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R. Klein, EA
R. Klein, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 3374
Experience:  Over 20 Years experience
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Hi. I have several filed all of my personal taxes, but owe

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Hi. I have several filed all of my personal taxes, but owe $200,000 in back taxes including penalties and interest. At the point FINALLY where I can make estimated taxes to become current and begin to chip away at back payments. My current Tax Lawyer doesn't seem to have my best interest at heart - I'd like to reduce what I owe as much as legally possible so I can get out from under and put this to rest. He seems to feel less than optimistic. Is it reasonable that the IRS may lower the payments due???

R. Klein, EA :

Thank you for contacting me about your Tax issue. I will work hard to help you understand the issue clearly.

R. Klein, EA :

I'm not sure I understand correctly, but have you filed all of the tax returns that are past due as of now?

R. Klein, EA :

If so, there are programs that can provide you relief, either temporarily or permanently.

R. Klein, EA :

Assuming you are current on all returns, I have a few questions:

R. Klein, EA :

1) Do you have 200K in net worth (not including this debt)?

R. Klein, EA :

2) In what general range is your income (if you don't mind me asking)? (Nearest 25K is close enough)

R. Klein, EA :

3) How many people in your family on on your 2012 tax return?

Customer:

Yes, all tax returns are filed. We are delinquent in paying. We have paid part of 2008, and the 200k represents 2008-2012. We have paid or are paying all VA taxes. Our home has POTENTIALLY just about $200k - advised that by the time we refinance it might not generate a large enough chunk of money to cover the debt. Just recently we are making an estimated $28k/month. We had been earning $15k/month and then lost 80% of our business when the economy tanked. Took all of our savings and assets to stay afloat while we rebuilt. There are 2 of us in the family - but we also have large expenses for caregiving my 89 yr old Mother.

R. Klein, EA : The IRS offer in Compromise program makes it possible to settle with the IRS for less than you owe, but it sounds like your income is too high.
R. Klein, EA : If you are making 28k a month, the IRS will expect you to prioritize your spending? With that kind of income, after you pay current taxes, mortgage and basic living expenses, I would expect the IRS to assume you have at least 10k per month to pay down your tax bill. This would take you about 2 years of sacrificing some of your luxuries that you see as necessities.
R. Klein, EA : i am not making commentary on your lifestyle here. The Formula the IRS uses is hard and fast and takes into account the average cost of Americans' expenses of food, shelter, and transportation and medical expenses.
R. Klein, EA : The minimum offer also must equal your net worth, so on both income and assets, you will not qualify for an OIC. So don't waste your time with the firms on TV.
R. Klein, EA : The IRS will likely grant you an installment plan to pay! but again! your convenience of paying is of no concern to the IRS. If you can knock out this debt in 24-36 months, then you will get your pain behind you.
R. Klein, EA : again, EXPECT your lifestyle to be impacted. This is a bitter pill.
R. Klein, EA : I wish I had better news, but I am both a realist and an experienced negotiator in dealing with the IRS.
Customer:

No need to apologize at all! We recognize the severity of the situation we are in and truly want to put this behind us. I also understand the IRS has no way to understand the whys and whatfors of the situation. I had determined $10k to be the amount we would most likely be asked to pay on a monthly basis and am fully prepared to come up with this. Most of the reason 'why' lately has been caregiving for my Mom and 96 yr old Aunt. Assisted Living isn't cheap and Medicare and supplemental insurance doesn't cover everything and the supplemental plans are pricey as well.... Thanks for you honesty and it makes me feel better to know that my current folks aren't overlooking any potential ways to reduce the penalties or interest. You sound like an honest, straight shooter and I highly value those attributes. If you practiced in the VA area I'd go to you and wish you every success.

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