offers in compromise strategies: using oics to challenge...
TRANSCRIPT
WHO TO CONTACT DURING THE LIVE EVENT
For Additional Registrations:
-Call Strafford Customer Service 1-800-926-7926 x10 (or 404-881-1141 x10)
For Assistance During the Live Program:
-On the web, use the chat box at the bottom left of the screen
If you get disconnected during the program, you can simply log in using your original instructions and PIN.
IMPORTANT INFORMATION FOR THE LIVE PROGRAM
This program is approved for 2 CPE credit hours. To earn credit you must:
• Participate in the program on your own computer connection (no sharing) – if you need to register
additional people, please call customer service at 1-800-926-7926 x10 (or 404-881-1141 x10). Strafford
accepts American Express, Visa, MasterCard, Discover.
• Listen on-line via your computer speakers.
• Respond to five prompts during the program plus a single verification code. You will have to write
down only the final verification code on the attestation form, which will be emailed to registered
attendees.
• To earn full credit, you must remain connected for the entire program.
Offers in Compromise Strategies: Using OICs to Challenge
Assessments and Request Reconsideration of Tax Bills
TUESDAY, JUNE 27, 2017, 1:00-2:50 pm Eastern
FOR LIVE PROGRAM ONLY
Tips for Optimal Quality
Sound Quality
When listening via your computer speakers, please note that the quality
of your sound will vary depending on the speed and quality of your internet
connection.
If the sound quality is not satisfactory, please e-mail [email protected]
immediately so we can address the problem.
FOR LIVE PROGRAM ONLY
June 27, 2017
Offers in Compromise Strategies
Benjamin J. Peeler, J.D., CPA, LL.M., Partner
Eide Bailly, Utah
A.J. Gross, CPA, EA, President and Founder
ALG Tax Solutions, Howell, Mich.
Howard S. Levy
Voorhees & Levy, Cincinnati
Notice
ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY
THE SPEAKERS’ FIRMS TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY
OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT
MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR
RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.
You (and your employees, representatives, or agents) may disclose to any and all persons,
without limitation, the tax treatment or tax structure, or both, of any transaction
described in the associated materials we provide to you, including, but not limited to,
any tax opinions, memoranda, or other tax analyses contained in those materials.
The information contained herein is of a general nature and based on authorities that are
subject to change. Applicability of the information to specific situations should be
determined through consultation with your tax adviser.
www.eidebai l ly.com www.eidebai l ly.com www.ALGTaxSolutions.com
June 2017
A.J. Gross, CPA, EA
Benjamin J. Peeler, J.D., C.P.A., LL.M
Howard S. Levy, J.D. LL.M.
Tax Controversy
Offers in Compromise
http://howardlevyirslawyer.com/
www.eidebai l ly.com www.eidebai l ly.com
Mastering the IRS Offer-In-Compromise program
Navigating the IRS Offer-In-Compromise (OIC)
procedures
www.ALGTaxSolutions.com http://howardlevyirslawyer.com/
6
www.eidebai l ly.com www.eidebai l ly.com www.ALGTaxSolutions.com http://howardlevyirslawyer.com/
Learning objectives
• Identify the three types of Offers-In-Compromise (OIC)
• Examine the Doubt as to Liability (DATL) OIC criteria
• Examine the DATL OIC Standards of review
• Develop OIC strategies
• Understand filing and documentation requirements 7
www.eidebai l ly.com www.eidebai l ly.com www.ALGTaxSolutions.com http://howardlevyirslawyer.com/
Doubt as to Collectability OIC (DATC)
• Components of Collectability • IRM 5.8.4.3.1
• Future Income • Income less allowable expenses times12, 24, or # of months left on CSEDs
• CSED can be a major factor
• Equity in Assets • Not just physical assets
• IRM section 5.8.5.15 allows exclusion of income-producing assets
• IRM section 5.8.5.18 IRS may include dissipated assets
• Amount Collectable from Third Parties • Ex. Transferee assessment, nominee lien, or suit to set aside a fraudulent
conveyance
• Assets/Income Beyond the Reach of the Government • Equity in assets located outside the country
8
www.eidebai l ly.com www.eidebai l ly.com www.ALGTaxSolutions.com http://howardlevyirslawyer.com/
Effective Tax Administration (ETA) OIC
• Doesn’t Qualify for DATC OIC or DATL OIC • DATC with Special Circumstances
• Economic Hardship IRM Section 5.8.11.2.1 • Unable to pay reasonable basic living expenses
• For individuals only
• ETA allows for more deviation from national standard
• Age, employment status, dependents, and extraordinary circumstances
• Public Policy/ Equitable Considerations IRM Section 5.8.11.2.2 • Show that full payment would undermine confidence that tax laws being
administered fairly and in an equitable manner
• Compromise Would Not Undermine Compliance with Tax Laws IRM Section 5.8.11.2.3
9
www.eidebai l ly.com www.eidebai l ly.com www.ALGTaxSolutions.com http://howardlevyirslawyer.com/
Effective Tax Administration (ETA) OIC
• Examples of ETA OIC based on hardship • There are sufficient assets to pay the tax liability. The taxpayer provides
full time care and assistance to a dependent child, who has a serious long-term illness.
• Taxpayer is retired with a retirement account that can pay the tax liability.
• Taxpayer’s monthly income less allowable expense is not sufficient to enter into an installment agreement. The taxpayer owns a modest house that is specially equipped to accommodate the taxpayer’s disability. There is sufficient equity to pay the tax liability.
• Examples of ETA OIC based on Public Policy/Equitable Considerations
• Taxpayer has money in a qualified IRA account. The taxpayer would like to move the money to a new IRA account. The taxpayer is not familiar with the rollover rules and wants it avoid penalties. The taxpayer submits an email inquiry to the IRS at its web page and is told the IRS must be transferred within 90 days.
• Taxpayer uses a payroll service provider. Payroll service payroll provider missed tax deposits. The IRS may accept an ETA OIC of a diligent taxpayer while a uninvolved taxpayer will not.
10
www.eidebai l ly.com www.eidebai l ly.com www.ALGTaxSolutions.com http://howardlevyirslawyer.com/
Doubt as to Liability OIC (DATL)
Dispute the existence or amount of a taxpayer’s correct liability.
IRM Section - 4.18.2.2
• Conducted in a similar manner to an audit reconsideration
• IRS maintains separate file from any previous examination
• A statutory right, IRS required to examine and respond
• Automatically accepted if no response within 24 months
• Denial letter sufficient to satisfy the statute
• Determined by evaluating the supporting evidence and circumstances
• Cannot be used for adjudicated liabilities
• Cannot submit DATL OIC combined w/ DATC or ETA OICs
• Cannot not be rejected solely because IRS cannot locate the taxpayer's return or return information
• Avoid financial disclosure unlike DATC or ETA
• No filing fee 11
www.eidebai l ly.com www.eidebai l ly.com www.ALGTaxSolutions.com http://howardlevyirslawyer.com/
DATL OIC
Like an audit reconsideration, IRS evaluates hazards of litigation and extent of doubt created in OIC. It is necessary to submit comprehensive documentation and information that explains the taxpayers’ position, including the following:
• Supporting documents, evidence, affidavits, etc. to supports claims
• A comprehensive summary of legal position w/ an analysis of the risk to the IRS
• Additional records unavailable at the time of an audit
• Corrected penalty and interest calculations
• Cancelled checks proving payments that were not credited properly
• Court case, revenue ruling, and other legal authority that supports position
13
www.eidebai l ly.com www.eidebai l ly.com www.ALGTaxSolutions.com http://howardlevyirslawyer.com/
DATL OIC
Alternative to Tax Court
• Missed deadline for petitioning Tax Court = judicial remedies require full payment of tax and filing a claim for refund before District Court filing
• DATL OIC = can be submitted without paying the tax and filing claim for refund (unpaid tax)(end around statue of limitations problems)
• Can also be appealed when an unfavorable result received, and if submitted via CDP Hearing, it can be appealed to the U.S. Tax Court (unless prior opportunity) and Chief Counsel can sometimes help
14
www.eidebai l ly.com www.eidebai l ly.com www.ALGTaxSolutions.com http://howardlevyirslawyer.com/
DATL OIC
• DATL OIC Income Tax assessment example scenario
• A taxpayer was represented during audit, but the representative fell ill and taxpayer missed Tax Court petition filing date. Tax was assessed and the IRS began collection action. Taxpayer had difficult time recovering documents from now deceased representative. DATL OIC is filed with RO for $1 submitting all available documents. While the OIC is pending assignment taxpayer sought FOIA to gather previously submitted documents. IRS reduces some of the adjustments, but taxpayer has to Appeal some of the remaining adjustments and new issues raised by examiner (assigned to the same examiner).
15
www.eidebai l ly.com www.eidebai l ly.com www.ALGTaxSolutions.com http://howardlevyirslawyer.com/
DATL OIC
You can also contest the legitimacy of:
• Trust Fund Recovery Penalty (TFRP) assessments IRM Section 5.8.4.22.1
• Willful and responsible parties
• IRS often attempts to asses anyone with check signing authority
• Under Fifth Circuit precedent, check signing authority alone can indicate someone is a responsible person. Howard v. United States, 711 F.2d 729 (5th Cir. 1983).
• FOIA request for 4180 (TFRP investigation) file
• Before DATL OIC will be investigated, the trust fund portion of the taxes must be paid, the TFRP must be assessed against all responsible/willful persons, a determination made by an RO to not assert due to collectability or dollar criteria, or the trust fund package forwarded for assessment.
• Personal Liability for Excise Tax (PLET) assessments
• Assessments made on individual taxpayers for withheld excise taxes.
16
www.eidebai l ly.com www.eidebai l ly.com www.ALGTaxSolutions.com http://howardlevyirslawyer.com/
DATL OIC
• DATL OIC TFRP assessment example scenario
• A bookkeeper was hired by a corporation to perform normal bookkeeping duties and other routine tasks related to these duties. The business accrued payroll taxes and the IRS interviewed the corporate officers and the bookkeeper during their 4180 investigation. The Revenue Officer made a determination that the bookkeeper was a willful and responsible individual; however, despite the bookkeeper’s ability to sign checks and her responsibility to keep company records and handle payroll, she never exercised any independent judgment as to which creditors to pay before others. The bookkeeper essentially followed instructions from the corporate officers and had no authority to pay any bills, including the IRS, unless directed to do so. The bookkeeper had no ownership interest in the corporation and was not involved in hiring, nor firing. If the bookkeeper missed the opportunity to appeal the assessment or was unsuccessful, a DATL OIC should be considered.
17
www.eidebai l ly.com www.eidebai l ly.com www.ALGTaxSolutions.com http://howardlevyirslawyer.com/
DATL OIC
• You can submit a DATL on Combined Annual
Wage Reporting (CAWR) penalties
• Example:
If the IRS denies abatement of civil penalty submit
DATL and reference IRS Legal Memorandum ILM
199411 (6/23/1994), which concluded that there is
no time limit to correct the W2 forms or to file an
abatement claim for a CAWR assessment.
18
www.eidebai l ly.com www.eidebai l ly.com www.ALGTaxSolutions.com http://howardlevyirslawyer.com/
DATL Standards of Review
The judicial standard of review is considerably more lenient
• Tax Court can review ETA and DATC OICs in limited circumstances, i.e, during a CDP Hearing for abuse of discretion
• For DATL standard of review is de novo
• IRS’ actions and determinations can be reviewed from the beginning
• Sego v. Commissioner, 114 T.C. 604, 610 (2000)
• Goza v.Commissioner, 114 T.C. 176, 181-182 (2000)
19
www.eidebai l ly.com www.eidebai l ly.com www.ALGTaxSolutions.com http://howardlevyirslawyer.com/
Filing and documentation requirements
• DATL • Form 656-L
• No filing fee
• Must include comprehensive information and documentation that shows how the correct tax amounts were derived and to support their position. (i.e., do all the work for the auditor ahead of time)
• DATC • Form 656 OIC and Form 433A/Form 433B
• Filing fee ($186) and down-payment *maybe be waived
• ETA • Form 656 OIC
• Filing fee ($186)
20
www.eidebai l ly.com www.eidebai l ly.com www.ALGTaxSolutions.com http://howardlevyirslawyer.com/
OIC Strategies
• Know Your Collection Statute Expiration Date
(CSED) Before Filing the OIC
• CSED is 10 years, beginning when the IRS place the liability on
their books (assessment).
• Call IRS Tax Practitioner Line, 1-866-860-4259 for IRS internal
date calculation.
• Secure account transcripts to verify – IRS makes errors in their
calculations.
• Tolling events include bankruptcy, collection appeals, innocent
spouse claims, offer in compromise
22
www.eidebai l ly.com www.eidebai l ly.com www.ALGTaxSolutions.com http://howardlevyirslawyer.com/
OIC Strategies
OIC tolls collection statute date from:
• 1.The date the IRS accepts OIC for processing
and while it’s pending until,
• 2.The rejection of the offer and 30 days after.
• 3. If appealed, during the appeal, and 30 days
after.
23
www.eidebai l ly.com www.eidebai l ly.com www.ALGTaxSolutions.com http://howardlevyirslawyer.com/
OIC Strategies
• IRS Has Two Years to Accept or Reject Offer
Internal Revenue Code Section 7122(f), Deemed
acceptance of offer not rejected within certain
period
“Any offer-in-compromise submitted under this
section shall be deemed to be accepted by the
Secretary if such offer is not rejected by the Secretary
before the date which is 24 months after the date of
the submission of such offer.”
24
www.eidebai l ly.com www.eidebai l ly.com www.ALGTaxSolutions.com http://howardlevyirslawyer.com/
OIC Strategies
• Working OICs Direct in Appeals via
Collection Due Process Hearings Tired of dealing with Centralized Offer in Compromise?
• OIC is a valid collection alternative in a CDP
Hearing.
• CDPs provide face-to-face conferences – yes, you
can actually meet with the IRS rep handling the OIC.
• A timely CDP provides Tax Court appeal rights, you
can have an OIC reviewed by the Tax Court.
• Equivalent Hearings – filing your appeal late.
25
www.eidebai l ly.com www.eidebai l ly.com www.ALGTaxSolutions.com http://howardlevyirslawyer.com/
OIC Strategies
• Consider Other Collection Resolution
Options and Your Client’s Needs Why does your client want to compromise tax liabilities?
Consider the following:
• Degree of IRS enforcement – Quiet or active?
• Client’s age and dependents
• Need for release of tax lien
• Future increase in income
• CSED
• Alternative options
26
www.eidebai l ly.com www.eidebai l ly.com www.ALGTaxSolutions.com http://howardlevyirslawyer.com/
OIC Strategies
• Bankruptcy as Leverage to Reduce
the Value of an OIC IRM 5.8.10.2.2, Offers in Compromise Before
Bankruptcy
“When a taxpayer or representative states…that a
bankruptcy petition will be filed if the taxpayer’s offer is
not accepted, the offer examiner must determine whether
the potential for a bankruptcy filing actually exists and the
impact the possible bankruptcy filing may have on the
collection of the outstanding tax liability
27
www.eidebai l ly.com www.eidebai l ly.com www.ALGTaxSolutions.com http://howardlevyirslawyer.com/
DTAL Example
• Corporation filed S Corporation tax returns
• Shareholders reported S Corporation income on personal income tax returns
• IRS accepted S Corporation tax returns as filed
• S Corporation tax returns selected for audit
• No record of Form 2553 filed
• Auditor assessed C Corporation tax returns
• Filed DTAL for $1 • Based case on the IRS not notifying the taxpayer of rejected S-election within 6
months of first filed 1120S return.
28
www.eidebai l ly.com www.eidebai l ly.com www.ALGTaxSolutions.com http://howardlevyirslawyer.com/
DTAL Example
• Taxpayer was pitched an abusive tax avoidance scheme by seemingly qualified tax professionals who arranged the entire transaction, including preparation of the returns and provided a convincing opinion letter.
• Years later the promoters were involved in a injunction audit and hired a related law firm to represent all the taxpayers in summons enforcement and their own audits.
• These lawyers did not do much to defend the taxpayer and as a result taxes and severe fraud penalties were assessed by default.
• When the tax bills came due the taxpayer sought help.
• With the tax still unpaid an offer was made through CDP paying the portion of tax that resulted from the ATAT transaction, but disputing obvious incorrect tax and the penalties.
• Settlement Officer at first refused to hear penalty issues (missed 30 day deadline) and requests were made for Appeals Officer to hear penalty portion.
• Where there was no prior Appeal IRM provides for the penalty Appeal in CDP under IRM 20.1.2.2.7.5.1
29
www.eidebai l ly.com www.eidebai l ly.com www.ALGTaxSolutions.com http://howardlevyirslawyer.com/
OIC Example
• Strong OIC filed with declining business income because of IRS
liens.
• OIC was held up because of Errors in OIC payment recording (IRS
simply recorded the payment incorrectly).
• OIC was assigned soon after to a specialist (bottom of pile).
• Upset the client because timing delay and client on his own began
calling her everyday.
• Then the client (on his own) began calling the manager
complaining that they were taking too long.
• OIC was rejected despite its strength “because it was not in the
best interests of the government” based on a double counting of
the same net income from the business (bank statements and
income statement).
• Now the OIC had to be Appealed. 30
www.eidebai l ly.com www.eidebai l ly.com www.ALGTaxSolutions.com http://howardlevyirslawyer.com/
OIC Example
• OIC submitted in CDP but referred back to RO to consider the
collection information statement documentation
• This seems to be happening more often because of AJAC
• IRS Chief Counsel is worn out over CDP motions for summary
judgement and trials that accomplish nothing
• Requested that CC find a new RO to consider the offer for
efficiency
31
www.eidebai l ly.com www.eidebai l ly.com
Benjamin J. Peeler Partner, Tax Controversy and Procedure
• Benjamin J. Peeler , J.D., CPA, LL.M.
Partner, Tax Controversy and Procedure 801.456.5476 | [email protected] Knowledge and Experience More than 17 years of tax experience specializing in federal tax, controversy and procedure. Works with clients in the controversy areas relating to income tax, estate and gift tax, property tax, employment
tax and other various tax matters. Represents cli ents before the IRS in examination, Appeals, collection, penalty abatement, audit reconsideration,
interest abatement and interest netting. Represented the IRS before the United States Tax Court in large and specially designated tax cases, and in
litigation before the federal district court as a special assistant to the United States Attorney. Worked as an attorney for the IRS Office of Chief Counsel. Also, led and instructed groups of attorneys,
revenue agents and revenue officers through various procedures. Leads Eide Bailly's IRS Practices & Procedures as a federal tax, controversy and procedure specialist. Member of Eide Bailly’s National T ax Office team; committed to helping clients stay informed about tax news,
developments and trends.
Professional Memberships AICPA UACPA
Designations & Licensures Texas Bar, member Certified Public Accountant, Texas California Bar, member
Education LL. M., Taxation – Golden Gate University School of Law Juris Doctor – University of California, Hastings College of the Law, San Francisco Bachelor of Science, Accounting – University of Utah
32
www.ALGTaxSolutions.com http://howardlevyirslawyer.com/
www.eidebai l ly.com www.eidebai l ly.com
A.J. Gross
A.J. Gross is the President and Founder of ALG Tax Solutions. He started the company with
the goal of helping individuals and businesses get through stressful tax problems and
handle their problems with the IRS or state once and for all.
A.J. is both a Certified Public Accountant (C.P.A.) and Enrolled Agent (E.A.). Since
beginning his career in tax resolution, A.J. has assisted hundreds of clients in resolving their
tax issues. His unique combination of skills, discipline and persistence has given him an
advantage in problem solving and negotiation skills. His drive to solve complex financial
problems and to customize workable tax solutions will result in you receiving the best
options for solving your tax problem.
A.J. earned his Masters of Business Administration (M.B.A.) and Bachelor of Science in
Electrical Engineering, both with honors, at Michigan State University. Before becoming
interested in tax resolution, he worked at at Motorola/Freescale Semiconductor as an
Advanced Powertrain Account Manager managing an $80 million automotive powertrain
account. A.J.’s unique ability to analyze customer needs enabled a “full-solution” approach
to product development. He was responsible for multimillion dollar negotiations, supporting
customers’ needs with products designed for companies such as Ford, GM, Chrysler, and
Honda.
A.J. Gross and wife Naomi live with their three children in Haslett, MI. A.J.’s busy schedule
with his children includes soccer games, basketball games, swim meets, school events, etc.
A.J., himself, plays as a hard-charging point guard in a highly competitive church basketball
league. He brings the same passion to his profession, driving to deliver the best quality
service, tailored to the needs of each ALG Tax Solutions client. 33
A.J. Gross
ALG Tax Solutions
855-648-2943
www.ALGTaxSolutions.com http://howardlevyirslawyer.com/
www.eidebai l ly.com www.eidebai l ly.com
Howard S. Levy
Howard Levy is a former IRS trial attorney with over 20 years of experience representing
individuals and companies facing tax controversies. Howard's expertise centers on IRS
collection and examination problems, tax court litigation, IRS trust fund investigations, IRS
referrals to the Department of Justice, and the use of bankruptcy as a method of resolving
IRS problems.
Howard is an active contributor to the National Association of Enrolled Agents, writing yearly
articles for the EA Journal and teaching courses at the National Tax Practice Institute
(NTPI). Howard has been interviewed and quoted in The Wall Street Journal, New York
Times, USA Today and NPR radio about the IRS and tax problems.
Based in Cincinnati, Ohio, Howard is a partner in law firm of Voorhees & Levy, LLC. Howard
earned his bachelor's degree in finance from The Ohio State University, law degree from
Northern Kentucky University and Masters in Tax Law (LL.M) from Boston University. You
can stay continually updated about the IRS from Howard’s blog,
www.howardlevyirslawyer.com/blog
34
Howard S. Levy
Voorhees & Levy, LLC
11159 Kenwood Road
Cincinnati, Ohio 45242
Telephone: 513.489.2555
Facsimile: 513.489.2556
Email:
www.howardlevyirslawyer.com
www.ALGTaxSolutions.com http://howardlevyirslawyer.com/