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Session 12 Week 2

Can be automatically approved if under $10,000 Financial statement (Form 433) required if liability over $25,000 IA Terms:
Make payments on time Be up to date on filing your returns

Three-year payment period

Any tax refunds for these years will be offset against prior tax liabilities

Taxpayer must apply for IA and pay fee

Interest keeps running Does not prevent but deters IRS from using liens or levies to collect


Doubt as to Liability Doubt as to Collectibility Promotion of Effective Tax Administration

Form 656 + Financial Statement

Filing Fee + Payment Required CSED Suspended while OIC request is under consideration

IRS must act within 2 years of application

Dont forget your Circular 230 obligations and state laws on dealing with clients if youre doing a lot of OIC cases

Bankruptcy stops IRS collection of liabilities while bankruptcy is pending

CSED is tolled while case exists IRS can request permission from court to continue collection while case is pending, but that is rare

Automatic Stay Bankruptcy does not stop IRS from assessing taxes

Chapter 7 = Liquidation Chapter 11 = Reorganization Chapter 13 = Individual Refinance

Individuals - Can generally get rid off (discharge) most tax liabilities over 3 years old if no fraud Cannot discharge trust fund taxes

Trust Fund Recovery Penalty

Corporate officers and owners who are deemed responsible for the corporations failure to turn over withholding taxes

Transferee Liability
Heirs and Gift Recipients Successors in Interest Certain Fiduciaries The transferee is held liable for the debt of the previous owner, but no fraud is alleged in the transfer of the asset

Nominees and Alter-Egos

Taxpayer transfers assets to another person, but retains use and control The third party holds title to the asset, but the taxpayer remains the owner

Fraudulent Transfer Recipients

If the transfer of the asset was with the intent to defraud a creditor, then the transfer is void

Four types of relief available:

1. 2. 3. 4. Innocent spouse relief IRC 6015(b) Separate of liability relief IRC 6015(c) Equitable relief IRC 6015(f) Relief from liability arising from community property law IRC 66

Two-year rule for requesting relief under 6015(b) or (c) Certain cases can be appealed to Tax Court or a refund court

Relief can be requested in exam or during collection Relief requests halt many collection actions but not all

Foreclosure / Seizure Proceedings Reduce Liability to Judgment

Extends liability past the CSED

Transferee Liability Determination Suit Fraudulent Conveyance Suits Suits for Failure to Obey a Levy Erroneous Refund Suits