Found an issue on this page? Let us know and we will look into it as soon as possible.
File BK or keep fighting IRS? Tax lien received for 90K.
Seattle, WA
Anonymous5 views5 answers
2002: I rec'd 235K from a lawsuit. I have papers stating it is not for lost wages.
2008: I started to have IRS returns withheld & sent in forms to IRS for inquiry; every 6 months I rec'd IRS papers stating they are "behind and will get back to me".
2012: I now have a tax lien against me for 90K.
I went to the IRS office and they said the payee in 2002 incorrectly reported as 1099 self employment income. I have a court settlement they reported as self employment income, how do I show this was non taxable?
They (payee) listed this in box 7 (non employee compensation box) but it should have been in box 3 (other income).
Ok, this isn't an easy answer. As a rule, Bankruptcy should only be considered when you have other liabilities than the IRS, just because there is usually a solution to resolving those. However, individual income taxes are dischargeable in a bankruptcy if all the elements are met. The most important thing you need to know is how the IRS calculated, and when did they assess, the tax due. You can get this from the IRS by calling them and asking for a Record of Account. Any honest or competent tax practitioner would order one in this case if you went to someone for help. So you can order it yourself, and then go to a tax professional for advice, or just to go them, give them an IRS Form 2848 power of attorney, and they can get it. Then you can see what the options are, including, if applicable, bankruptcy. But it would really suck to file Bankruptcy to find the tax isn't dischargeable. So I suggest going to see a Tax Attorney, either before or after, preferably one local to you if possible, so you can meet them and see how you feel. However that is personal preference.
Income taxes arising from a tax year for which the tax return was last due at least 3 years before the date of the filing of the petition are potentially dischargeable. Taxes that otherwise seem dischargeable under the 3-year rule might not be due to a number of other factors. For example, there cannot be a discharge where there is an outstanding offer in compromise, or that less than 30 days had elapsed since it was withdrawn or rejected.
Bankruptcy is a radical way to deal with income taxes. It should be a last resort. You should first retain a lawyer in Seattle who will help you evaluate whether you can make an offer in compromise due to doubt as to liability. That is accomplished using Form 656-L. You may request the form by calling the toll free number 1-800-829-1040.
Depending on the bankruptcy exemptions in Washington State the bankruptcy trustee may take a significant amount of your assets. I would hire counsel to contest the characterization with the IRS.
I would add to the other attorney's advice that you consider the audit reconsideration process for disputing the amount of the assessed tax, and the OIC based on doubt as to collectibility if you only want to persuade the IRS to forgive some of the debt based on your inability to pay.
I would agree with the suggestion to pursue the audit reconsideration process. If it is a misunderstanding, it can be cleared up in this process. Or at the very least, the liability could be reassessed at a lower value. Then you will have the opportunity to pursue an OIC.
Sean R. Kennedy, J.D., LL.M
[email protected]
www.tollefsenlaw.com
