Friday, May 25, 2012

Summary judgment - IRS abuse of discretion on Installment Agreement


This is a summary judgment case where the facts presented by the IRS were "equivocal" on the factual issues.



Bilal Salahuddin v. Commissioner, TC Memo 2012-141 , Code Sec(s) 6330; 6404.

UNITED STATES TAX COURT BILAL SALAHUDDIN AND MONIQUE SALAHUDDIN, Petitionersv. COMMISSIONER OF INTERNAL REVENUE, Respondent.
Case Information:

Code Sec(s):       6330; 6404
Docket:                Docket No. 7050-11L.
Date Issued:       05/17/2012
HEADNOTE

XX.

Reference(s): Code Sec. 6330; Code Sec. 6404

Syllabus

Official Tax Court Syllabus

Ps owed outstanding Federal income tax liabilities for tax years 2004, 2005, and 2006. R issued to Ps a levy notice to collect those unpaid liabilities. Ps requested a collection due process (CDP) hearing before IRS Appeals pursuant to I.R.C. sec. 6330, during which they sought an installment agreement. Ps submitted a Form 433-A, Collection Information Statement for Wage Earners and Self- Employed Individuals, without supporting documentation. An Appeals team manager informed Ps that R's Philadelphia Service Center had calculated Ps' acceptable amount for an installment agreement to be $900 to $1,000 monthly and advised Ps that their prior submission would be "sufficient". Without further communication with Ps, the Appeals settlement officer closed the CDP hearing and sustained the proposed levy on the ground that Ps had not provided sufficient financial information and Ps' ability to pay exceeded the proposed $900 to $1,000 per month. Ps filed a timely petition for review of that determination with this Court, and R moved for summary judgment.
Held : There is a genuine issue of material fact as to whether Appeals, having advised Ps that their submission was "sufficient", abused its discretion in terminating the CDP hearing and rejecting Ps' proposal for an installment agreement, rather than soliciting a satisfactory substitute proposal. R's motion for summary judgment will be denied.
Counsel

Bilal Salahuddin and Monique Salahuddin, for themselves.
Melissa Ellen Avrutine, for respondent.

MEMORANDUM OPINION

GUSTAFSON, Judge: This is a collection due process ("CDP") appeal pursuant to section 6330(d), 1 in which petitioners Bilal and Monique Salahuddin ask this Court to review the determination by the Office of Appeals ("Appeals") of the Internal Revenue Service ("IRS") to deny the Salahuddins' request for a collection alternative and to proceed with a levy to collect their unpaid Federal income tax for tax years 2004, 2005, and 2006. The issue is whether Appeals abused its discretion in making that determination. Respondent, the Commissioner of the IRS, moved for summary judgment pursuant to Rule 121, and the Salahuddins filed an opposition. We hold that there is a genuine issue of material fact as to whether Appeals abused its discretion in rejecting their request for an installment agreement and determining to proceed with the proposed levy. We will therefore deny the Commissioner's motion.

Background

The Commissioner's motion establishes the following facts, which the Salahuddins did not dispute. Events before the CDP process The Salahuddins filed tax returns reporting income tax liabilities for the years 2004, 2005, and 2006; but they did not pay those liabilities. On March 12, 2010, the IRS sent the Salahuddins a "Final Notice of Intent to Levy and Notice of Your Right to a Hearing," advising them that the IRS intended to levy to collect those unpaid tax liabilities, and advising that they could receive a hearing with Appeals. On April 6, 2010, the Salahuddins timely filed a Form 12153, "Request for a Collection Due Process or Equivalent Hearing". 2

In July 2010, before their CDP hearing was scheduled (and in circumstances not clear in our record), the Salahuddins submitted to the Automated Collection System Support unit of the IRS a Form 433-A, "Collection Information Statement for Wage Earners and Self-Employed Individuals", stating their income, expenses, assets, and liabilities. The Salahuddins failed to provide the accompanying financial documents called for by the instructions, but the form showed that their monthly living expenses were $11,737 and that their monthly income was $17,568 (i.e., a surplus of over $5,800). Dealings with IRS Appeals On September 26, 2010, an Appeals settlement officer ("SO") mailed the Salahuddins a letter, offering a telephone CDP hearing on October 19, 2010. The SO's letter requested that, by October 14, 2010, the Salahuddins provide the SO with: (1) a completed Form 433-A, along with proof of income and expenses for the past three months, and (2) a Form 656, "Offer in Compromise" and the $150 application fee. (The Salahuddins never submitted a Form 656. See note 2 above.)

On October 13, 2010, the Salahuddins sent the SO a letter requesting additional time to gather the information and requesting that the hearing be conducted through correspondence. By letter dated October 19, 2010, the SO gave the Salahuddins until November 2, 2010, to provide any additional information for Appeals to consider during the hearing. On October 26, 2010--i.e., before the November 2 deadline--Mrs. Salahuddin telephoned Appeals and spoke with the SO's supervisor, an Appeals team manager ("ATM"). In the case activity record, the ATM described the call as follows: ATM received call from Mrs TP [i.e., taxpayer] requesting answers to specific questions. I pulled the case file and talked with SO. After reviewing the TPs letter I returned her call and advised her that the information in the case file was sufficient and that we would continue based on the 433A and their figures which show disposable income and assets for an I/A [installment agreement]. The tp will keep the co[r]respondence hearing date of 11-2. She will also send her requ[es]t by fax. On October 31, 2010, the Salahuddins sent the SO a letter that similarly described the call as follows: [The ATM] was kind enough to provide a brief review of my case and clarify that the 433 form we submitted in July 2010 would be sufficient. He also indicated that no further documentation would be needed in support of said form. Additionally, [the ATM] said that we would not be eligible for and [sic] Offer in Compromise. It was conveyed that the office in Philadelphia, Pennsylvania, determined that we could pay approximately $900 to $1,000 monthly. I would like to request that all payments made by us be applied to the most recent tax year first. That being 2006, 2005, and 2004, in this order. Also, please confirm the order of how payments are posted ... i.e.--principle [sic], penalties then interest. The SO never responded to this letter by telephone or in writing. For purposes of the Commissioner's motion for summary judgment, and entertaining all reasonable inferences in favor of the non-movants (i.e., the Salahuddins) pursuant to Rule 121, we assume that in that telephone conversation, the Salahuddins were informed (or reasonably believed that they were informed) that the information they had already submitted was "sufficient" to justify an installment agreement under which they would pay "approximately $900 to $1,000 monthly". The record does not show that anyone in Appeals ever asked the Salahuddins to submit a formal proposal for an installment agreement. The SO's deliberations After three and a half months, the SO came to a conclusion that she described as follows in her case activity record on an entry dated February 17, 2011: [I]t appears TP may want an IA in the amount of $900-$1000 monthly per this same letter [of October 31, 2010]. S/O reviewed and analyzed the CIS to determine the taxpayer's ability to pay. Tp's monthly income is $17567.88 per Form 433A. TP has not provided any supporting documentation. Tp's monthly actual expenses were $11736.85 per F433A. Tp's monthly allowable expenses were $9,345. Tp does have the ability to full pay by income. ***

Tp currently owes $54,894.17. Tp can full pay this liability within 7 months using their monthly disposable income. Net Equity in assets is $68,217 per AET [asset equity table on the Form 433-A]. *** No supporting documentation was provided by the taxpayer to determined if these amounts are accurate. Based on financial analysis, the taxpayer has the ability to full pay their liability by liquidating their assets or monthly payments within 7 months. Therefore, S/O will recommend rejection of IA per review of information in the case file as it appears TP has the ability to pay more than their proposed amount and without supporting documen[t]ation full payment is the only , alterative that could be considered. Determination is to sustain the proposed levy action. Although, TP indicated PSC [Philadelphia Service Center] convey[ed] that they could pay $980 per five year rule. 3 TP did not propose an amount. No collection alternative could be reached since TP did not verify CIS and the amount owed was over $25K. [Emphasis added.] For purposes of the Commissioner's motion for summary judgment, and entertaining all reasonable inferences in favor of the Salahuddins, we assume that the SO's determination not to allow an installment agreement was based in part on the Salahuddins' failure to provide documentation to support the information on the Form 433-A. Appeals' determination and Tax Court proceedings On February 24, 2011, Appeals sent to the Salahuddins a "Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330", with respect to their income tax liabilities for 2004, 2005, and 2006. The notice of determination sustained the proposed levy action and stated, among other things, that the Salahuddins did not qualify for an installment agreement. An attachment to the notice of determination stated in part:

On September 26, 2010, the Settlement Officer mailed you a letter offering a conference by telephone, face-to-face or correspondence. This letter gave fourteen (14) days to respond if a face-to-face or correspondence conference was preferred. There was no response to this letter. Therefore, a telephone conference was scheduled January 6, 2011 at 10:00 AM Central time. This letter also requested for a Collection Information Statement along with supporting documents by October 14, 2010. The Collection Information was provided; however, there were [sic] no supporting documentation . [Emphasis added.] We note that this paragraph (1) was incorrect in stating that "[t]here was no response to this letter [of September 6, 2010]", since the Salahuddins responded by their letter of October 13, 2010, (2) was incorrect in stating that "a telephone conference was scheduled January 6, 2011", since no such conference was scheduled, and (3) was correct in stating that "there were [sic] no supporting documentation" but evidently overlooked the ATM's assurances to the Salahuddins that the information they had provided was "sufficient".

On March 25, 2011, the Salahuddins timely filed their petition with this Court. The petition stated, among other things: [W]e have proposed alternative method of paying our federal tax liability and this alternative was positively conveyed to us by the settlement officers' supervisor verbally. *** *** [The ATM] indicated that the Pennsylvania Office already determined the petitioner's could pay between $900-$1000, per month and that he concurred and would update the settlement officer our [sic] this conversation. We drafted a follow up letter recanting [sic] this conversation and sent to the settlement officer to include in the file. This information runs contrary to the notice of determination. On March 8, 2012, the Commissioner filed his motion for summary judgment, in which he contends: "Because, based on the financial information submitted by petitioners, petitioners have the ability to fully pay their income tax liability, the settlement officer properly rejected petitioners' request for an installment agreement."

Discussion

I. General legal principles A. Summary judgment Under Rule 121 (the Tax Court's analog to Rule 56 of the Federal Rules of Civil Procedure), the Court may grant summary judgment where there is no genuine issue of any material fact and a decision may be rendered as a matter of law. The moving party (here, the Commissioner) bears the burden of showing that no genuine issue of material fact exists, and the Court will view any factual material and inferences in the light most favorable to the nonmoving party.Dahlstrom v. Commissioner, 85 T.C. 812, 821 (1985); cf. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986) (same standard under Fed. R. Civ. P. 56). "The opposing party is to be afforded the benefit of all reasonable doubt, and any inference to be drawn from the underlying facts contained in the record must be viewed in a light most favorable to the party opposing the motion for summary judgment."Espinoza v. Commissioner, 78 T.C. 412, 416 (1982).

In this case we assume the facts as shown by the Commissioner, but viewed in the light most favorable to the Salahuddins. In that light, the Commissioner's motion must be denied. B. Collection review procedure 1. In general If a taxpayer fails to pay any Federal income tax liability after notice and demand, section 6331(a) authorizes the IRS to collect the tax by levy on the taxpayer's property. However, Congress has added to chapter 64 of the Code certain provisions (in subchapter C, part I, and in subchapter D, part I) as "Due Process for Collections", and those provisions must be complied with before the IRS can proceed with a levy: The IRS must first issue a final notice of intent to levy and notify the taxpayer of the right to an administrative hearing before Appeals.  Sec. 6330(a) and (b)(1). After receiving such a notice, the taxpayer may request an administrative hearing before Appeals. Sec. 6320(a)(3)(B), (b)(1). Administrative review is carried out by way of a hearing before Appeals pursuant to  section 6330(b) and (c); and, if the taxpayer is dissatisfied with the outcome there, he can appeal that determination to the Tax Court under section 6330(d), as the Salahuddins have done. 2. Agency-level review in levy cases At the CDP hearing, the Appeals Officer must make a determination whether the proposed collection action may proceed. In the case of a notice of levy, the procedures for the agency-level CDP hearing beforeAppeals are set forth in  section 6330(c). The Appeals Officer is required to take into consideration several things:

First, the Appeals Officer must verify that the requirements of any applicable law and administrative procedure have been met by IRS personnel. See  sec. 6330(c)(3)(A). The attachment to the notice of determination set forth the Appeal Officer's compliance with these requirements, and the Salahuddins make no challenge as to verification in their petition (or in their response to the motion for summary judgment), so no verification issues under  section 6330(c)(1) are at issue.

Second, the taxpayer may "raise at the hearing any relevant issue relating to the unpaid tax or the proposed levy, including" challenges to the appropriateness of the collection action and offers of collection alternatives.  Sec. 6330(c)(2)(A). The Salahuddins' contentions pertain to a collection alternative (i.e., an installment agreement), which we will discuss below.

Additionally, the taxpayer may contest the existence and amount of the underlying tax liability, but only if he did not receive a notice of deficiency or otherwise have a prior opportunity to dispute the tax liability.  Sec. 6330(c)(2)(B). In their opposition to the motion for summary judgment, the Salahuddins "ask the court to require the Respondent to re-access any penalty and interest that has accrued on our tax account from the original date of our request for a payment plan." We construe this as a request for an abatement of interest and penalty pursuant to section 6404(e) and (f) and as a challenge to the existence of an underlying liability. It appears that the Salahuddins did not raise this issue before Appeals and that we therefore lack jurisdiction to entertain it,see Giamelli v. Commissioner, 129 T.C. 107, 113-114 (2007); but we need not reach this issue to decide the Commissioner's motion.

Finally, the Appeals Officer must determine "whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary." Sec. 6330(c)(3)(C). The notice of determination found that "the proposed levy action balances the need for efficient collection of taxes with your concern that any collection action be no more intrusive than necessary"; but the Salahuddins' petition and their opposition to the motion for summary judgment assert that the levy would impose a financial hardship on them, and we consider that argument as an assertion of undue intrusiveness. But again, it appears that the Salahuddins did not raise this issue before Appeals and that we therefore lack jurisdiction to entertain it, but that we do not need to reach it in order to decide the Commissioner's motion. 3. Tax Court review When Appeals issues its determination, the taxpayer may "appeal such determination to the Tax Court", pursuant to section 6330(d)(1), as the Salahuddins have done. In such an appeal, where the underlying liability is at issue, we review the determination of Appeals de novo. Goza v. Commissioner,  114 T.C. 176, 181- 182 (2000). As to issues other than the underlying liability, we review the determination for abuse of discretion. That is, we decide whether the determination was arbitrary, capricious, or without sound basis in fact or law. See Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff'd, 469 F.3d 27 [98 AFTR 2d 2006-7853] (1st Cir. 2006). Here we review Appeals' denial of an installment agreement, to determine whether it involved an abuse of discretion.

II. Denial of the Salahuddins' request for an installment agreement The Commissioner argues that because the Salahuddins offered an amount ($900 to $1,000 per month) that was less than their own reckoning of their surplus monthly income (about $5,800 more income than living expenses), it could not be an abuse of discretion for Appeals to reject such an offer. This might be a winning argument, except for two problems that arise under the facts as we are required to assume them for purposes of deciding a motion for summary judgment. A. Apparent reliance on failure to produce information IRS personnel in Philadelphia had suggested to the Salahuddins that their information would justify an installment agreement calling for payment of $900 to $1,000 monthly, and the ATM told the Salahuddins that the information they had submitted was "sufficient". We have consistently held that it is not an abuse of discretion for Appeals to reject collection alternatives and sustain the proposed collection action on the basis of the taxpayer's failure to submit requested financial information. See Huntress v. Commissioner, T.C. Memo. 2009-161 [TC Memo 2009-161]; Prater v. Commissioner, T.C. Memo. 2007-241 [TC Memo 2007-241]; Roman v. Commissioner, T.C. Memo. 2004- 20 [TC Memo 2004-20]. However, for purposes of this summary judgment motion, we hold that because Appeals had thus advised the Salahuddins that their financial information was "sufficient", Appeals could not thereafter terminate the CDP process on the grounds that the Salahuddins had followed the very advice that Appeals had given them. To the extent that Appeals' determination was based on a supposed failure to submit information, we cannot say that that determination did not involve an abuse of discretion.

We can easily imagine a denial of an installment agreement based on two clear alternative grounds--i.e., (1) that the taxpayer failed to provide documentation to substantiate his financial information, and separately (2) that the amount offered by the taxpayer was inadequate even assuming accurate the taxpayer's unsupported financial information. If the notice of determination stated such grounds, then the Commissioner could well argue that the first was harmless error, because the second was independent and sufficient. However, our role under  section 6330(d) is to review actions that the IRS took, not actions that it could have taken. As the Supreme Court stated in SEC v. Chenery Corp., 318 U.S. 80, 93-95 (1943): [The agency's] action must be measured by what the *** [agency] did, not by what it might have done. *** The *** [agency's] action cannot be upheld merely because findings might have been made and considerations disclosed which would justify its order as an appropriate safeguard for the interests protected by the Act. There must be such a responsible finding. *** In this case, we cannot say with certainty that the SO proceeded on two independent grounds. The Commissioner admits that "the Notice of Determination does not fully explain the settlement officer's denial of petitioners' installment agreement" but argues that "the settlement officer's case activity records do." However, those records emphatically show a reliance on the fact that the Salahuddins supposedly failed to provide information to substantiate their financial condition. In statements addressing the possibility of an installment agreement, the SO said: "TP has not provided any supporting documentation"; "No supporting documentation was provided"; "without supporting documen[t]ation, full payment is the only alterative that could be considered"; and "No collection alternative could be reached since TP did not verify CIS". We find that the record before us is equivocal about the reasoning for Appeals' denial of the installment agreement.

The situation is made even more unclear by the factual errors in the attachment to the notice of determination. We do not by any means hold that a notice of determination must be error-free in order to be sustained. However, in this circumstance, the error suggesting that the Salahuddins had failed to respond to Appeals' letter has an unfortunate resonance with the unfair determination that they had failed to provide supporting information; and the error suggesting that a telephone conference had been scheduled raises the question whether the SO was confusing two different cases--the Salahuddins case and another case in which other taxpayers had made a material failure to produce information thatwas requested. Under Rule 121 we cannot hold that there is no genuine issue as to the reason for Appeals' determination to deny an installment agreement and the absence of an abuse of discretion in that determination. B. Apparent misleading of the taxpayers For purposes of summary judgment, the evidence shows that the Salahuddins were led to believe that their $900-to-$1,000-per-month proposal for an installment agreement was agreeable to the IRS, and they gratefully submitted a proposal for how their upcoming payments could be applied to their outstanding liabilities. Until it issued the adverse determination, Appeals did not correct their impression or solicit a different proposal. We do not hold that these facts constitute offer (by the Salahuddins) and acceptance (by Appeals), giving rise to a contract. Nor do we hold that Appeals was barred in any way from rejecting the proposal and demanding more. We hold rather that there is a genuine issue of material fact as to whether Appeals induced the Salahuddins to believe that their information was "sufficient" and that their proposal would be accepted--i.e., whether Appeals thus misled the Salahuddins by inducing them to leave their proposal pending and unrevised--and whether it was an abuse of discretion for Appeals to terminate the CDP hearing by rejecting that proposal, rather than soliciting a satisfactory substitute proposal.

In light of the foregoing, the Commissioner's motion for summary judgment will be denied.

An appropriate order will be issued.

1
 
Unless otherwise indicated, all section references are to the Internal Revenue Code of 1986 as in effect at all relevant times (codified in 26 U.S.C., and referred to herein as "the Code"), and all Rule references are to the Tax Court Rules of Practice and Procedure.
2
 
The Salahuddins' request for a CDP hearing indicated that they desired an offer-in-compromise ("OIC") as a collection alternative. However, they later effectively retracted this proposal in favor of a request for an installment agreement. Since the Salahuddins do not contend that Appeals abused its discretion in denying them an OIC, we do not address the Commissioner's arguments in defense of that denial.
3
  The "five year rule" to which the SO's notes refer is evidently Internal Revenue Manual ("IRM") pt. 5.15.1.2(5) (Oct. 2, 2009), which provides that, in determining a taxpayer's ability to pay, expenses will be allowed above the national and local standards if (A) taxpayer establishes that he or she can stay current with all paying and filing requirements; (B) the tax liability, including projected accruals, can be paid within five years; and (C) expense amounts are reasonable. In this particular case, even taking the five-year rule into account, the Salahuddins' disposable income based on actual income and expenses would exceed $5,800 per month, which is much more than the $900 to $1,000 suggested by the Philadelphia Service Center. As a result, the Philadelphia Service Center apparently erred in suggesting a monthly installment amount that was less than the Salahuddins' actual ability to pay. See IRM pt. 5.15.1.2(6).


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Thursday, May 24, 2012

reasonable cause - reliance on an attorney



Reliance on an attorney is normally reasonable cause sufficient to abate a negligence penalty.  The case below notes that for a taxpayer to rely reasonably upon advice so as possibly to negate a section 6662(a) accuracy-related penalty determined by the Commissioner, the taxpayer must prove *** that the taxpayer meets each requirement of the following three-prong test: (1) The adviser was a competent professional who had sufficient expertise to justify reli[pg. 226] ance, (2) the taxpayer provided necessary and accurate information to the adviser, and (3) the taxpayer actually relied in good faith on the adviser's judgment. ***
Neonatology Assocs., P.A. v. Commissioner, 115 T.C. 43, 99 (2000), aff'd, 299 F.3d 221 [90 AFTR 2d 2002-5442] (3d Cir. 2002). 


Faina Bronstein v. Commissioner, 138 T.C. No. 21, Code Sec(s) 163.

FAINA BRONSTEIN, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
Case Information:

[pg. 221]
Code Sec(s):       163
Docket:                Dkt. No. 24168-10.
Date Issued:       05/17/2012 .
Judge:   Opinion by Goeke, J.
Tax Year(s):        Year 2007.

Section 6662(a) and (b)(1) and (2) imposes a 20% accuracy-related penalty if any part of an underpayment of tax required to be shown on a return is due to, among other things, negligence or disregard of rules or regulations or a substantial understatement of income tax. The penalty is 20% of the portion of the underpayment of tax to which the section applies. Sec. 6662(a).

The Commissioner bears the burden of production on the applicability of an accuracy-related penalty in that he must come forward with sufficient evidence indicating that it is proper to impose the penalty. See  sec. 7491(c); see also Higbee v. Commissioner, 116 T.C. 438, 446 (2001). Once the Commissioner meets this burden, the burden of proof remains with the taxpayer, including the burden of proving that the penalty is inappropriate because of reasonable cause and good faith. See Higbee v. Commissioner, 116 T.C. at 446-447.

Respondent satisfies his burden of production by showing that the understatement meets the definition of “substantial”. See Janis v. Commissioner, T.C. Memo. 2004-117 [TC Memo 2004-117], aff'd, 461 F.3d 1080 [98 AFTR 2d 2006-6075] (9th Cir. 2006), and aff'd, 469 F.3d 256 [98 AFTR 2d 2006-7836] (2d Cir. 2006). An understatement of income tax is “substantial” if it exceeds the greater of 10% of the tax required to be shown on the return or $5,000. Sec. 6662(d)(1)(A). An “understatement” is defined as the excess of the [pg. 225] tax required to be shown on the return over the tax actually shown on the return, less any rebate. Sec. 6662(d)(2)(A). The understatement of income tax in this case is $7,589, which exceeds the greater of 10% of the tax required to be shown on the return 8 or $5,000 and is thus “substantial”. Respondent has therefore met his burden of production.

The amount of an understatement shall be reduced by that portion of the understatement which is attributable to: (1) the tax treatment of any item by the taxpayer if there is or was substantial authority for such treatment; or (2) any item if the taxpayer adequately disclosed relevant facts affecting the item's tax treatment in the return or in a statement attached to the return and there is a reasonable basis for the tax treatment of the item by the taxpayer. Sec. 6662(d)(2)(B).

Although petitioner claims to have followed the advice given to her by her tax adviser, 9 she has made no attempt to establish that the reliance was reasonable. See Freytag v. Commissioner, 89 T.C. 849, 888 (1987), aff'd on another issue, 904 F.2d 1011 [66 AFTR 2d 90-5322] (5th Cir. 1990), aff'd, 501 U.S. 868 [68 AFTR 2d 91-5025] (1991); sec. 1.6664-4(b)(1), Income Tax Regs. We have previously held that for a taxpayer to rely reasonably upon advice so as possibly to negate a section 6662(a) accuracy-related penalty determined by the Commissioner, the taxpayer must prove *** that the taxpayer meets each requirement of the following three-prong test: (1) The adviser was a competent professional who had sufficient expertise to justify reli[pg. 226] ance, (2) the taxpayer provided necessary and accurate information to the adviser, and (3) the taxpayer actually relied in good faith on the adviser's judgment. ***
Neonatology Assocs., P.A. v. Commissioner, 115 T.C. 43, 99 (2000), aff'd, 299 F.3d 221 [90 AFTR 2d 2002-5442] (3d Cir. 2002). Petitioner has failed to prove that she satisfied any of these three requirements.

Petitioner has failed to show substantial authority or a reasonable basis for the position she took on her 2007 tax return. Petitioner has also faileAlthough petitioner claims to have followed the advice given to her by her tax adviser, 9 she has made no attempt to establish that the reliance was reasonable. See Freytag v. Commissioner, 89 T.C. 849, 888 (1987), aff'd on another issue, 904 F.2d 1011 [66 AFTR 2d 90-5322] (5th Cir. 1990), aff'd, 501 U.S. 868 [68 AFTR 2d 91-5025] (1991); sec. 1.6664-4(b)(1), Income Tax Regs. We have previously held that for a taxpayer to rely reasonably upon advice so as possibly to negate a section 6662(a) accuracy-related penalty determined by the Commissioner, the taxpayer must prove *** that the taxpayer meets each requirement of the following three-prong test: (1) The adviser was a competent professional who had sufficient expertise to justify reli[pg. 226] ance, (2) the taxpayer provided necessary and accurate information to the adviser, and (3) the taxpayer actually relied in good faith on the adviser's judgment. ***
Neonatology Assocs., P.A. v. Commissioner, 115 T.C. 43, 99 (2000), aff'd, 299 F.3d 221 [90 AFTR 2d 2002-5442] (3d Cir. 2002). Petitioner has failed to prove that she satisfied any of these three requirements.

Petitioner has failed to show substantial authority or a reasonable basis for the position she took on her 2007 tax return. Petitioner has also faile



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Wednesday, May 23, 2012

Innocent spouse - equitable relief


Internal Revenue Bulletin:  2012-4 

January 23, 2012 

Notice 2012-8


This notice provides a proposed revenue procedure that would update Rev. Proc. 2003-61, 2003-2 C.B. 296, which provides guidance regarding equitable relief from income tax liability under section 66(c) and section 6015(f) of the Internal Revenue Code. Since the issuance of Rev. Proc. 2003-61 in August 2003, the Internal Revenue Service’s experience in working section 6015(f) equitable relief cases has grown significantly. This proposed update to Rev. Proc. 2003-61 addresses the criteria used in making innocent spouse relief determinations for section 6015(f) equitable relief cases and revises the factors for granting equitable relief. The factors have been revised to ensure that requests for innocent spouse relief are granted under section 6015(f) when the facts and circumstances warrant and that, when appropriate, requests are granted in the initial stage of the administrative process.
Significantly, this proposed revenue procedure expands how the IRS will take into account abuse and financial control by the nonrequesting spouse in determining whether equitable relief is warranted. Review of the innocent spouse program demonstrated that when a requesting spouse has been abused by the nonrequesting spouse, the requesting spouse may not have been able to challenge the treatment of any items on the joint return, question the payment of the taxes reported as due on the joint return, or challenge the nonrequesting spouse’s assurance regarding the payment of the taxes. Review of the program also highlighted that lack of financial control may have a similar impact on the requesting spouse’s ability to satisfy joint tax liabilities. As a result, this proposed revenue procedure provides that abuse or lack of financial control may mitigate other factors that might otherwise weigh against granting equitable relief under section 6015(f).
The proposed revenue procedure also provides for certain streamlined case determinations; new guidance on the potential impact of economic hardship; and the weight to be accorded to certain factual circumstances in determining equitable relief.
The proposed revenue procedure sets forth the background concerning the relief from joint and several liability under section 6015, a summary of the proposed changes to Rev. Proc. 2003-61, and the proposed text of the updated revenue procedure. Before issuing an updated revenue procedure addressing the equitable relief under section 6015(f), the Department of the Treasury and the Internal Revenue Service invite comments from the public regarding the proposed revenue procedure. Treasury and the Service also invite comments related to the administration of the innocent spouse relief program. Because the provisions in the proposed revenue procedure expand the equitable relief analysis by providing additional considerations for taxpayers seeking relief, until the revenue procedure is finalized, the Service will apply the provisions in the proposed revenue procedure instead of Rev. Proc. 2003-61 in evaluating claims for equitable relief under section 6015(f). If taxpayers conclude that they would receive more favorable treatment under one or more of the factors provided in Rev. Proc. 2003-61 they should advise the Service in their application for relief or supplement an already existing application. Then the Service will apply those factors from Rev. Proc. 2003-61, until a new revenue procedure is finalized. Comments also are requested on any factors contained in Rev. Proc. 2003-61 that might be interpreted as being more favorable to requesting spouses than those proposed in this notice.
Comments should be submitted by February 21, 2012 to:
Internal Revenue Service
Attn: CC:PA:LPD:PR
(Notice 2012-8)
Room 5203
P.O. Box 7604
Ben Franklin Station
Washington, D.C. 20044
or hand deliver comments Monday through Friday between the hours of 8 a.m. and 4 p.m. to:
Courier’s Desk
Internal Revenue Service
Attn: CC:PA:LPD:PR
(Notice 2012-8)
1111 Constitution Avenue, N.W.
Washington, D.C. 20224
Alternatively, persons may submit comments electronically via e-mail to the following address: Notice.Comments@irscounsel.treas.gov. Persons should include “Notice 2012-8” in the subject line. All comments submitted by the public will be available for public inspection and copying in their entirety.

Proposed Rev. Proc. [XXXX-XX]

SECTION 1. PURPOSE AND SCOPE

.01 Purpose . This revenue procedure provides guidance for a taxpayer seeking equitable relief from income tax liability under section 66(c) or section 6015(f) of the Internal Revenue Code (a “requesting spouse”). Section 4.01 of this revenue procedure provides the threshold requirements for any request for equitable relief. Section 4.02 of this revenue procedure sets forth the conditions under which the Internal Revenue Service will make streamlined relief determinations granting equitable relief under section 6015(f) from an understatement of income tax or an underpayment of income tax reported on a joint return. Section 4.03 of this revenue procedure provides a nonexclusive list of factors for consideration in determining whether relief should be granted under section 6015(f) because it would be inequitable to hold a requesting spouse jointly and severally liable when the conditions of section 4.02 are not met. The factors in section 4.03 also will apply in determining whether to relieve a spouse from income tax liability resulting from the operation of community property law under the equitable relief provision of section 66(c).
.02 Scope This revenue procedure applies to spouses who request either equitable relief from joint and several liability under section 6015(f), or equitable relief under section 66(c) from income tax liability resulting from the operation of community property law.

SECTION 2. BACKGROUND

.01 Section 6013(d)(3) provides that married taxpayers who file a joint return under section 6013 will be jointly and severally liable for the income tax arising from that joint return. For purposes of section 6013(d)(3) and this revenue procedure, the term “tax” includes penalties, additions to tax, and interest. See sections 6601(e)(1) and 6665(a)(2).
.02 Section 3201(a) of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. No. 105-206, 112 Stat. 685, 734 (RRA), enacted section 6015, which provides relief in certain circumstances from the joint and several liability imposed by section 6013(d)(3). Section 6015(b) and (c) specify two sets of circumstances under which relief from joint and several liability is available in cases involving understatements of tax. Section 6015(b) is modeled after former section 6013(e), the prior innocent spouse statute, and section 6015(c) provides for separation of liability. If relief is not available under section 6015(b) or (c), section 6015(f) authorizes the Secretary to grant equitable relief if, taking into account all the facts and circumstances, the Secretary determines that it is inequitable to hold a requesting spouse liable for any unpaid tax or any deficiency (or any portion of either). Section 66(c) provides relief from income tax liability resulting from the operation of community property law to taxpayers domiciled in a community property state who do not file a joint return. Section 3201(b) of RRA amended section 66(c) to add an equitable relief provision similar to section 6015(f).
.03 Section 6015 provides relief only from joint and several liability arising from a joint return. If an individual signs a joint return under duress, the election to file jointly is not valid and there is no valid joint return. The individual is not jointly and severally liable for any income tax liabilities arising from that return. Therefore, section 6015 does not apply and is not necessary for obtaining relief.
.04 Under section 6015(b) and (c), relief is available only from an understatement or a deficiency. Section 6015(b) and (c) do not authorize relief from an underpayment of income tax reported on a joint return. Section 66(c) and section 6015(f) permit equitable relief from an underpayment of income tax or from a deficiency. The legislative history of section 6015 provides that Congress intended for the Secretary to exercise discretion in granting equitable relief from an underpayment of income tax if a requesting spouse “does not know, and had no reason to know, that funds intended for the payment of tax were instead taken by the other spouse for such other spouse’s benefit.” H.R. Conf. Rep. No. 105-599, at 254 (1998). Congress also intended for the Secretary to exercise the equitable relief authority under section 6015(f) in other situations if, “taking into account all the facts and circumstances, it is inequitable to hold an individual liable for all or part of any unpaid tax or deficiency arising from a joint return.” Id.

SECTION 3. SIGNIFICANT CHANGES

This revenue procedure supersedes Revenue Procedure 2003-61, changing the following:
.01 Section 4.01(3) of this revenue procedure provides that a request for equitable relief under section 6015(f) or section 66(c) must be filed before the expiration of the period of limitation for collection under section 6502, or, if applicable, the period of limitation for credit or refund under section 6511. This is a significant change to the requirement in Revenue Procedure 2003-61, section 4.01(3) and Treas. Reg. § 1.6015-5(b)(1) (T.D. 9003), that the requesting spouse’s claim for equitable relief must be filed no later than two years after the date of the Service’s first collection activity. See Notice 2011-70.
.02 Section 4.01(7)(e) of this revenue procedure adds a new exception to the threshold condition in section 4.01(7) that the income tax liability must be attributable to an item of the nonrequesting spouse, when the nonrequesting spouse’s fraud gave rise to the understatement of tax or deficiency.
.03 Section 4.02 of this revenue procedure has been revised to apply to understatements of income tax in addition to underpayments. Section 4.02 has also been revised to apply to claims for equitable relief under section 66(c).
.04 Section 4.03(2) is revised to clarify that no one factor or a majority of factors necessarily controls the determination. Therefore, depending on the facts and circumstances of the case, relief may still be appropriate if the number of factors weighing against relief exceeds the number of factors weighing in favor of relief, or a denial of relief may still be appropriate if the number of factors weighing in favor of relief exceeds the number of factors weighing against relief.
.05 Section 4.03(2)(b) of this revenue procedure revises the economic hardship equitable factor to provide minimum standards based on income, expenses, and assets, for determining whether the requesting spouse would suffer economic hardship if relief is not granted. Section 4.03(2)(b) is also revised to provide that the lack of a finding of economic hardship does not weigh against relief.
.06 Section 4.03(2)(c)(i) of this revenue procedure provides that actual knowledge of the item giving rise to an understatement or deficiency will no longer be weighed more heavily than other factors. Further, section 4.03(2)(c)(ii) clarifies that, for purposes of this factor, if the nonrequesting spouse abused the requesting spouse or maintained control over the household finances by restricting the requesting spouse’s access to financial information, and, therefore, because of the abuse or financial control the requesting spouse was not able to challenge the treatment of any items on the joint return for fear of the nonrequesting spouse’s retaliation, then that abuse or financial control will result in this factor weighing in favor of relief even if the requesting spouse had knowledge or reason to know of the items giving rise to the understatement or deficiency.
.07 Section 4.03(2)(c)(ii) of this revenue procedure provides that, in determining whether the requesting spouse had knowledge or reason to know that the nonrequesting spouse would not pay the tax reported as due, the Service will consider whether the requesting spouse reasonably expected that the nonrequesting spouse would pay the tax liability within a reasonably prompt time. Further, section 4.03(2)(c)(ii) clarifies that for purposes of this factor, if the nonrequesting spouse abused the requesting spouse or maintained control over the household finances by restricting the requesting spouse’s access to financial information, and, therefore, because of the abuse or financial control the requesting spouse was not able to question the payment of the taxes reported as due on the joint return or challenge the nonrequesting spouse’s assurance regarding payment of the taxes for fear of the nonrequesting spouse’s retaliation, then that abuse or financial control will result in this factor weighing in favor of relief even if the requesting spouse had knowledge or reason to know that the nonrequesting spouse would not pay the tax liability.
.08 Section 4.03(2)(d) of this revenue procedure clarifies that a requesting spouse’s legal obligation to pay outstanding tax liabilities is a factor to consider in determining whether equitable relief should be granted, in addition to whether the nonrequesting spouse has a legal obligation to pay the tax liabilities.
.09 Section 4.03(2)(f) of this revenue procedure is revised to provide that the fact that a requesting spouse is subsequently compliant with all Federal income tax laws is a factor that may weigh in favor of relief.
.10 Section 4.04 of this revenue procedure broadens the availability of refunds in cases involving deficiencies by eliminating the rule in section 4.04(1) of Rev. Proc. 2003-61 that limited refunds in cases involving deficiencies to payments made by the requesting spouse pursuant to an installment agreement.

SECTION 4. GENERAL CONDITIONS FOR RELIEF

.01 Eligibility for equitable relief . A requesting spouse must satisfy all of the following threshold conditions to be eligible to submit a request for equitable relief under section 6015(f). With the exception of conditions (1) and (2), a requesting spouse must satisfy all of the following threshold conditions to be eligible to submit a request for equitable relief under section 66(c). The Service may relieve a requesting spouse who satisfies all the applicable threshold conditions set forth below of all or part of the income tax liability under section 66(c) or section 6015(f) if, taking into account all the facts and circumstances, the Service determines that it would be inequitable to hold the requesting spouse liable for the income tax liability. The threshold conditions are as follows:
(1) The requesting spouse filed a joint return for the taxable year for which he or she seeks relief.
(2) Relief is not available to the requesting spouse under section 6015(b) or (c).
(3) Time for filing claim for relief:
(a) If the requesting spouse is applying for relief from a liability or a portion of a liability that remains unpaid, the request for relief must be made before the expiration of the period of limitation on collection of the income tax liability, as provided in section 6502. Generally, that period expires 10 years after the assessment of tax. Section 6502.
(b) Claims for credit or refund of amounts paid must be made before the expiration of the period of limitation on credit or refund, as provided in section 6511. Generally, that period expires three years from the time the return was filed or two years from the time the tax was paid, whichever is later.
(4) No assets were transferred between the spouses as part of a fraudulent scheme by the spouses.
(5) The nonrequesting spouse did not transfer disqualified assets to the requesting spouse. For this purpose, the term “disqualified asset” has the meaning given the term by section 6015(c)(4)(B). If the nonrequesting spouse transferred disqualified assets to the requesting spouse, relief will be available only to the extent that the income tax liability exceeds the value of the disqualified assets. This condition will not result in the requesting spouse being ineligible for relief if the nonrequesting spouse abused the requesting spouse or maintained control over the household finances by restricting the requesting spouse’s access to financial information, or the requesting spouse did not have actual knowledge that disqualified assets were transferred.
(6) The requesting spouse did not knowingly participate in the filing of a fraudulent joint return.
(7) The income tax liability from which the requesting spouse seeks relief is attributable (either in full or in part) to an item of the nonrequesting spouse or an underpayment resulting from the nonrequesting spouse’s income. If the liability is partially attributable to the requesting spouse, then relief can only be considered for the portion of the liability attributable to the nonrequesting spouse. Nonetheless, the Service will consider granting relief regardless of whether the understatement, deficiency, or underpayment is attributable (in full or in part) to the requesting spouse if any of the following exceptions applies:
(a) Attribution solely due to the operation of community property law. If an item is attributable or partially attributable to the requesting spouse solely due to the operation of community property law, then for purposes of this revenue procedure, that item (or portion thereof) will be considered to be attributable to the nonrequesting spouse.
(b) Nominal ownership. If the item is titled in the name of the requesting spouse, the item is presumptively attributable to the requesting spouse. This presumption is rebuttable. For example, H opens an individual retirement account (IRA) in W’s name and forges W’s signature on the IRA in 2006. Thereafter, H makes contributions to the IRA and in 2008 takes a taxable distribution from the IRA. H and W file a joint return for the 2008 taxable year, but do not report the taxable distribution on their joint return. The Service later determines a deficiency relating to the taxable IRA distribution. W requests relief from joint and several liability under section 6015. W establishes that W did not contribute to the IRA, sign paperwork relating to the IRA, or otherwise act as if W were the owner of the IRA. W thereby rebutted the presumption that the IRA is attributable to W.
(c) Misappropriation of funds. If the requesting spouse did not know, and had no reason to know, that funds intended for the payment of tax were misappropriated by the nonrequesting spouse for the nonrequesting spouse’s benefit, the Service will consider granting equitable relief although the underpayment may be attributable in part or in full to an item of the requesting spouse. The Service will consider granting relief in the case only to the extent that the funds intended for the payment of tax were taken by the nonrequesting spouse.
(d) Abuse not amounting to duress. If the requesting spouse establishes that he or she was the victim of abuse prior to the time the return was signed, and that, as a result of the prior abuse, the requesting spouse did not challenge the treatment of any items on the return, or question the payment of any balance due reported on the return, for fear of the nonrequesting spouse’s retaliation, the Service will consider granting equitable relief even though the deficiency or underpayment may be attributable in part or in full to an item of the requesting spouse.
(e) Fraud committed by nonrequesting spouse. The Service will consider granting relief notwithstanding that the item giving rise to the understatement or deficiency is attributable to the requesting spouse, if the requesting spouse establishes that the nonrequesting spouse’s fraud is the reason for the erroneous item. For example, W fraudulently accesses H’s brokerage account to sell stock that H had separately received from an inheritance. W deposits the funds from the sale in a separate bank account to which H does not have access. H and W file a joint Federal income tax return for the year, which does not report the income from the sale of the stock. The Service determines a deficiency based on the omission of the income from the sale of the stock. H requests relief from the deficiency under section 6015(f). The income from the sale of the stock normally would be attributable to H. Because W committed fraud with respect to H, however, and because this fraud was the reason for the erroneous item, the liability is properly attributable to W.
.02. Circumstances under which the Service will make streamlined determinations granting equitable relief under sections 66(c) and 6015(f).
If a requesting spouse who filed a joint return, or a requesting spouse who filed a separate return in a community property state, satisfies the threshold conditions of section 4.01, the Service will consider whether the requesting spouse is entitled to a streamlined determination of equitable relief under section 66(c) or section 6015(f) under section 4.02. If a requesting spouse is not entitled to a streamlined determination because the requesting spouse does not satisfy all the elements in section 4.02, the requesting spouse is still entitled to be considered for relief under the equitable factors in section 4.03. The Service will make streamlined determinations granting equitable relief under sections 66(c) and 6015(f), in cases in which the requesting spouse establishes that the requesting spouse:
(1) Is no longer married to the nonrequesting spouse as set forth in section 4.03(2)(a);
(2) Would suffer economic hardship if relief were not granted as set forth in section 4.03(2)(b); and
(3) Did not know or have reason to know that there was an understatement or deficiency on the joint return, as set forth in section 4.03(2)(c)(i), or did not know or have reason to know that the nonrequesting spouse would not or could not pay the underpayment of tax reported on the joint income tax return, as set forth in section 4.03(2)(c)(ii). If the nonrequesting spouse abused the requesting spouse or maintained control over the household finances by restricting the requesting spouse’s access to financial information, and therefore, because of the abuse or financial control the requesting spouse was not able to challenge the treatment of any items on the joint return, or to question the payment of the taxes reported as due on the joint return or challenge the nonrequesting spouse’s assurance regarding payment of the taxes, for fear of the nonrequesting spouse’s retaliation, then the abuse or financial control will result in this factor being satisfied even if the requesting spouse had knowledge or reason to know of the items giving rise to the understatement or deficiency or had knowledge or reason to know that the nonrequesting spouse would not pay the tax liability.
.03. Factors for determining whether to grant equitable relief.
(1) Applicability. This section 4.03 applies to requesting spouses who request relief under section 66(c) or section 6015(f), and satisfy the threshold conditions of section 4.01, but do not qualify for streamlined determinations granting relief under section 4.02.
(2) Factors. In determining whether it is inequitable to hold the requesting spouse liable for all or part of the unpaid income tax liability or deficiency, and full or partial equitable relief under section 66(c) or section 6015(f) should be granted, all the facts and circumstances of the case are to be taken into account. The degree of importance of each factor varies depending on the circumstances of the requesting spouse and the factual context surrounding the marriage. The factors are designed as guides. It is not intended that only the factors described in this paragraph are to be taken into account in making the determination. No one factor or a majority of factors necessarily determines the outcome. Factors to consider include the following:
(a) Marital status. Whether the requesting spouse is no longer married to the nonrequesting spouse as of the date the Service makes its determination. If the requesting spouse is still married to the nonrequesting spouse, this factor is neutral. If the requesting spouse is no longer married to the nonrequesting spouse, this factor will weigh in favor of relief. For purposes of this section, a requesting spouse will be treated as being no longer married to the nonrequesting spouse only in the following situations:
(i) The requesting spouse is divorced from the nonrequesting spouse,
(ii) The requesting spouse is legally separated from the nonrequesting spouse under applicable state law,
(iii) The requesting spouse is a widow or widower and is not an heir to the nonrequesting spouse’s estate which would have sufficient assets to pay the tax liability, or
(iv) The requesting spouse has not been a member of the same household as the nonrequesting spouse at any time during the 12-month period ending on the date relief was requested.For these purposes, a temporary absence (e.g., due to incarceration, illness, business, military service, or education) is not considered separation if the absent spouse is expected to return to the household. See Treas. Reg. § 1.6015-3(b)(3)(i). A requesting spouse is a member of the same household as the nonrequesting spouse for any period in which the spouses maintain the same residence.
(b) Economic hardship. Whether the requesting spouse will suffer economic hardship if relief is not granted. For purposes of this factor, an economic hardship exists if satisfaction of the tax liability in whole or in part will cause the requesting spouse to be unable to pay reasonable basic living expenses. Whether the requesting spouse will suffer economic hardship is determined based on rules similar to those provided in §301.6343-1(b)(4), and will take into consideration a requesting spouse’s current income and expenses and the requesting spouse’s assets. In determining the requesting spouse’s reasonable basic living expenses, the Service will consider whether the requesting spouse shares expenses or has expenses paid by another individual (such as a spouse). If denying relief from the joint and several liability will cause the requesting spouse to suffer economic hardship, this factor will weigh in favor of relief. If denying relief from the joint and several liability will not cause the requesting spouse to suffer economic hardship, this factor will be neutral.
In determining whether the requesting spouse would suffer economic hardship if relief is not granted, the Service will compare the requesting spouse’s income to the Federal poverty guidelines (as updated periodically in the Federal Register by the U.S. Department of Health and Human Services under the authority of 42 U.S.C. § 9902(2)) for the requesting spouse’s family size and will determine by how much, if at all, the requesting spouse’s monthly income exceeds the spouse’s reasonable basic monthly living expenses. If the requesting spouse’s income is below 250% of the Federal poverty guidelines, or if the requesting spouse’s monthly income exceeds the requesting spouse’s reasonable basic monthly living expenses by $300 or less, then this factor will weigh in favor of relief unless the requesting spouse has assets out of which the requesting spouse can make payments towards the tax liability and still adequately meet the requesting spouse’s reasonable basic living expenses. If the requesting spouse’s income exceeds these standards, the Service will consider all facts and circumstances in determining whether the requesting spouse would suffer economic hardship if relief is not granted. If the requesting spouse is deceased, this factor is neutral.
(c) Knowledge or reason to know.
(i) Understatement cases. Whether the requesting spouse knew or had reason to know of the item giving rise to the understatement or deficiency at the time the requesting spouse signed the joint return (including a joint amended return). In the case of an income tax liability that arose from an understatement or a deficiency, this factor will weigh in favor of relief if the requesting spouse did not know and had no reason to know of the item giving rise to the understatement. If the requesting spouse knew or had reason to know of the item giving rise to the understatement, this factor will weigh against relief. Actual knowledge of the item giving rise to the understatement or deficiency will not be weighed more heavily than any other factor. Depending on the facts and circumstances, if the requesting spouse was abused by the nonrequesting spouse (as described in section 4.03(2)(c)(iv)), or the nonrequesting spouse maintained control of the household finances by restricting the requesting spouse’s access to financial information and, therefore, the requesting spouse was not able to challenge the treatment of any items on the joint return for fear of the nonrequesting spouse’s retaliation, this factor will weigh in favor of relief even if the requesting spouse had knowledge or reason to know of the items giving rise to the understatement or deficiency.
(ii) Underpayment cases. In the case of an income tax liability that was properly reported on a joint return (including a joint amended return) but not paid, whether the requesting spouse knew or had reason to know at the time the requesting spouse signed the joint return that the nonrequesting spouse would not or could not pay the tax liability at the time the joint return was filed or within a reasonably prompt time after the filing of the joint return. This factor will weigh in favor of relief if the requesting spouse reasonably expected the nonrequesting spouse to pay the tax liability reported on the joint return. This factor will weigh against relief if, based on the facts and circumstances of the case, it was not reasonable for the requesting spouse to believe that the nonrequesting spouse would or could pay the tax liability shown on the joint return within a reasonably prompt time after filing of the return. For example, if prior to signing the return, the requesting spouse knew of the nonrequesting spouse’s prior bankruptcies, financial difficulties, or other issues with the IRS or other creditors, or was otherwise aware of difficulties in timely paying bills, then this factor will generally weigh against relief. Depending on the facts and circumstances, if the requesting spouse was abused by the nonrequesting spouse (as described in section 4.03(2)(c)(iv)), or the nonrequesting spouse maintained control of the household finances by restricting the requesting spouse’s access to financial information and, therefore, the requesting spouse was not able to question the payment of the taxes reported as due on the joint return or challenge the nonrequesting spouse’s assurance regarding payment of the taxes for fear of the nonrequesting spouse’s retaliation, this factor will weigh in favor of relief even if the requesting spouse had knowledge or reason to know regarding the nonrequesting spouse’s intent or ability to pay the taxes due.
(iii) Reason to know. The facts and circumstances that are considered in determining whether the requesting spouse had reason to know of an understatement, or reason to know the nonrequesting spouse could not or would pay the reported tax liability, include, but are not limited to, the requesting spouse’s level of education, any deceit or evasiveness of the nonrequesting spouse, the requesting spouse’s degree of involvement in the activity generating the income tax liability, the requesting spouse’s involvement in business and household financial matters, the requesting spouse’s business or financial expertise, and any lavish or unusual expenditures compared with past spending levels.
(iv) Abuse by the nonrequesting spouse. For purposes of this revenue procedure, if the requesting spouse establishes that he or she was the victim of abuse (not amounting to duress, see Treas. Reg. § 1.6015-1(b)), then depending on the facts and circumstances of the requesting spouse’s situation, the abuse may result in certain factors weighing in favor of relief when otherwise the factor may have weighed against relief. Abuse comes in many forms and can include physical, psychological, sexual, or emotional abuse, including efforts to control, isolate, humiliate and intimidate the requesting spouse, or to undermine the requesting spouse’s ability to reason independently and be able to do what is required under the tax laws. All the facts and circumstances are considered in determining whether a requesting spouse was abused. The impact of a nonrequesting spouse’s alcohol or drug abuse is also considered in determining whether a requesting spouse was abused.
(d) Legal obligation. Whether the requesting spouse or the nonrequesting spouse has a legal obligation to pay the outstanding Federal income tax liability. For purposes of this factor, a legal obligation is an obligation arising from a divorce decree or other legally binding agreement. This factor will weigh in favor of relief if the nonrequesting spouse has the sole legal obligation to pay the outstanding income tax liability pursuant to a divorce decree or agreement. This factor, however, will be neutral if the requesting spouse knew or had reason to know, when entering into the divorce decree or agreement, that the nonrequesting spouse would not pay the income tax liability. This factor will weigh against relief if the requesting spouse has the sole legal obligation. The fact that the nonrequesting spouse has been relieved of liability for the taxes at issue as a result of a discharge in bankruptcy is disregarded in determining whether the requesting spouse has the sole legal obligation. If, based on an agreement or consent order, both spouses have a legal obligation to pay the outstanding income tax liability, the spouses are not separated or divorced, or the divorce decree or agreement is silent as to any obligation to pay the outstanding income tax liability, this factor is neutral.
(e) Significant benefit. Whether the requesting spouse received significant benefit (beyond normal support) from the unpaid income tax liability or item giving rise to the deficiency. See Treas. Reg. § 1.6015-2(d). If the requesting spouse enjoyed the benefits of a lavish lifestyle, such as owning luxury assets and taking expensive vacations, this factor will weigh against relief. If the nonrequesting spouse controlled the household and business finances or there was abuse (as described in section 4.03(2)(c)(iv)) such that the nonrequesting spouse made the decision on spending funds for a lavish lifestyle, then this mitigates this factor so that it is neutral. If only the nonrequesting spouse significantly benefitted from the unpaid tax or item giving rise to an understatement or deficiency, and the requesting spouse had little or no benefit, or the nonrequesting spouse enjoyed the benefit to the requesting spouse’s detriment, this factor will weigh in favor of relief. If the amount of unpaid tax or understated tax was small such that neither spouse received a significant benefit, then this factor is neutral.
(f) Compliance with income tax laws. Whether the requesting spouse has made a good faith effort to comply with the income tax laws in the taxable years following the taxable year or years to which the request for relief relates.
(1) If the requesting spouse is compliant for taxable years after being divorced from the nonrequesting spouse, then this factor will weigh in favor of relief. If the requesting spouse is not compliant, then this factor will weigh against relief. If the requesting spouse made a good faith effort to comply with the tax laws but was unable to fully comply, then this factor will be neutral. For example, if the requesting spouse timely filed an income tax return but was unable to fully pay the tax liability due to spouse’s poor financial or economic situation after the divorce, then this factor will be neutral.
(2) If the requesting spouse remains married to the nonrequesting spouse, whether or not legally separated or living apart, and continues to file joint returns with the nonrequesting spouse after requesting relief, then this factor will be neutral if the joint returns are compliant with the tax laws, but will weigh against relief if the returns are not compliant.
(3) If the requesting spouse remains married to the nonrequesting spouse but files separate returns, this factor will weigh in favor of relief if the requesting spouse is compliant with the tax laws and will weigh against relief if the requesting spouse is not compliant with the tax laws. If the requesting spouse made a good faith effort to comply with the tax laws but was unable to fully comply, then this factor will be neutral. For example, if the requesting spouse timely filed an income tax return but was unable to fully pay the tax liability due to the requesting spouse’s poor financial or economic situation as a result of being separated or living apart from the nonrequesting spouse, then this factor will be neutral.
(g) Mental or physical health. Whether the requesting spouse was in poor physical or mental health. This factor will weigh in favor of relief if the requesting spouse was in poor mental or physical health at the time the requesting spouse signed the return or returns for which the request for relief relates or at the time the requesting spouse requested relief. The Service will consider the nature, extent, and duration of the condition. If the requesting spouse was in neither poor physical nor poor mental health, this factor is neutral.
04. Refunds. In both understatement and underpayment cases, a requesting spouse is eligible for a refund of separate payments made by the requesting spouse after July 22, 1998, and the requesting spouse establishes that the funds used to make the payment for which a refund is sought were provided by the requesting spouse. A requesting spouse is not eligible for refunds of payments made with the joint return, joint payments, or payments that the nonrequesting spouse made. A requesting spouse, however, may be eligible for a refund of the requesting spouse’s portion of the requesting and nonrequesting spouse’s joint overpayment from another tax year that was applied to the joint income tax liability to the extent that the requesting spouse can establish that the requesting spouse provided the funds for the overpayment. The availability of refunds is subject to the refund limitations of section 6511.

SECTION 5. PROCEDURE

A requesting spouse seeking equitable relief under section 66(c) or section 6015(f) must file Form 8857, Request for Innocent Spouse Relief (and Separation of Liability, and Equitable Relief), or other similar statement signed under penalties of perjury, within the applicable period of limitation as set forth in section 4.01(3) of this revenue procedure.

SECTION 6. EFFECT ON OTHER DOCUMENTS

Revenue Procedure 2003-61, 2003-2 C.B. 296, is superseded.

SECTION 7. EFFECTIVE DATE

This revenue procedure is effective for requests for relief filed on or after [INSERT DATE REVENUE PROCEDURE IS RELEASED TO THE PUBLIC]. In addition, this revenue procedure is effective for requests for equitable relief pending on [INSERT DATE REVENUE PROCEDURE IS RELEASED TO THE PUBLIC], whether with the Service, the Office of Appeals, or in a case docketed with a Federal court.

SECTION 8. DRAFTING INFORMATION

The principal authors of this revenue procedure are Nancy Rose and Sheida Lahabi of the Office of Associate Chief Counsel (Procedure & Administration). For further information regarding this revenue procedure, contact Branches 1 or 2 of Procedure and Administration at (202) 622-4910 or (202) 622-4940 (not a toll-free call).
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new form 656 for offers in compromise


New Form 656 for offers in compromise http://www.irs.gov/pub/irs-pdf/f656.pdf  (May 2012)

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effect of fraudulent conveyance



The Supreme Court has declined to review a decision of the Tenth Circuit that capital gains tax In re Dawes, (CA 10 6/23/2011), 107 AFTR 2d 2011-267`\1. cert denited 5/21/2012.


Background. Under Chapter 12 of the Bankruptcy Code (11 U.S.C. §§1201-31), family farmers and fishermen are allowed to reorganize their business affairs while keeping creditors at bay. In such bankruptcy cases, the debtor must file a plan of reorganization, which provides for full deferred payments of all claims entitled to priority under §507 of the Bankruptcy Code unless the claim is one owed to a governmental unit that arises as a result of the sale, transfer, exchange, or other disposition of any farm asset used in the debtor's farming operation, in which case the claim is treated as an unsecured claim that isn't entitled to priority under §507. (§1222(a)(2)(A)) Among the claims entitled to priority under §507 are (1) various taxes incurred on or before the date of the filing of the petition, i.e., pre-petition income tax; (§507(a)(8)(A)) and (2) administrative expenses allowed under §503(b), including any tax incurred by the estate. (§507(a)(2))
Facts. Decades ago, Donald and Phyllis Dawes (the Daweses) pleaded guilty for failing to file income tax returns in '81 through '83. They also failed to pay all their taxes for still more years, including '86–'88 and '90. IRS ultimately obtained a judgment declaring that the Daweses had fraudulently conveyed certain assets in an effort to avoid their creditors and that those unlawful conveyances were null and void. This result was previously affirmed by the Tenth Circuit, after which the government proceeded to execute its judgment, notifying the Daweses that it intended to take possession of various pieces of their property. But before it could do so, they declared bankruptcy, seeking the protections of Chapter 12.
After declaring bankruptcy, the Daweses, with the permission of the bankruptcy court, sold several tracts of farm land. This sale created income tax liabilities. The Daweses proceeded to submit a bankruptcy reorganization plan in which they proposed to treat their newly incurred tax liabilities as general unsecured claims. As unsecured claims, the taxes would be entitled to no priority, paid only to the extent funds might be available after priority claims were satisfied, and any remaining unpaid portion would be eligible for discharge. IRS opposed the plan, but lost before the bankruptcy court and then on appeal before the district court. It then appealed to the Tenth Circuit.
The Tenth Circuit reversed the district court, holding that the Daweses' post-petition income tax liabilities were not eligible for treatment as unsecured claims under §1222(a)(2)(A) as proposed in their reorganization plan. The Court rejected the Daweses' argument that the subject taxes were “incurred by the estate” as a result of the farm asset sale and were thus eligible for treatment as general unsecured claims. The Tenth Circuit noted that one who has incurred an expense is liable for it; however, in Chapter 12 bankruptcies, the debtor, and not the estate, is liable for the payment of post-petition taxes. Accordingly, these taxes aren't part of the bankruptcy estate, but rather were the personal obligation of the Daweses. 
The Hall case. On May 14, 2012, the Supreme Court, in a 5-4 decision, affirmed a factually similar Ninth Circuit decision that the capital gains tax arising from the post-petition sale of farm assets wasn't dischargeable under §1222(a)(2)(A). In so holding, the Court found that the tax wasn't “incurred” by the bankruptcy estate and thus wasn't eligible for treatment as a nonpriority claim. 
Decision now final. The Supreme Court has now declined to review the Dawes case. Accordingly, the Tenth Circuit's decision is final.




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Monday, May 21, 2012

Changes in the IRS Offer in Compromise Manual


New changes in the Internal Revenue Manual dealing with Offers in  Compromise.

IRM 5.8.5.5.1, Income-Producing Assets

(3) As a general rule, equity in income producing assets will not be added to the RCP of a viable, ongoing business unless it is determined the assets are not critical to business operations. The following examples provide guidance in evaluating equity and income produced by assets.
Example (1) A business depends on a machine to manufacture parts and cannot operate without this machine. The equity is $100,000. The machine produces net income of $5,000 monthly. The RCP should include the income produced by the machine, but not the equity. Equity in this machine will generally not be included in the RCP because the machine is needed to produce the income, and is essential to the ability of the business to continue to operate.
Note: It is in the government’s best interest to work with this taxpayer to maintain business operations, particularly in a bad economy.
Example (2) The same business in the prior example, but the business can continue to operate without the machine, i.e. the equipment is not used in the process of generating the key product of the business. The machine generates only $500 net monthly income. Consider including the equity in the RCP and remove $500 from the business income.
Example (3) A trucking company has ten trucks. Eight are fully encumbered and two trucks have no encumbrances and $30,000 in equity. The two trucks combined generate net income of $12,000 per year. Add the net income from the trucks to the RCP and do not add the equity.
Example (4) The same trucks described in the previous example generate only $1000 per year in net income, but have $30,000 in equity. If the business can successfully operate without the two trucks, consider removing the income from the RCP and including the equity in the RCP.
Example (5) A real estate salesman has a vehicle with $30,000 in equity. The vehicle is used to transport clients and assists in the production of income. The taxpayer's net monthly disposable income is $3000. The equity in the vehicle generally will not be included in the RCP.
Example (6) The same salesman in the previous example only has net monthly disposable income of $500 per month. Consider including the equity in the vehicle, yet allow for the impact the loss of the vehicle may have on the taxpayer's income.
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(4) When considering equity in income producing assets and the effect on income streams and expenses, you must exercise sound judgment consistent with the unique facts of each case.
(5) Each case must be thoroughly documented regarding equity decisions in income producing property.
IRM 5.8.5.6, Cash
(1) Use the amount listed on the Form 433-A (OIC) for the amount of cash in the taxpayer’s bank accounts. Reduce the total amount listed by $1,000. If the total amount listed on the Form 433-A (OIC) is over $1,000 and you have reason to believe the money will be used to pay for the taxpayer's monthly allowable living expenses, do not include it on the AET. Document the AOIC or ICS history with the findings.
(2) Review checking account statements over a reasonable period of time, generally three months for wage earners and six months for in-business taxpayers. Look for any unusual activity, such as deposits in excess of reported income, withdrawals, transfers, or checks for expenses not reflected on the CIS. The OE/OS should discuss these inconsistencies, if appropriate, with the taxpayer.
Example: The taxpayer lists $10,000 on Form 433-A (OIC) The taxpayer’s allowable living expenses are $3,000. Include $6,000 ($10,000 less $1,000 less $3000) as an asset value on the AET.
Example: The taxpayer lists $3,000 on the Form 433-A (OIC) and his allowable living expenses are $2,700. Do not include any amount on the AET since the $300 difference is less than $1000.
(3) Review savings account statements over a reasonable period of time, generally three months.

If the account has little withdrawal activity, use the ending balance on the latest statement, less $1,000, if not previously applied to other accounts, as the asset value for the AET.

If it is apparent that the account is used for paying monthly living expenses, treat it as a checking account and follow the instructions in paragraphs (1) and (2) above to determine its value.
(4) If analysis of the bank statement reveals large amounts of recently expended funds, see IRM 5.8.5.6 below for a full discussion of the treatment of dissipated assets.
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(5) If the taxpayer offers the balances of accounts (for example, certificate of deposit, savings bonds, etc.) to fund the offer, allow for any penalty for early withdrawal and the expected current year tax consequence.
IRM 5.8.5.11, Motor Vehicles, Airplanes, and Boats
(2) Exclude $3,450 per car from the net equity valuation of vehicles owned by the taxpayer(s) and used for work, the production of income, and/or the welfare of the taxpayer’s family, up to two cars per household.
IRM 5.8.5.16, Dissipation of Assets
(1) Inclusion of dissipated assets in the calculation of the reasonable collection potential (RCP) is no longer applicable except in situations where it can be shown the taxpayer has sold, transferred, encumbered or otherwise disposed of assets in an attempt to avoid the payment of the tax liability or used the assets or proceeds (other than wages, salary, or other income) for other than the payment of items necessary for the production of income or the health and welfare of the taxpayer or their family, after the tax has been assessed or within six months prior to the tax assessment.
(2) Generally, a three year timeframe will be used to determine if it is appropriate to include a dissipated asset in RCP. Include the year of submission as a complete year in the calculation, For example, if the offer is submitted in 2012, any asset dissipated prior to 2010 should not be included.

If the tax liability did not exist prior to the transfer or the transfer occurred prior to the taxable event giving rise to the tax liability, generally, a taxpayer cannot be said to have dissipated the assets in disregard of the outstanding tax liability.

If a taxpayer withdraws funds from an IRA to invest in a business opportunity but does not have any tax liability prior to the withdrawal, the funds were not dissipated.
(3) If it is determined inclusion of a dissipated asset is appropriate and the taxpayer is unwilling or unable to include the value of the dissipated asset in the offer amount, the offer should be rejected as not in the government’s best interest.
NOTE: Even if the transfer and/or sale took place more than three years prior to the offer submission, it may be appropriate to include the asset in the calculation of RCP if the asset transfer and/or sale occurred either within six months prior to or within six months after the assessment of the tax liability.
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In these instances, a determination on whether the funds were used for health/welfare of the family or production of income would be appropriate.
(4) See below for examples of the types of situations where it may be appropriate to include, or not include, the value of an asset in the calculation of RCP. The examples provided are not meant to be all inclusive as each case must be evaluated on its own merit.
(5) Examples of situations in which the value of an asset should be included in RCP include, but are not limited to:
Note: Each of the examples in paragraph (5) occurred within three years prior to the offer submission or during the offer investigation, and the taxpayer dissipated the assets after incurring the tax liability or within six months prior to the tax assessment.

The taxpayer dissolved an IRA or other investment account to pay for specific non-priority items, i.e. child's wedding, child's university tuition, extravagant vacation, etc.

The taxpayer refinanced their house and used the funds to pay off credit card and non-secured debt. The credit cards were NOT used for payment of necessary living expenses and/or the production of income.

The taxpayer inherited funds and used the funds for non-priority items (other than health/welfare of the family or production of income).

The taxpayer closed bank/investment accounts and will not disclose how the funds were spent or if any funds remain.

A taxpayer filed a CAP to avoid the filing of a NFTL and insisted the lien would impair his credit and his ability to successfully operate his business. After the non-filing was granted, the taxpayer fully encumbered his assets, used the funds for non-priority items (items not necessary for the production of income or the health and welfare of the taxpayer and/or their family) and then submitted an OIC.

The taxpayer sold real estate and gifted the funds from the sale to family members.
(6) Situations may occur in which the transfer happened over 3 years prior to the offer submission, yet because of the timing of the transfer (within six months prior to or six months after the tax assessment), the inclusion of the asset in RCP may be appropriate.
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Example: The taxpayer filed tax returns for five years (2001 - 2005) in February of 2007, which were assessed in March 2007. In January of 2007, the taxpayer transferred real property to a family member for no consideration. An offer was submitted in January 2012. In this instance, since the transfer was within six months of the tax assessments, it may be appropriate to include the value of the real property in RCP.
(7) Examples of situations in which the value of an asset should NOT be included in RCP, include but are not limited to:

When it can be shown through internal research or substantiation provided by the taxpayer that the funds were needed to provide for necessary living expenses, these amounts should not be included in the RCP calculation.

Dissolving an IRA during unemployment or underemployment. Review of available internal sources verified the taxpayer’s income was insufficient to meet necessary living expenses. In this case, do not include the funds up to the amount needed to meet allowable expenses in the RCP calculation.

Substantial amount withdrawn from bank accounts. Taxpayer provided supporting documentation that funds were used to pay for medical or other necessary living expenses. This amount will not be included in the RCP calculation.

Disposing of an asset and using the funds to purchase another asset that is included in the offer evaluation. Do not include the value of the asset disposed of as a dissipated asset.
(8) Prior to including the dissipated asset in the RCP, the taxpayer should be contacted by telephone and afforded the opportunity to explain or verify the dissipation of the asset.
(9) The case history must be clearly documented with the basis for your decision regarding the dissipated asset.
IRM 5.8.5.17, Retired Debt
(3) Do not retire the first $400 of a loan on a vehicle (limited to one vehicle for a single taxpayer and two vehicles for a joint offer)
Example: If the taxpayer has a car payment of $750 per month and the maximum standard is $450, $50 would be retired beginning the date the loan is paid.
IRM 5.8.5.20.3, Transportation Expenses
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(5) When the taxpayer owns a vehicle that is six years or older or has reported mileage of 75,000 miles or more, allow an additional operating expenses of $200 or more per vehicle. The additional operating expense will be allowed on any vehicle meeting the criteria, up to two cars per household.
Example: The taxpayer who has a 1998 Chevrolet Cavalier with 50,000 miles will be allowed the standard of $231 per month plus $200 per month operating expenses for a total operating expense of $431 per month.
IRM 5.8.5.20.4, Other Expenses
(3) Minimum payments on student loans guaranteed by the federal government will be allowed for the taxpayer’s post-high school education. Proof of payment must be provided. If student loans are owed, but no payments are being made, do not allow them, unless the non-payment is due to circumstances of financial hardship, e.g. unemployment, medical expenses, etc.
(7) When a taxpayer owes both delinquent federal and state or local taxes, and does not have the ability to full pay the liabilities, monthly payments to state taxing authorities may be allowed in certain circumstances.
a) Determine the disposable income on a Collection Information Statement (CIS), Forms 433-A (OIC or 433-B (OIC). Do not include any amount that is being paid for outstanding state or local tax liabilities in the calculation of the future income value component (FIV) of the reasonable collection potential (RCP). FIV is the difference between gross income and allowable living expenses.
Calculate the dollar amounts for IRS and state or local payments based on the total liability owed to each agency (including penalties and interest to date).
Example: The taxpayer owes the state $20,000 and owes the IRS $100,000, a total of $120,000 ($20,000/$120,000 = 17%; $100,000/$120,000 = 83%). The taxpayer has disposable income of $300 per month. A monthly payment to the state taxing authority of $51 may be allowed until the debt is retired. See the If/Then table below for examples.

Seventeen percent (17%) of $300 = $51

Eighty-three percent (83%) of $300 = $249
b) To determine allowable payments for delinquent state or local tax debts follow the procedures below:
If…
And…
Then…
(1) The taxpayer does
Provides a complete CIS
Follow procedures in
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If… And… Then…
not have an existing agreement for payment of the delinquent state or local tax debts,
and verification of state or local tax debts,
paragraph (a) above to establish the calculated percentage amount that will be determined as the allowable monthly payment for delinquent state or local taxes.
(2) The taxpayer has an existing agreement for delinquent state or local tax debts, which was established after the earliest IRS date of assessment,
The payment amount on the state or local agreement is less than the calculated percentage amount,
The monthly amount due on the existing state or local agreement will be listed as the allowable delinquent state or local tax payment.
Example: The calculation based on the example in paragraph (a) above shows the taxpayer should pay $51 but the State agreement is for $50. Allow the State agreed payment of $50.
The payment to IRS will be increased by the amount allowed for the monthly state or local payment with the state or local liability is scheduled to be full paid.
(3) The taxpayer has an existing agreement for delinquent state or local tax debts, which was established after the earliest IRS date of assessment,
The payment amount on the agreement is more than the calculated percentage amount,
The amount allowed as the delinquent state or local tax payment will be the calculated percentage amount. Advise the taxpayer that he/she can use the amount IRS allows for Miscellaneous expenses under National Standards to pay the additional amount due for the delinquent state or local tax payment.
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IRM 5.8.5, Financial Analysis
If… And… Then…
Example: The calculation based on the example in paragraph (a) above shows the taxpayer should pay $51 but the State agreement is for $52. Allow the calculated payment of $51.
The payment to IRS will be increased by the amount allowed for the monthly state of local payment when the state or local liability is scheduled to be full paid.
(4) The taxpayer has an existing agreement for delinquent state or local tax debts, which was established prior to the IRS earliest date of assessment
The payment is not greater than the taxpayer’s net disposable income
Allow the state or local tax agreement.
IRM 5.8.5.23, Calculation of Future Income
(2) Future income is defined as an estimate of the taxpayer’s ability to pay based on an analysis of gross income, less necessary living expenses, for a specific number of months into the future. The number of months used depends on the payment terms of the offer.
If…
Then…
The offer will be paid in 5 or fewer installments in 5 months or less
Use the realizable value of assets plus the amount that could be collected in 12 months.
The offer will be paid in more than 5 installments or more than 5 months up to a maximum of 24 months
Use the realizable value of assets plus the amount that could be collected in 24 months.
Note: The deferred payment option which allows payment over the life of the statute is no longer available. With implementation of the multipliers,
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the maximum number of months for a deferred payment cannot exceed 24 months.

www.irstaxattorney.com (212) 588-1113 ab@irstaxattorney.com