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The friend was notified by the Federal Government that she

Customer Question
failed to include a $4,000...
The friend was notified by the Federal Government that she failed to include a $4,000 severance payment on her 2010 taxes. The Federal Government sent her a tax bill saying she owes $1300 which includes interest and penalties. Does she have any options? Can she file an amended 2010 tax return to avoid the penalties and interest? This person is unemployed and can not pay the monies owed.
Submitted: 5 years ago.Category: Tax
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5/1/2012
Tax Professional: IRS Solutions, Certified Public Accountant (CPA) replied 5 years ago
IRS Solutions
IRS Solutions, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 42
Experience: CPA, CFS. Individual, corporation, estate, trust, non-profit tax filings. Tax debt relief.
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IRS Solutions :

Form 843 Claim for Refund and Request for Abatement may be filed after the principle portion of tax is full paid. The IRS will forgive the penalties and interest thereon if your friend has not been subject to penalties and interest for other tax filings in the recent ten years.

IRS Solutions :

http://www.irs.gov/pub/irs-pdf/f843.pdf

IRS Solutions :

Above is a link to Form 843.

IRS Solutions :

We have been successful petitioning for penalty abatement if clients have not had more than a couple of instances of penalties in the recent 10 years.

IRS Solutions :

Filing an amended return should not reduce the debt unless the IRS has an error in their computation.

Customer:

Isn't a $1,300 tax bill high for $4,000 of income? 30+%?

IRS Solutions :

Review the penalty and interest portion on the notice. Verify reasonable. If the person is unable to afford to make payments, the person may qualify for currently not collectible status or perhaps even an offer in compromise.

IRS Solutions :

Currently not collectible (CNC) status means the earnings of all members of the household income and expenses are such there is no remaining income available for payment. If this person qualifies and is approved for CNC, the IRS will not pursue collection action and the person does not have to make payment on the debt. The IRS has ten years from the filing date of the tax return to collect the debt or the debt is written off uncollected.

Customer:

Wouldn't the tax rate for the $4,000 be equal to the rate she actually paid on the 2010 tax return. I'm sure it wouldn't be more than 20%.

IRS Solutions :

The tax rate should be approximately the same. If anything, a slight increase. Review the detail in the notice for the principle portion/penalties/interest. Sometimes the IRS will group penalty portions with the principle.

Customer:

This person has filed for bankrupcy protection twice in the last 10 years. Will this have any bearing on the resolution of the matter?

IRS Solutions :

Bankruptcy will have no bearing. Tax debt can be included in BK if the debt is greater than three years of age.

IRS Solutions :

Any additional concerns?

Customer:

Not now thanks.

IRS Solutions :

Feel free to come back and discuss these matters at any time. Please leave positive feedback upon checkout. Have a nice day!!

Customer:

I will not have any additional questions. Am I obligated for anything other than the $39.00 fee for today?

IRS Solutions :

No you are not obligated any further. You may return to inquire further regarding this matter at no addtl cost.

IRS Solutions
IRS Solutions, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 42
Experience: CPA, CFS. Individual, corporation, estate, trust, non-profit tax filings. Tax debt relief.
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Satisfied Customers: 42
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