INNOCENT SPOUSE RELIEF CLAIM
When CM came for her free initial consultation she owed the IRS $362,173 for the years 2015, 2016, and 2017. The amounts due were from Joint Tax returns filed with her ex-husband. In discussing the matter with CM it was discovered that the large balances were caused by her husband. During the marriage she had been a stay-at-home wife, raising kids, and looking after the household. My first thoughts were to do either an Offer in Compromise or bankruptcy to eliminate the tax debt. Her income and expenses were in line with an Offer or Chapter 7 bankruptcy. However, due to the equity in her home, she would not have been able to do either the Offer in Compromise or the Chapter 7 bankruptcy. I advised her that the only way to eliminate her tax debt at this time was to file a claim for Innocent Spouse Relief. I explained to CM how such a claim worked and what we would need from her to prove our claim. Once CM gave me the information I needed, I prepared and filed the claim for Innocent Spouse Relief. For 2015, $299,024.00 was owed, all but $339.00 was forgiven; for 2016 $58,218.00 was owed, all but $5,585.00 was forgiven, and for 2017 the IRS granted full relief from the $5,000.00 owed. Because CM had made payments on the debt over the years, those payments were applied to her new balances and were able to pay off those balances. CM’s case was a great success story for The Law Office of John D. Harrington, PLLC, and shows that you don’t need a large firm to represent large dollar amount cases. You just need a dedicated and knowledgeable attorney to represent your interests.
The IRS granted our request.
OFFER IN COMPROMISE CASE
CW & RW are an elderly couple, ages 77 and 70 respectively, living in Livingston County. When they came to me for their free initial consultation they owed the IRS $55,000.00 for the years 2014, 2015, 2017, and 2018. At the consultation, I reviewed their income, living expenses, and equity in assets. Based on that review, it was determined that they may be eligible for an Offer in Compromise. The income was good, the necessary living expenses were good, but it appeared that there was equity in the home they owned. If there was equity in the home, how much was there and could the clients afford to pay the IRS that equity in their Offer in Compromise. The IRS allows certain ways to determine the equity in a home without doing an expensive appraisal. One way is to take the SEV (State Equalized Value) of the home and multiply it by two. 2 x SEV = FMV (fair market value). However, using this method left too much equity in the home and made doing an Offer in Compromise unaffordable for CW & RW. The IRS also allows the use of a CMA (Comparable Market Analysis) to establish fair market value. A CMA is done by a real estate agent and is usually free. We were able to secure a local agent to do the CMA and it came back showing that the value of the home, less the mortgage, left no equity. I then prepared and filed the Offer in Compromise with the IRS, offering the IRS $671.00 to settle out the $55,000.00 owed. After several rounds of negotiations, and providing the IRS additional documentation to support our claim, the IRS accepted our Offer in Compromise as filed.
The IRS accepted our Offer in Compromise as filed.
CURRENTLY NON-COLLECTIBLE STATUS CASE
LL is a great case study for showing that you don’t have to owe a lot to use the services of The Law Office of John D. Harrington, PLLC. When LL came for his free initial consultation he owed about $6,000 to the IRS for 2 older years. The IRS was threatening to levy his bank account. Because of the small balances, it made no sense to do an Offer in Compromise. The years LL owed for were from over 10 years ago. Typically, the Statute of Limitations for collection of a federal tax debt is 10 years from the date of assessment. However, there are events that will add time to the Statute of Limitations and extend it past the 10 years. At the consultation, I came up with a plan to both protect LL from an IRS tax levy and to eliminate the tax debt. The IRS has a program called a Currently Non-Collectible Status (CNC). A CNC means that at this time the IRS is not able to collect anything from the taxpayer so a hold is put on all collection activities. Typically a taxpayer can stay in a CNC for about 2 years. My plan for LL was to get his account transcripts from the IRS and calculate the statute of limitations for each year. Once I had established when the tax debt would expire, I would call the IRS and request the CNC, with the thought that the years would expire prior to LL being taken out of the CNC status. I called the IRS, requested and received LL’s account transcripts and I calculated when his balances would expire. As it turned out 1 year, the smaller balance was set to expire in 1 month. The other year, the larger balance was set to expire in 5 months. I then called the IRS and negotiated with the IRS to put LL in a CNC status. LL was able to use the CNC status to protect from IRS bank levies and wage garnishments until the tax debt expired. After the tax debt expired, I obtained new account transcripts showing that the IRS had zeroed out LL’s accounts. Large tax resolution firms will not take a tax case if the tax debt is not over $10,000.00. LL’s case is a great example of The Law Office of John D. Harrington, PLLC representing a taxpayer that owed less than $10,000 but still great results and great value by hiring my firm.