IRS trying to get over!

[lolly78]

I called the IRS in December to inquire as to how much I owed for my back taxes, so that my attorney could include the total with my other debt. They indicated that it was roughly $6000. I checked Pacer today and they have put in a claim for over $12,000! Only about $200 of that is unsecured which I assume is the interest/penalties. I owed about $4000 for 2009 and about 3500 for 2007 (after being audited due to accountant error!) I've been paying $200 a month for nearly a year, not to mention the $2500 refund for 2010 that they're probably going to keep! Has anyone else had a situation like this?

[daxtell]

the irs generally explains what you owe them in correspondence to you based on the original amount owed, plus the interest and penalties based on the payment plan you worked out with them. the amounts can change based on the time length of the payment arrangements. maybe they are taking into account your chapter 13 bankruptcy plan time frame now and additional money was added.

[lolly78]

I don't see how they can do that since they don't know how much I'm paying into the plan yet and they don't know how the trustee will be allocating the funds. Plus I would think that any additional interest/penalties they add on should be part of that "unsecured" amount that was claimed. I'm going to give both the IRS and my attorney a call today to find out what's going on!

[chicagoed195]

If you haven't filed your 2010 tax returns yet, it is very possible that they have filed a statutory claim based on the information reported to them for 2010 or based on your 2009 returns.

[HHM]

Well, your attorney may file an objection to the proof of claim. But if these are "secured" debts (meaning a tax lien is filed), or priority debts, the IRS gets interest.

[justbroke]

I have never had a conversation with the IRS where they indicated that I owe "roughly" so much money. They are very precise. I would speak to my attorney and have them object to the claim if you think it's wrong.

In your specific case, the IRS claim seems wrong to me. Usually, the penalties and interest on the penalties, known as the "general" unsecured portion, is a lot more than $200 on a $7,000+ tax debt. The IRS charges as much as 18% APR on past due items, That means $1,260 a year in interest on $7,000 debt. That's about $100/month in payments just to cover the interest. The additional $100 would reduce the balance.

Perhaps the IRS has found something else? I guess you won't know until you object.

[HHM]

I have never had a conversation with the IRS where they indicated that I owe "roughly" so much money. They are very precise. I would speak to my attorney and have them object to the claim if you think it's wrong.

In your specific case, the IRS claim seems wrong to me. Usually, the penalties and interest on the penalties, known as the "general" unsecured portion, is a lot more than $200 on a $7,000+ tax debt. The IRS charges as much as 18% APR on past due items, That means $1,260 a year in interest on $7,000 debt. That's about $100/month in payments just to cover the interest. The additional $100 would reduce the balance.

Perhaps the IRS has found something else? I guess you won't know until you object.

To follow on that thought, the two major penalties are failure to file and failure to pay. When those penalties fully mature, they equal something like 42.5% of the principal tax. By fully mature, the penalties grow over time, i.e. 0.5% per month for 48 months, etc. So, on a 7000 tax debt with fully matured penalties, the total would be around $10,150 without even calculating interest on the principal and interest on the penalties.

So 12K owed on a principal debt of $7500 that is 3-4 year old is not that unrealistic.

[lolly78]

I called both the IRS and my attorney, IRS confirmed that I owe even less than I included on my petition. The person I talked to indicated that they may have calculated the 12k based on what they thought I would owe including 2010 since I hadn't filed my return yet at the time I filed. My attorney indicated that we can use the documentation they faxed me back in December, but it probably won't be necessary because they will most likely amend their claim because I didn't owe for 2010 and actually had a refund. Now on the IRS website they are holding my refund. They can't apply it to what I owe as that is a possible violation of the automatic stay, so it may become part of the bankruptcy estate. It would be nice if I could keep that $2500!

[justbroke]

Since you are in a Chapter 13, it's likely that they will return the $2,500 to you. The IRS actually did this 2 years of my Chapter 13 (held my refund), but released it shortly thereafter (and they were sizable refunds of over $7K each). In any event, yes, it sounded like they did an "estimate", and I don't know why they'd do that. They'll amend their claim, but your attorney can still "object" to the current claim.

[chicagoed195]

The IRS does an estimate or a "statutury" return to protect their interest. If you file for bk after December 31 of a tax year, your tax obligations are fixed as of that date. So, even though your return might not be due until April 15th, your liability is as of December 31.

[IamOld]

Question to HHM - so IRS is a SECURED debt? I have a payment plan with them (no levies, liens) just a payment plan...which I'm paying - so that counts as SECURED???

[HHM]

Question to HHM - so IRS is a SECURED debt? I have a payment plan with them (no levies, liens) just a payment plan...which I'm paying - so that counts as SECURED???

This issue gets confusing, but for the sake of clarity, I will just say...

For Bankruptcy Purposes, IRS is not a secured debt unless they have filed and perfected liens.

[justbroke]

IRS is a "priority" unsecured claim. All priority (unsecured) claims must be paid first. However, there are times where the IRS will actually obtain a tax lien on your real and personal property. In either case, the IRS always enjoys special status as a priority creditor.

In your case, no liens no levies, the IRS has a priority unsecured claim.

[IamOld]

This issue gets confusing, but for the sake of clarity, I will just say...

For Bankruptcy Purposes, IRS is not a secured debt unless they have filed and perfected liens.

Thanks!