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Author: RBMunkin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: deal with IRS Date: 4/22/2011 10:33 PM
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Hi,
Does anyone here know about making a settlement deal with the IRS, how to do it?
A friend is going back six years to file taxes from 2005-2010 and is going to owe a lot of money. Can he say to the IRS, I owe you $20K, will you accept $12K or something like that?
Thanks,
RB
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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113278 of 121061
Subject: Re: deal with IRS Date: 4/22/2011 11:09 PM
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A friend is going back six years to file taxes from 2005-2010 and is going to owe a lot of money. Can he say to the IRS, I owe you $20K, will you accept $12K or something like that?

Yes. It's called an offer in compromise, and it's not a DIY project. I would urge him to check www.naea.org for an enrolled agent experienced with this process. Stay away from the TV hucksters.

Phil
Rule Your Retirement Home Fool

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Author: RBMunkin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113279 of 121061
Subject: Re: deal with IRS Date: 4/22/2011 11:12 PM
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Ok, thanks for the advice not to DIY. I thought maybe one could because for sales tax in California it's quite DIY. I guess the IRS is a different beast!
I'll pass on that web site to him.

Thanks,
RB

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Author: charliebonds Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113283 of 121061
Subject: Re: deal with IRS Date: 4/23/2011 4:36 PM
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RB,

I've settled twice with the IRS and on my own terms, not theirs, meaning I paid what I owed, not what the auditors initially said I owed. But I wasn't tried to cheat in the first place, and my records were impeccable.

The first time, in 2004, the amount in dispute was $465,000. The final settlement was $17 dollars (or something similar). Just recently, they came after me again, this time for about $3,500, but once I re-did my return and corrected their mistakes (and mine), they settled with a zero change in more taxes owed.

My experience with the IRS, is that, by and large, they are honest, decent people trying to serve the public within the training and guidelines they have received. It's when matters and numbers get outside of their expectations that misunderstandings arise which get further complicated if the return contains its fair share of the inevitable errors (in both directions, their favor and yours) one makes with complicated returns involving hundreds of transactions such as any active investor will have.

But if you can provide the documentation they are legally required to ask for and have a legal right to see, then a settlement is a straight-forward matter (even if the docs run to 236 pages, as they did in my 2004 tussle with them).

So my advice is this. Don't be belligerent. Ask what they need to see and then provide it. If a person is filing an honest return, he/she will be dealt with fairly and doesn't need a lawyer, accountant, etc. Their published rules can be deciphered and followed by "ordinary citizens". All that is required is patience, common sense, and honesty.

Charlie

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113285 of 121061
Subject: Re: deal with IRS Date: 4/23/2011 5:01 PM
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But if you can provide the documentation they are legally required to ask for and have a legal right to see, then a settlement is a straight-forward matter (even if the docs run to 236 pages, as they did in my 2004 tussle with them).

So my advice is this. Don't be belligerent. Ask what they need to see and then provide it. If a person is filing an honest return, he/she will be dealt with fairly and doesn't need a lawyer, accountant, etc. Their published rules can be deciphered and followed by "ordinary citizens". All that is required is patience, common sense, and honesty.


Your settlements appear to have been agreement upon and payment of the amount owed. What the OP is asking about is an "offer in compromise," where both the IRS and the taxpayer agree that the taxpayer owes more that the taxpayer can (or possibly wants to) pay, since the OP said A friend is going back six years to file taxes from 2005-2010 and is going to owe a lot of money. Can he say to the IRS, I owe you $20K, will you accept $12K or something like that?

As already advised, an offer in compromise is not something that should be attempted without prfessional advice. If the taxpayer was willing/able to pay what both the taxpayer and the IRS agreed is owed, then your approach would be more appropriate.

AJ

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Author: vkg Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113286 of 121061
Subject: Re: deal with IRS Date: 4/23/2011 5:06 PM
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I've settled twice with the IRS and on my own terms, not theirs, meaning I paid what I owed, not what the auditors initially said I owed. But I wasn't tried to cheat in the first place, and my records were impeccable.

The OPs situation and yours are different. You had filed returns, paid the taxes due and had the documentation to backup the returns.

The situation the OP is asking about is someone who hasn't filed returns for 5 years. They will owe a significant amount of back taxes including penalties and are planning to trying an offer in comprise to pay less than is due.

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Author: charliebonds Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113289 of 121061
Subject: Re: deal with IRS Date: 4/24/2011 12:26 PM
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A friend is going back six years to file taxes from 2005-2010 and is going to owe a lot of money. Can he say to the IRS, I owe you $20K, will you accept $12K or something like that?

AJ & VKG,

My apologies to you both for my misunderstanding. I made the mistake of assuming that the person wasn't a tax-criminal and that he was merely trying to correct earlier filings.

Charlie

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Author: JeanDavid Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113292 of 121061
Subject: Re: deal with IRS Date: 4/24/2011 1:56 PM
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Hidden cost in not filing.

Some one I used to know never filed an income tax return. He was self-employed and did everything in cash. All went well until he got married. When it came to his wife's attention that he never filed on his taxes, she insisted that he do so forthwith. He protested that if he did so, he might have to explain to the IRS how he supported himself for the previous 20 years or so, and did not care to do that. She opined that no filing, no social security and no medicare for the family. He was unconvinced. So she divorced him.

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Author: vkg Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113294 of 121061
Subject: Re: deal with IRS Date: 4/24/2011 2:41 PM
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I made the mistake of assuming that the person wasn't a tax-criminal and that he was merely trying to correct earlier filings.

Tax criminal maybe an over statement. The road to tax problems is often not a deliberate plan. There are many paths:
Delyaing (and never getting around to) paying taxes to avoid facing that a business is failing or
Just living beyond their means and believing soon they will be able to fix the problem.
Add in a job loss or underemployment and the house of cards falls.

For an Offer in Compromise to be accepted, the person needs to not have the income or assets to pay the taxes due. The IRS (and state) have more options than credit card companies.

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