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.

Question: what statement of laws that we can apply and discuss that laws

Answer 1

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Here we have to use Form 656 ie when applying for an Offer in Compromise (OIC), which is an agreement between client and the IRS that settles clients tax liabilities for less than the full amount that client owe along with 433A which is Collection Information Statement for Wage Earners and Self-Employed Individuals.

Here the client qualify for offering compromise.Out of the three grounds on which IRS can grant offer in compromise the client is based on the following criteria.

IRS can accept a compromise based on effective tax adminstration.An offer may be accepted based on the effective tax administration when there is no doubt that the tax is legally owned and that the full amount owned can be collected but it requires payment to be made in full would either create an economic hardship or would be unfair and inequitable of exceptional circumstances.

So the amount which can be offered to IRS =3333*60+(210000-177395)=$232585.