Question

Your client is in big trouble. He owes $1.3 million to IRS for the year ended December 31, 2017. He won a lawsuit on June 1, 2016 in the amount of $5 million and lost almost everything in day trading. He just forgot to pay taxes on his winning of law suit. He is married and has three children-16 years, 12 years and 11 years old. He makes $3,333 per month. H had $439 in his bank account. He has two credit cards (1) Credit limit $18500, amount owed 8,592 (2) Credit limit 7,500 amount owed $6,247. He owns two cars (1) 2006 Nissan Quest, miles 85,000 (2) 2007 Maxima miles 87,000. He has clear title to these cars. He owns a house in Kingwood Texas –purchase price $217,000 date acquired 02/01/01 current value 210,000 loan balance 177,395 monthly payments $1,585. There are quite a few homes on sale in his neighborhood.

Answer 1

here the form that has to be used is Form 656 for the offer in compromise and attached 433A

the client qualify for offering compromise

the criteria for offering compromise are:

• IRS can accept a compromise based on effective tax administration (i.e., no doubt that there is no doubt that the tax is legally owed and that the free amount owed can be collected but requiring payment in full would either create an economic hardship or would be unfair and inequitable because of exceptional circumstances.

amount that can be offered to IRS is per month salary + (current value of property (house) owned - liability (loan))

3333 + (210000 - 177395) = $232585