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. He had $439 in his bank account. He has two credit cards (1) Credit limit $18,500, amount owed 8,592 (2) Credit limit 7,500 amount owed $6,247. He owns two cars (1) 2011 Nissan Quest, miles 85,000 (2) 2012 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.

Provide forms: 656 for the offer in compromise and 433A

Answer 1

1. The forms needed is Form 656 for the offer in compromise and attched 433A

2. Yes, the client qualify for offering compromise.

Out of the three grounds based on which IRS can grant offer in compromise the client meet the following criteria:

IRS can accept a compromise based on effective tax administration. An offer may be accepted based on effective tax administration when there is no doubt that the tax is legally owed and that the full 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.

3. Amount that can be offered to IRS = 3333 x 60 + (210000 - 177395) = $232585