I were audited for the tax years 2008 and 2009 and as we sat at a meeting with the auditor and our accountant we were shocked and horrified to find out she was not very familiar with the tax rule regarding mileage and "tax home." My husband's mileage was called into question because he is a construction worker and much travel a great deal for his job. The problem is the auditor says that his drive from our home to the job site is not deductible because they are commuting miles. We argued that his job does not begin once he gets to the job site because often times he makes stops to pick up materials for the job on his way to the job site or he has to meet his boss before he goes to the job site or he has to stop at the company's main office before he goes to the job site. We were successful with getting the auditor to allow some of his mileage. However, because of our accountant's incompetence we owed over $11,000.00 in taxes for 2008, over $7,000.00 in taxes for 2009, and in 2010 we owed over $22,000.00 because she advised me that I did not have to pay quarterly taxes because enough tax was taken out of David's pay which is the reason why we received a refund in 2008 and only owed about $1,000.00 in 2009! Needless to say, I am making bi-weekly payments to the IRS and NYS for my 2011 tax obligation. Now that I have written my saga, my question is are there are any grants or is possible to get a small business loan to pay these back taxes? I have tried using the equity in our home, but was told we didn't have enough so I did refinance and lowered our interest rate from 6.75% to 3.875% for a monthly savings of over $300.00 per month. I don't have enough credit available on credit cards to pay that much, and I cannot use my American Express business account gold card to pay that amount because I need that card to pay for expenses in relating to my job. I am scared to death that I won't be able to find financing before the IRS freezes my assets and thus effectively makes it impossible for me to do my job. Any suggestions/advice would be appreciated!! Thank you!
Submitted: 2 years ago.
Category: Finance
Expert:  CGCPA replied 2 years ago.

Welcome to Just Answer. I am here to help you resolve your tax and finance concerns. Please feel free to ask anytime you need extra help.

 

I am sorry that you received bad advice. This places you in a terrible situation. However, there are several things you can do to help this along the path to resolution.

 

1.You can ask, and if need be sue, the old accountant for the penalties and interest imposed because of the incorrect advice. This will not remove the entire issue but may ultimately assist you financially.

 

2.You were not properly advised about the payment arrangement. The IRS, while not a bank, is willing to enter into such arrangements to help taxpayers resolve their debts while not falling further behind. The downside of this is that the fees they charge are quite high and the interest will continue to accrue until the debt is paid in full. Here is a short piece from the IRS about this. It has links to forms and other information you may wish to consider. I will then continue my remarks in another post due to space limitations.

 

Payment Plans, Installment Agreements

You can make monthly payments through an installment agreement if you're not financially able to pay your tax debt immediately. However, you will reduce or eliminate the amount of penalties and interest you pay and avoid the fee associated with setting up an installment agreement if you pay your tax bill in full. Before you apply:

  • File all required tax returns;
  • Consider other sources (loan or credit card) to pay your tax debt in full to save money;
  • Determine the largest monthly payment you can make ($25 minimum); and
  • Know that your future refunds will be applied to your tax debt until it is paid in full.

Avoid the fee for setting up an installment agreement

Pay the full amount you owe within 120 days to avoid the fee. You should apply online to specify this option (or call if you owe more than $25,000). If you cannot pay the full amount within 120 days, the fee for setting up an agreement is:

  • $52 for a direct debit agreement;
  • $105 for a standard agreement or payroll deduction agreement; or
  • $43 if your income is below a certain level.

Apply for an installment agreement

Understand your agreement, avoid default

To keep your account in good standing:

  • Pay at least your minimum monthly payment when it's due (direct debit or payroll deductions make this easy);
  • Include your name, address, SSN, daytime phone number, tax year and return type on your payment;
  • File all required tax returns on time;
  • Pay all taxes you owe in full and on time (contact us to change your existing agreement if you cannot);
  • Continue to make all scheduled payments even if we apply your refund to your account balance; and
  • Ensure your statement is sent to the correct address, contact us if you move or complete and mail Form 8822, Change of Address (PDF).

If you don't receive your statement, send your payment to the address listed in your agreement.

There may be a reinstatement fee if your agreement goes into default. Penalties and interest continue to accrue until your balance is paid in full. If you are in danger of defaulting on your payment agreement for any reason, contact the IRS immediately. The IRS will generally not take enforced collection actions:

  • When an installment agreement is being considered;
  • While an agreement is in effect;
  • For 30 days after a request is rejected, or
  • During the period the IRS evaluates an appeal of a rejected or terminated agreement
CGCPA, CPA
Category: Finance
Satisfied Customers: 3738
Experience: 40+ years experience in taxes and financial planning
CGCPA and 3 other Finance Specialists are ready to help you
Expert:  CGCPA replied 2 years ago.

3.Another option available to you is to submit an Offer In Compromise (OIC). This is a process which enables you to offer to settle the debt for less than full value. The OIC process has a downside as well. It is a task requiring a great deal of disclosure and can be complex. If you chose this route you should seek professional assistance from either a CPA or tax attorney. You can best find these professionals through referrals from family, friends, or coworkers. To enable you to familiarize yourself with the OIC process, I am attaching another piece from the IRS. It will follow my last comment. If you need further assistance, please feel free to ask.

 

Offer in Compromise

An offer in compromise allows you to settle your tax debt for less than the full amount you owe. It may be a legitimate option if you can't pay your full tax liability, or doing so creates a financial hardship. We consider your unique set of facts and circumstances:

  • Ability to pay;
  • Income;
  • Expenses; and
  • Asset equity.

We generally approve an offer in compromise when the amount offered represents the most we can expect to collect within a reasonable period of time. Explore all other payment options before submitting an offer in compromise.

Make sure you are eligible

Before we can consider your offer, you must be current with all filing and payment requirements. You are not eligible if you are in an open bankruptcy proceeding.

Submit your offer

You'll find step-by-step instructions and all the forms for submitting an offer in the Offer in Compromise Booklet, Form 656-B (PDF). Your completed offer package will include:

  • Form 433-A (OIC) (individuals) or 433-B (OIC) (businesses) and all required documentation as specified on the forms;
  • Form 656;
  • $150 application fee (non-refundable); and
  • Initial payment (non-refundable).

Select a payment option

Your initial payment will vary based on your offer and the payment option you choose:

  • Option 1: Submit an initial payment of 20 percent of the total offer amount with your application. Wait for written acceptance, then pay the remaining balance of the offer in five or fewer payments.
  • Option 2: Submit your initial payment with your application. Continue to pay the remaining balance in monthly installments while the IRS considers your offer. If accepted, continue to pay monthly until it is paid in full.

If you meet the Low Income Certification guidelines, you do not have to send the application fee or the initial payment and you will not need to make monthly installments during the evaluation of your offer. See your application package for details.

Understand the process

While your offer is being evaluated:

  • Your non-refundable payments and fees will be applied to the tax liability (you may designate payments to a specific tax year and tax debt);
  • A Notice of Federal Tax Lien may be filed;
  • Other collection activities are suspended;
  • The legal assessment and collection period is extended;
  • Make all required payments associated with your offer;
  • You are not required to make payments on an existing installment agreement; and
  • Your offer is automatically accepted if the IRS does not make a determination within two years of the IRS receipt date.
If your offer is acceptedIf your offer is rejected
  • You must meet all the Offer Terms listed in Section 8 of Form 656, including filing all required tax returns and making all payments;
  • Any refunds due within the calendar year in which your offer is accepted will be applied to your tax debt;
  • Federal tax liens are not released until your offer terms are satisfied; and
  • Certain offer information is available for public review at designated IRS offices.
  • You may appeal a rejection within 30 days using Request for Appeal of Offer in Compromise, Form 13711 (PDF).

<< Make a Payment

Icon of cover of printed Publication 656-B

Find all you need
to consider and make an offer in Form 656-B, Offer in Compromise Booklet (PDF)

Icon of cover of printed Form 656-L

Doubt as to Liability
If you believe there is verifiable doubt that you owe part or all of your tax debt, use Form 656-L, Offer in Compromise Doubt as to Liability (PDF)

Get Help

Icon of cover of printed Publication 594

Pub. 594: IRS Collection Process
Explains the actions IRS may take to recover taxes owed. Download Pub. 594 (PDF)

There is one other thing you need to be aware of. Since the IRS has changed your tax returns you will need to file amended NY returns to reflect these changes. NY also has payment agreements and an OIC process. These can be found at the NYS Tax Department's web site www.nystax.gov

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