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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3854
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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We have been having some problems with the IRS for a few years

Resolved Question:

We have been having some problems with the IRS for a few years and had hired a company to handle the problem. They are now bankrupt and the issue is not resolved. My question is: If I receive an inheritance of a portion of stocks left by a parent (less than would qualify for inheritance taxes), would the IRS go after those stocks? They already are taking 15% of my social security check at the present time.
Submitted: 10 months ago.
Category: Tax
Expert:  Lane replied 10 months ago.

Lane :

Hi,

Lane :

Do you know if your parents will be transferring more than the lifetime exemption of $5,250,000?

Lane :

ok i see now that you said less than would qualify ....

Lane :

I would highly recommend that your parent do a vary simple revocable living trust (NOT the IRRevocable type, needed to avoid estate taxation) but rather a will replacement, that allows their assets to bypass the probate process ... thereby keeping the transfer NOT a matter of public record

Lane :

Cant guarantee that IRS wouldnt place a lien or do a levy against a bank account (depending on the facts and circumstances of your case)

Customer:

It is too late for that, mother has passed recently and the four children are trying to finalize her estate. Some of it is in stock at Fidelity. I have to make a choice of taking my portion either in certified check or set up my own stock account for my portion of the stock. They are very good stocks and it might be wise to keep my share, but, I don't want to do that if the IRS can take, or force me to sell them and take the money. We placed our trust in a company and paid them, what I consider a large sum of money to resolve these issues and it appears they have made it worse and then went bankrupt leaving us high and dry. I don't know who to trust or get advice from at this point.

Lane :

SO sorry ... Can you tell me a little more about your case with IRS? - Would it be reasonable to say that the 15% is satisfying them, or have they mentioned liens and/or levys?

Lane :

FOr example ... how long has it been ... have they tried to levy or put a lien on any EXISTING accounts?

Lane :

Also, do you know if you will be getting a K-1 from the estate (as a beneficiary)?

Lane :

Still with me?

Customer:

In 2009 we received letters from the IRS wanting us to pay them over 200,000 dollars for tax years 2000 through 2007. I did not have copies of the tax returns that I could locate and send to them and could not, at that time find any documentation for those years. The company we hired was located in Houston, Tx. and had us sign all kinds of papers including tax forms which we stupidly signed. It appears they filed those returns only applying the standard deductions for those years. I don't know how that has impacted the situation. I honestly have been burying my head in the sand over this. My husband was ill for over a year before he was diagnosed with advanced stage four Hodgkin's lymphoma and then spent most of 2011 doing chemo and radiation. I am self employed and did little work through the last half of 2011 and then had back surgery myself in Aug of 2012, also not working very much that year. My husband is now disabled and has been on long term disability through his previous employer until he just became eligible for Social Security Disability. It has been rough since all of this has started. Any money we have had has been used to get us through to this point. My income this year thus far has only been about 18,000 plus my social security and my husband's disability income. There is also a house of my mothers which has just gone on the market and she did have some CD's. Her will indicated no probate was wanted but the bank with the CDs is requiring probation of the will and I do believe it is probable the sale of the house would require probate. Sorry to go on and on but I am just so frustrated and troubled by all of this.

Lane :

That's ok the background helps ... let me give you a couple of things here ...

Lane :

First, if she had a will and someone has notified the probate court, then unless it can be found to be invalid or contested as being made under duress, etc. there has to be probate ... only trusts and accounts that already have a beneficiary through either AGREEMENT (like life insurance or IRA beneficiaries and transfer on death agreement on accounts) or through OPERATION OF LAW (like jointly held accounts) can bypass probate ... even when theres NO will the probate court applies what called intestate succession rules to probate the estate ... so it takes some pre-planning NOT to go through probate ... HOWEVER ... what we're dealing with here is the transfer of those assets to you 2 questions:

Lane :

(1) When did the IRS start taking the 15% and what sort of letter, documentation or notice did you receive ... and

Lane :

(2) Have you been told that you will (or have you aleady) received and K-1 or other tax reporting form associated with the transfer?

Lane :

sorry for the typo "any" K-1, 1099, etc.

Lane :

One the GENERAL situation, you should really consider an offer in compromise ... Given your situation, you may be able to do something about the ROOT PROBLEM that way ...Regarding this transaction, I think it depends on (1) whether there's going to be any tax reporting of the transfer and (2) how aggressive/proactive the IRS is being here ... its POSSIBLE that as they have already seen that the 15% of the SS checks is all there is "to get," anf if's there's noting to draw attention here...

Lane :

'On" the general...

Customer:

There were a couple of accounts that were jointly owned or beneficiary named and those have not been declared in the probate process and have been equally dispersed among the four of us. I do not know anything about a K-1 or if I will receive one. I know the IRS has been taking the money out of my social security check all this year and probably last year....I don't really know how long. They've also found my husband is just recently gone on social security and have notified us by letter they will be taking 15% from his check. Oddly, this month, either federal taxes were not applied to my check or they did not take the 15% from my check. I don't know which but the check was higher. I usually get a statement from the IRS every month stating they have taken the 15%. We've received a letter of 'Levy on Social Security Benefits' dated Oct. 7th, saying they will be taking the 15% from his.

Lane :

I see you're typing, I'll wait

Lane :

Very quickly, it could very well be that they have decided to take from his because of a higher amount? (15% of bigger number?) and if so, COULD indicate that they will not do more than that (having dropped yours).

Customer:

I don't know whether you got what I just entered but it disappeared from my screen. IRS has been taking their percentage out of my social security check for some time. I filed for social security when I was 66 and am 69 at present. We received letters Oct. 7th stating they would be taking 15% out of my husbands disability check and it was a 'Levy on Social Security Benefits' letter. There were some bank accounts that were jointly owned or named beneficiaries on that have been resolved and split between the four of us. The stock account at Fidelity was, I believed, named to my brothers who are going to split the stocks between them and then each will split their half with either my sister or myself, giving each a fourth of the stock or money whichever each of us decide. On the general side, I have managed to find some documentation on the 2000-2007 but I'm sure not all of it but I've never found copies of the tax returns or documentation relating to those returns. I have not filed for 2010, 2011 or 2012; perturbed at how to proceed with all of this. I know have a real trust issue with getting this resolved. I paid that company 11,000. to handle and I've not been able to give anyone anything toward resolving all of this until this gift from our mother.

Lane :

Again, I think the answer to your ORIGINAL question will turn on two things; whether there will be any reporting of the inheritance ... (and setting up a new account with YOUR tax ID could also raise the flag) and how aggressively IRS is watching to see if you open any new accounts

Lane :

I DID see the above both times

Lane :

I really believe that you are candidates for an offer in compromise ... see thsi, from IRS: "The IRS recognizes that many taxpayers are still struggling to pay their bills so the agency has been working to put in place common-sense changes to the OIC program to more closely reflect real-world situations."

Lane :

And to be honest, the only way that you could make yourself "bullet proof here is to take the check NOT open an account (which will require your tax ID) and then use the OIC (Offer in Compromise) the erase the fundamental problem

Customer:

Is an Offer in Compromise something I would handle or would I need an attorney to handle for me?

Lane :

You an do this ... It's cumbersome, with some real detail, but many do

Lane :

The Form 656-B, Offer in Compromise Booklet, and Form 656, Offer in Compromise, has been revised to reflect the changes making it easier to be approved.

Customer:

Thank you so very much for your help and your patience.

Lane :

You're very welcome

Lane :

I really would consider sitting down at the kitchen table and working through this, just taking some action begins to relieve the stress ...

Lane :

If this HAS helped, I would appreciate a rating of 3 (ok) or better, that's the only way I will be paid for my time, othrwise JustAnswer keeps BOTH halves of your payment ...

Lane :

By the way, once you rate, all of the links (and our entire conversation) will stay active and be here for your reference

Lane :

Hope this has helped

Lane :

Lane

Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3854
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and 2 other Tax Specialists are ready to help you
Expert:  Lane replied 10 months ago.

Thanks so much Linda.

Let me know if I can help further.

If you'd like to ask for me on another question, just say "For Lane only," at the beginning OR you can set me up as a preferred expert on your home page.

Regardless, thanks again, and good luck.

Lane

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