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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4229
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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IRS NOT COLLECTING? i owe around $250K in back taxes, penalties,

Resolved Question:

IRS NOT COLLECTING?

i owe around $250K in back taxes, penalties, etc. about three (3) years ago i tried to work up a payment plan with a local agent whom has since retired. When the payment plan fell through, the IRS garnished every account about which i had provided them information. i closed all accounts and opened new ones at different banks and haven't heard from them since.

i was reading in another thread on here that the lien never goes away. i don't believe that is accurate here because the lien language itself says that it expires ten(10) years after it is filed. this may be a state law thing, i'm not sure why.

i do understand that they could renew the lien. however, when working with the now-retired agent, he stated that the only way they would do that is by taking the debt itself, then processing it through the local courts to obtain a judgment, and then to re-assert the lien, the second time, as a judgment lien.

i'm about four-five years in as to the majority of back taxes owed. i'm somewhat comfortable waiting the ten(10) years and crossing the fingers in hope that they don't resurface in the meantime.

i did receive several statements just a month or so ago showing how much was due for each year--as did my wife--but nothing came via certified mail and no real follow up (just the standard language) was suggested.

question: can you reply regarding the lien expiration issue?

question: is there a chance that my file has fallen through the cracks somehow? it makes no sense as to why i haven't heard anything since the bank accounts were levied and since the previous agent retired.

question: could it be that he just liked me and shredded my file on his way out?

thanks!
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

NPVAdvisor :

HI,

Customer:

hello

NPVAdvisor :

OK, I can help you walk through the issues here ... But they CAN renew the lien, and your previous guy was right ... it does take going through judgment and execution, but that's not neccessarily a difficulty for them

Customer:

right. i think i have a handle on how that works--but if they are not collecting at all now--i don't see them doing that at the last minute--maybe i'm wrong--who knows.

NPVAdvisor :

What it will probably turn on (and I don't think anyone here can really provide this information) is whether their doing it is cost effective (or will be determined as a diminimus issue - more costly to obtain than the revenue generated for them)

NPVAdvisor :

They DO have to re-file within thirty days (the law says filed timely, and the courts have sadi that means 30 days)

NPVAdvisor :

What I'd watch for is a lot of activity in the year before the 10 yr is up ... and do remember that offers and other things toll (stop the cloxk) on the statute

NPVAdvisor :

Just to help you see around some corners, I WOULDN'T count on it having disappeared

Customer:

right, i'm not sure my attempt at payment plan tolled it--because we never got to the point where we established one. i met with the guy a couple times, on my own initiative, and skipped out on last meeting--but only after he had a lot of financial info on me. he then levied accounts, i changed banks, and nothing since (3+ years ago).

Customer:

right-re disappearing--which is where my true dilemma lies.

NPVAdvisor :

You might want to condier ordering a transcript of your account on-line ... you can ask for an ACCOUNT transcript which will have all actions (not just returns, 1099s and W-2s

Customer:

i practiced bankruptcy law for 5-6 years before selling out that practice to a now-permanent tenant. believe it or not, based on the means test, my student loans, etc. i would qualify for a chapter 7 bankruptcy and most if not all back taxes would be gone.

Customer:

liens would stay until 10 year expiration, but then after discharge, there would be no effective way to renew liens.

NPVAdvisor :

Hang on a sec I just saw something on bankruptcy and taxes

Customer:

is there any risk in ordering a transcript causing a review of file--and then a pick-back-up on collection activity?

Customer:

taxes, generally, to be discharged have to have been assessed more than 1 year prior to the bankruptcy (maybe 2) and two (maybe 3) years must have passed since the actual filing date of the returns.

NPVAdvisor :

I really do not knw.... It's automated ... and you CAN give permission for loan underwriters. etc to order so it MAY not be a flag

NPVAdvisor :

Five Rules to Discharge Tax Debts


If the income tax debt meets all five of these rules, then the tax debt is dischargeable in Chapter 7 and Chapter 13 bankruptcy petitions.



  1. The due date for filing a tax return is at least three years ago.

  2. The tax return was filed at least two years ago.

  3. The tax assessment is at least 240 days old.

  4. The tax return was not fraudulent.

  5. The taxpayer is not guilty of tax evasion.

NPVAdvisor :

Here's a good article by an EAhttp://taxes.about.com/od/bankruptcy/qt/bankruptcy_tax.htm

Customer:

right--see i was close--it's been four years since i've handled a bankruptcy.

NPVAdvisor :

yep, you obviously have a feel

Customer:

i think i just need to pull the trigger on the bankruptcy and put it behind me. dilemma there is that i own a portion of a start-up company that is doing well and will have to sell out prior to filing--but it seems like my only way out at the time.

Customer:

otherwise, net worth and chapter 7 eligibility won't be around in five years if they pick back up on collections.

NPVAdvisor :

I'd say what you have here is a calculated risk ... also I'd be you have a way of doing a little monitoring re: and fpre-judgment filings?

NPVAdvisor :

right

NPVAdvisor :

sorry for the typos

Customer:

yes, i would see if any lawsuits were filed against me immediately in my county. use an online service that monitors those and i have my own name saved as a search watch. so the minute anything is entered in the court system with my name as defendant i receive an email

Customer:

same with wife

NPVAdvisor :

They CAN attach pre-judgment if the court thinks they have a credible case, but if you get the heads-up on the initiation of an action you should be good

Customer:

my window for the chapter 7 is really just the next six months or so. after this spring, i'd be ineligible due to cars paid off, etc.

Customer:

i'm not worried too much about pre-judgment attachments. most of my money is in the business account for me to draw from as necessary. in a worst case scenario a creditor could attach $1K-$2K

NPVAdvisor :

just be careful about mens rae ... you won't get the benefit of the doubt that you didn't do all of this WITH THE PURPOSE ....

Customer:

and the biz is not really much of an asset on paper because of liabilities associated with it. for example, even though the brick and mortar has some equity, every single client whom has paid in full, and whose criminal case is still pending, is a liability. the net worth of the biz considering that and a few disputed outstanding advertising bills, is zero or negative.

Customer:

re: mens rea--i'm not concerned. if i could pay it, i would.

NPVAdvisor :

Actually it sound like you've got your arms around it ... I think it comes down to the cost-benefit for them to go after the intent piece and that gets more expenssive (and as with everything else in life... higher risk higher reward or penalty)

NPVAdvisor :

There you g

Customer:

it's like 200K-300K. i am just barely getting by with three kids, student loans, etc. on paper, i look really broke.

Customer:

i just have the earning potential that is just right around the corner.

NPVAdvisor :

Right ... sounds like it's time to put it to bed (BK)

NPVAdvisor :

federal loans, as IM sure you know won't BE in the bankruptcy (right?)

Customer:

right--just thought i'd try to get a feel for the non-collection status i seem to be in. it seems odd. i have had a lot of clients in the past that owed a lot less but that were very intently pursed.

Customer:

pursued.

Customer:

well, hey. you've done your job in my opinion. thanks for the input and links.!

NPVAdvisor :

THis is completely anecdotal, but when it comes to the from lines folks I think they goafter non-professionals as easy pickins (pure speculation)

NPVAdvisor :

you know about OIC right?

Customer:

possibly. i did make clear to the local agent that i knew i could bk it. he liked me a lot. a real down-to-earth guy that had been around 20 years here in town.

NPVAdvisor :

OIC (and in your case) in doubt as to collectability (future earnings potentialmay be the issue there)

Customer:

OIC won't work based on folks i've consulted with. because, in part, my personal injury practice has too much random potential.

NPVAdvisor :

yep

Customer:

my biggest liability of $150K from 2006 (but filed return late) was because i settled a case that year for 900K, 1/3 of which was fee income.

Customer:

so, they know my potential for sure.

NPVAdvisor :

K, (probably stating the obvious) but watch for the regulatory bar in your state

Customer:

it's either sell my portion of the small biz (shares valued at $150K right now) and then file bankruptcy thereafter--and after having paid off some student loans. or just wait it out.

Customer:

my situation is though, if i sell all those shares at once, i'll only get $200/share for the 325 shares. the company was just listed in WSJ last week! just stinks i won't be able to sit back and ride that waive with the other founders.

Customer:

i had just sold 25 shares for $500/share two months ago.

NPVAdvisor :

should woulda coulda

NPVAdvisor :

(sorry)

NPVAdvisor :

On the student loans ... If you're talking Federal, they now have something called income based repayment, where you can get it down to something like 15% of discretionary income

Customer:

right, you mean the board of law examiners?

Customer:

bankruptcy planning is not a crime in any way shape or form.

Customer:

maybe the tax side of it, but i cannot pay that much---and in the current scenario they are not even trying to collect.

Customer:

right, i read about the student loan thing. where if you make that calculated payment for ten years (i think) that then the balance is forgiven?

NPVAdvisor :

Npe but the folks at IRS could say tax evasion is

NPVAdvisor :

you know more that I there probably, I just know that when all else fails they go for intent

NPVAdvisor :

again at your level, especially where there's a legit inability to pay, not an issue just brainstorming

Customer:

right--if that's what i was doing--but it's not. i have a debt that i cannot pay and obviously taxes are dischargeable in bankruptcies for a reason. i would love to hit the lottery or something and pay it--and not have to file bankruptcy. that's why i'm still on the fence.

NPVAdvisor :

k you aleady beat me to that one

NPVAdvisor :

RIght

Customer:

thanks for the thought though. i could see them trying to argue that it was fraudulent-but i'm not lying about anything. all of my cards are on the table and are what they are.

Customer:

three kids, wife, two cars, boat, camper, small biz law firm with five employees, etc.

NPVAdvisor :

I think you're there, no problem to document, there

Customer:

negative net worth on paper--and i say on paper because i see what the future has in store.

NPVAdvisor :

like you said "t's either sell my portion of the small biz (shares valued at $150K right now) and then file bankruptcy thereafter--and after having paid off some student loans. or just wait it out."

NPVAdvisor :

yes like I said you have the facts

Customer:

well, short of me concluding that this retired agent shred my file and put a "DO NOT COLLECT" stamp on my digital file, i'll have to file bankruptcy in the spring.

Customer:

right---and choosing to pay student loans versus tax debt is not criminal. the shares of stock are valued at $150K but i'd only get about $60-$70K in a forced sell situation.

NPVAdvisor :

yes the NCS (Non collectible status) has a 10 year as well

NPVAdvisor :

same thing really , 10 yr statute

Customer:

$60-$70K doesn't hardly put a dent in the amount i owe.

Customer:

what is NCS?

Customer:

i just made that Do Not Collect bit up.

NPVAdvisor :

exactly ... from their perspective De minimus

NPVAdvisor :

OIC

NPVAdvisor :

:)

NPVAdvisor :

Non Collectible Status

NPVAdvisor :

corry CNC - Curently not collectible

Customer:

hmm

Customer:

so, i truly could be in that status.

NPVAdvisor :

yep

Customer:

that would make sense as to why i'm receiving no collection calls.

NPVAdvisor :

that should be on the ACCOUNT ttranscript

Customer:

that status doesn't toll the ten year period right?

Customer:

i wonder how often, when and why they revisit that status?

NPVAdvisor :

No, it has its own 10 yr time frame

NPVAdvisor :

Now, you need internal eyes

Customer:

but if i go into CNC status, after the liens are filed--then the liens expire before the CNC. in other words the debts become uncollectible (unless taken to judgment) before teh CNC ten years is up/

Customer:

that sounds promising.

NPVAdvisor :

From Perez's (linked above) article: "While in not collectible status, the 10-year statute of limitations on tax debt collection is still running. If the IRS cannot collect the tax within the 10-year statutory period, then the tax debts will expire."

Customer:

right, just read that.

NPVAdvisor :

I think you have the extent of my wisdom

Customer:

because other option is to wait it out and then file a chapter 13 if and when necessary.

Customer:

hmmm...

NPVAdvisor :

food for thought ...

Customer:

now i'm back to not knowing what to do--but i've got a much clearer undertanding thanks to you.

Customer:

thank you.

NPVAdvisor :

you might want to chart this one out

NPVAdvisor :

YW

Customer:

we're done unless you want to give me an AMEX Black card number to just pay them with?

NPVAdvisor :

If only ....

NPVAdvisor :

:

NPVAdvisor :

)

Customer:

have a great day.

NPVAdvisor :

u2

Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4229
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and other Tax Specialists are ready to help you
Expert:  Lane replied 1 year ago.


Thanks for the rating.

Lane

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Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986