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Arthur Rubin
Arthur Rubin, Tax Preparer
Category: Tax
Satisfied Customers: 1233
Experience:  22 years of tax preparation experience, including individual, trust, and estate returns.
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I need to talk to someone about and IRS problem I am having,

Customer Question

I need to talk to someone about and IRS problem I am having, received a tax bill for old (2002) employee taxes, and I'm worried, need to know my options. It's roughly $11,000 plus added interest of another $6,000. Isn't there a statute of limitations? They already filed liens several years ago, but I have no property work speaking about for them to levy. Worried about having my wages garnished if I continue to ignore it. I tried a payment plan several years ago, and paid $200/month, but they added more interest than that back on each month so I was going nowhere. I eventually filed CH13, but did not follow thru with that, but they left me alone for the past 6 years, until now.
I'm wondering if I set up another payment plan, would there be a chance of paying the minimum $25/month for the rest of my life, just so they will leave me alone? Should I take a chance and wait it out for the statute of limitations? If they would drop the tax liens, I would be more likely to possibly get a loan to pay it off, but credit sucks now and I can't even get a credit card. Any way they would drop the interest? I know this is a lot of questions without you knowing more information about my finances, but I don't know where to start. I'm scared to call them and ask questions.
Please help!
Submitted: 2 years ago.
Category: Tax
Expert:  Arthur Rubin replied 2 years ago.

Arthur Rubin :

I may not be able to help you, but I need more information to be sure. Is this for so-called "trust fund" taxes (Social Security, Medicare, employee withholding)? Were you the actual employer, or just a "responsible party"?

Customer :

Yes, this was for payroll taxes that were not paid. I was the responsible party in the corporation that I operated for several years, but obviously had financial problems and closed the business. I was the President/CEO of the corporation. There are three different tax bills, two from 2002 and one from 2003. I'm pretty sure they were all three payroll taxes, but it has been so long now, I will have to go dig out all my old paperwork to find out for sure. The tax bills say to reference CVL PEN on my check if I send payment, I don't know if that means anything to you.
Thanks for your help with this, I am just sick over it.

Arthur Rubin :

I don't think chapter 13 would help on payroll taxes, although it would help for income tax liability more than 3 years past.

Arthur Rubin :

The statute of limitation for assessment of payroll taxes is approximately 3 years, so they probably already met that, and your previous payment plan probably included a clause that you agreed to the amount of the taxes, so the assessment is settled.

Arthur Rubin :

Collection statute of limitations are usually 10 years with the IRS option to extend for another 10, but it may be longer for trust fund taxes. "CVL PEN" means "civil penalty", so it's no longer exactly a tax.

Arthur Rubin :

I don't really know IRS settlement policy for trust fund taxes, but I don't think they'd accept an agreement which wouldn't pay off the debt within 10 years, unless they think there's no chance of collecting from you. $25/month wouldn't cover the processing fees, in their opinion.

Arthur Rubin :

They cannot drop the interest; any additional penalty could possibly be negotiated, but the IRS cannot forgive interest even if they believe it unjust.

Arthur Rubin :

Yep, the collection statute of limitation is 10 years from assessment; I can't find the revival clause for trust fund taxes, so they might not have an option to renew.

Customer :

When I had filed CH13, the only thing I got help with on repaying the tax debt was that they took off the interest and allowed me to pay back the tax amount without accruing more interest. The amount of interest they add back on each month makes it impossible to ever pay it off. I don't know if I need to talk to a bankruptcy attorney about the options there, I just hate to have another bankruptcy on my credit report, the old one is just now fixing to fall off. I don't know which is worse the tax liens or another bankruptcy. I am in such a mess.
So are you saying that in the previous payment plan I may have given up any opportunity for the statute of limitations to help me?
So if I wait it out until 2012 for my 2002 taxes, I may not have to pay them?

Arthur Rubin :

The previous collection plan agreed to the assessment, and may have waived the collection statute of limitations until it would have been paid off.

Customer :

So I will have to pay it, regardless if it takes me the rest of my life??

Arthur Rubin :

Possibly not; the collection plan obviously would have waived the collection statute of limitations until it would have been paid off, but the exact date would depend on details of the plan.

Arthur Rubin :

As removal of the lien, they might do it if you could give (not promise) them more than they think they could collect under the lien. You'll probably need a lawyer to vet the agreement, though. If you're not careful, any payments you make under the plan would first be applied to current taxes.

Customer :

So I need to dig through storage and find my old papers and see exactly what I agreed to with the payment plan?
If they set up a payment plan with me now, it would have to be a monthly amount that would pay it off in 10 years or less?

Arthur Rubin :

Either pay off in 10 years or less, or have an agreement to waive the statute until it would be paid off, yes.

Customer :

I am current on my taxes with the exception of those 2 years of corporate taxes that I never paid. They have kept my income tax refund each year as well.

Customer :

I think I remember when we were figuring the amount in the previous agreement, he figured to at $200/month because he said that amount would pay it off in less than 10 years.

Arthur Rubin :

Did they apply the income tax refunds to the trust fund debt, then? There should be some accounting....

Customer :

How would I find that out?

Arthur Rubin :

If you want to know where your refunds are going, I'd suggest calling the regular IRS information line, rather than any number given you on the collection notices. If you want to know (at least what the IRS thinks) the current statute of limitations waivers, the number on the collection notice would be the way to go.

Customer :

I'm assuming they did, the letter I received said I would not receive my refund because I owed federal debt, and that the amount would be applied, but that is pretty much all it said. It wasn't much though, a couple hundred dollars.

Customer :

It won't work against me if I call the IRS and ask questions like that?

Arthur Rubin :

It's possible the interest is dischargable in bankruptcy, even if they underlying tax (or penalty) would not be. But that's more a bankruptcy question than a tax question.

Arthur Rubin :

I've got a personal emergency here with my wife; I'll get back to you in about an hour or two.

Customer :

I'm almost certain the ch13 had dropped the interest amount, but after about 3 months of payments, I couldn't keep it going and they dismissed it.

Customer :

ok, thanks

Arthur Rubin :

I don't think asking questions would hurt.

Customer :

I will spend some time tomorrow trying to find all of my old papers and then I'm sure I will be able to give more details. Thanks so much for your help!

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