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R. Klein, EA
R. Klein, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 2879
Experience:  Over 20 Years experience
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My father owns a commercial fishing vessel that operates out

Resolved Question:

My father owns a commercial fishing vessel that operates out of Southeast Alaska but is a Washington State Business. He is being pursued by the IRS for back taxes and the IRS has so far refused to settle. It is at the point where he will lose everything. Lawyers were unable to help so far. Any suggestions on avenues to pursue? He cannot afford to pay a lawyer at this point since every dollar spent decreases his ability to pay what that IRS is asking even further.
Submitted: 1 year ago.
Category: Tax
Expert:  R. Klein, EA replied 1 year ago.

Randalltax :

So sorry to hear of your situation regarding back taxes.

Randalltax :

It's hard to suggest what to do next when we really don't know what you have done so far.

Randalltax :

In general, when there is a case of disputed back taxes, it usually comes down to one of two key issues: Inability to pay what is actually owed or disagreement with what taxes are owed. The resolution in different depending on which issue there is.

Randalltax :

In a case where the issue is disagreement of taxes assessed, the first step is to determine what is fairly owed. Failing to file a tax return for one or more years means your argument over the assessment of tax is in the government's hands only. If you filed a return, then there are several avenues to take for the next step(s).

Randalltax :

One of your options is to discuss your case with the Taxpayer Advocate, and independent arm of the IRS that can review a case and determine what is actually in the taxpayer's best interest and within their power.

Customer:

He has a CPA that has filed for him since he started his business.

Randalltax :

So is the issue he can't pay?

Customer:

Apparently they were filing incorrectly but I do need to get more information. I believe all fisherman in his area are filing the same way but my father is the only one being pursued on the issue to develop precedence.

Customer:

He cannot pay what they are asking and the IRS continues to add more in penalties and interest continually.

Randalltax :

Can or did he pay the amount he AGREES with?

Customer:

He had a lawyer attempting to settle for the past 6 months but the IRS has stayed firm on all or nothing.

Randalltax :

So, the answer is no he hasn't paid the amount he agrees with

Customer:

I don't believe he's paid anything and does not believe he should but will pay if it means he can keep his business and home.

Customer:

Correct.

Randalltax :

By not paying anything, he is not helping his case.

Customer:

He didn't make enough money to survive this year let alone pay $500K + to the IRS

Randalltax :

Has he worked a formal Offer in Compromise? Or has this been a "discussion between the IRS and the lawyer"?

Customer:

I will have to ask.

Randalltax :

Sounds like he hasn't taken the right actions yet. If he can prove he cannot pay, the IRS does not pursue that hard.

Randalltax :

Every week I get taxpayers entered into the system as Currently Not Collectible which causes collections to cease for at least a year.

Randalltax :

Something doesn't sound right with either how you are explaining the situation or how the lawyer is handling the case.

Randalltax :

First of all, I have not heard of a recent Offer In Compromise that would have negotiations from start to finish in just 6 months. It just doesn't happen that fast.

Randalltax :

And when there is a valid OIC, all collections stop immediately anyway.

Customer:

Ok, I'll have to ask more questions of my father. I haven't been directly involved. He's just fired his lawyer since he hasn't produced any results and has asked me to look into other alternatives.

Randalltax :

Father needs to find and hire an Enrolled Agent--someone who's experience is specific to tax problems.

Randalltax :

If there truly is a hardship, I usually can stop collections in as fast as 2 hours, and when there's a lot of documentation needed, it sometimes takes a whole week.

Randalltax :

This does not dismiss the case or make the problem go away, but it stops immediate collection activity for several months while the case is being reviewed.

Randalltax :

Money spent on defense will not reduce the amount he pays to the IRS, no matter what the outcome.

Randalltax :

Maybe just in his mind.

Customer:

Ok. I will have to see what he knows about the OIC as well as claiming that he's currently not collectible. I can't imagine he'd let all of this accrue if he knew he could postpone by pursuing one of these other avenues.

Customer:

Sorry, I am new to all of this and it seems I should chat more when I am with my dad so he can help me with the specifics of the situation.

Randalltax :

OK, it sounds like you'll need to gather more information about the situation. We'll be here when you return!

Customer:

He had a B&O tax specialist appeal the issue

Customer:

They said they couldn't take a lower rate at all. Even with a offer in compromise

Randalltax :

B&O is Washington state. It is NOT the IRS

Customer:

Right, I just found this out from getting further info from him.

Customer:

He was using IRS in place of B&O when describing it to me earlier

Randalltax :

It's like the difference between fishing for salmon or crabs

Customer:

Yeah exactly. He says they have been unable to find any other fisherman who have been charged this.

Customer:

It sounds like they'll loan him the money to cover it and then he can work on appealing it.

Randalltax :

Now you are going into uncharted waters for me. Never had a Washington Business tax appeal case.

Randalltax :

never had to go that far!

Randalltax :

but, at least you are getting some better information (and hopefully a good chat) with your father.

Customer:

So I should ask someone else how to proceed?

Randalltax :

I think the same basic premises apply. Only there is no Taxpayer Advocate.

Randalltax :

First you have to determine whether he has exhausted the standard procedures to object to the tax. Then he can go to the appeals process, which I am certain there is.

Randalltax :

And again, if he has no capacity to pay, Washington state, much like the IRS, will put collections on hold.

Customer:

Ok

R. Klein, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 2879
Experience: Over 20 Years experience
R. Klein, EA and 5 other Tax Specialists are ready to help you

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