Taxes, BK, and Offer in Compromise?

[quest42]

Since a layoff and divorce in 1998, my financial life has been a disaster which I am now working to clean up. I am in the process of getting my records together so I can file all my Federal and State tax returns in December.

I have tax debts from 1998 as well as 2000 (not yet filed) 2001 and 2002 (filed but not yet paid) with a total liability over $60,000 -- Federal and State (CA).

I again lost a job in 2000 and took money out of a 401k to pay debts and expenses (yeah, that was really a stupid thing to do!) Last year, I paid tax and the small refund was applied to my tax debt. I have been unemployed and working part-time, doing temporary work, with unpredictable income, averaging under $1,000 per month, since 2002... barely surviving, with insufficient income and assets to pay debts... can't even afford a visit to the dentist.

I filed a Chapter 7 bankruptcy (pro-se) in October with a large tax liability and $50k consumer debt... Had my 341 meeting two weeks ago -- the trustee reported no assets to distribute. My deadline for objections is mid-January, 2006.

I have no money to pay an Enrolled Agent or Tax Attorney... so I am going to have to do all this pro-se, by myself... but have plenty of time to devote to it.


Meanwhile, here are some of my questions:

1. Is anybody willing to share personal experiences about an IRS Offer In Compromise done with or without professional help?

2. Can I do an Offer-In-Compromise (OIC) while I am in bankruptcy, or must I wait for my discharge?

3. Should I file an Adversary Complaint in Bankruptcy court to get a judge's determination on the dischargeability of my tax debts? I was assessed over $50,000 taxes, but did not yet file for 1998 and 2000.

Any suggestions?

[bkfiler]

those are great questions. the only one i think i know the answer to is:

"Can I do an Offer-In-Compromise (OIC) while I am in bankruptcy, or must I wait for my discharge?"

and that answer is no. i read that somewhere on the IRS website about OICs. you can only get the tax debt bk'ed if its older then 3 years after filing, but you probably already knew that. i would honestly have someone help you with that stuff instead. maybe its a good idea to try to get it BKed too. did you list the 3 year old tax debt on your bk?

i'll pm you with a board where a great tax agent attorney posts. great info. check your private messages.

[AAAArt]

An Offer in Compromise is not that difficult to do by yourself. There is really no reason to hire someone to do this, as you will still have to geive them all of the info. At it's most basic, it is what the IRS will estimate that you can pay them over the next 3 years, but the kicker is that you have to come up with that amount in full w/in 90 days of their acceprtance of the offer.
That, however, is not your problem...or at least it wasn't mine. Let me tell you my story. Going through a divorce caused me to feel like a failure. I didn't file that year. In fact, the week before the divorce, I was driving home from work and due to leave on a 3 day trip that I had won at work. I knew at that time that I had two choices. I could either go on that trip and get away or I was driving to the hospital and checking myself in. The trip helped and the divorce became final, finally! (Talk about the wait for Bk. It took us 10 months to get it finalized and the average time in our area at that time was running close to two years.) I didn't owe much money and it didn't seem like a big deal. The nest year was kind of a blur and I didn't file. The 3rd year was pretty good. Fell in love, made a lot of money, got therapy, filed...but instead of paying, put the money into my business instead, sure that I was going to make enough money next year for it to be worth it all. Broke up, broken hearted, car accident, pain killers and muscle relaxants. Woke up again and with God's help started putting my life together again.
Filing taxes and paying and along comes the IRS. God was with me and I got a very gracous and compassionate IRS worker. I had to go down to their office and meet with them. Basically all that happened was that I signed the tax forms, they calculated the tax and put me on a payment plan.
Afew years later, I filed an OIC. They told me that I would have to come up with $10,000 on $40,000 worth of taxes and IRS person who came to my home that time told me that if I couldn't afford that, that I should withdraw the OIC or my monthly would go from $100 to about $350, so I withdrew. 2 years later, they sent me an income questionaire and raised the payts to $655 a month. Paid that for 7 or so years, then lost my job and am on medical disability and filing Bk. Paid them over $85,000 on back taxes and still owe $18,000.

[bkfiler]

looks like you just need to "Fell in love, made a lot of money" again my friend...

i like ya art. you are a good person

oh did i mention that the trustee at my 341 allowed me to ammend my petition to include your beer and horse ride? hehe

[AAAArt]

Part II
I was running out of space on that reply. Here's what you must do, IMHO (learned at a deep price to my self-esteem and pocketbook).
First...You MUST file for that year you did not. They will not work with you until you do, and if you get any type of agreement, it will be voided when they find that unfiled year.
Second...since you cannot afford paid legal help, you must do some research yourself. Fir instance, even if you have an OIC acceepted and in place, if you do not file or cannot pay w/in the next 3 years, the OIC is void and you go back to owing the full amount.
Third...You must sit down with someone in the IRS and discuss the situation. If you don't like that person, ask for time to think about it and call up and get another appt. w/ someone else. All of the dealings that I have had with the IRS via mail or phone have been pretty poor, but whenever I have met with them personally, I have never had a bad impression or result.
Now, you don't need to go to court to challenge those returns which they calculated for you. If you have the records, you can file an amended return and if they disagree w/ you, then it will be their responsibility to challenge. You will probably get a personal appt. w/ someone and after that you can decide about going to court.
The adversary court idea is not bad, but it won't do you a bit of good until you file for those 2 years.
Dealing w/ the IRS is not really difficult, but it is like going to the dentist. There are certain fears (ever watch Dustin Hoffman in "Marathon Man"?).
The main hurdle for me was my low ego strength and lack of self-esteem. I felt guilty and doomed before I began.
One major thought, which I've shared here before. "If you have to swallow a green frog, don't look at it too long first. If you have more than one green frog to swallow, begin with the largest!"
Sorry to have made this so long, but after I started it, I thought it might help some people to hear and feel that they are not alone.
Best wishes, Art

[quest42]

Art and Bkfiler -- thanks...

I'm googling this:
"offer in compromise" site:community.lawyers.com

[down @ out]

offer in compromise

Quest 42,

As my financial situation went from bad to worse in 2004 I filed a offer in compromise on taxes from 1999 and 2000. I have always paid my taxes but ran into quite a dispute with the feds over lost medical records dealing with my daughters illness.

Anyway I handled it by myself and was able to handle it ok. Also since I was unemployed I didn`t cost me anything. Anyway the OIC unit accepted my offer for consideration. This is no small accomplishment. The rules are strict and they do anything they can not to even process the offer. Then they took four months to contact me and then wanted me to take another snapshot of my finances since 4 months elasped since my offer. I did this and then they got upset at me since I had found a part-time job and did not report it. As I told the lady since no one had contacted me I didn`t know what to do.

Anyway they looked at my offer and used the irs standards that are being utilized under the new bankruptcy code to make their decision. What they did was appaling. I am 56 and they looked at what I made several years ago before, my employer closed our plant and moved to Germany, and decided well I would probably find a job making comparable wages. I know that is not true but what can I do. I believe really the only folks who can really get a oic approved are those who don`t need it. You have to be either homeless or disabled and living in a wheelchair to be qualified.

I believe oic`s are basically a shame. Folks who have exeperienced this process probably would agree. They will disqualify anyone they can. And break their own rules to begin with. This is exactly what will happen with the new bankruptcy laws.

Anyway I had to file a bankruptcy and the time the oic was supposedly being considered impacts whether or not you can discharge the debt. My issue is the 240 day rule. If you get to this point get all the information you can from the irs.


Good luck

[down @ out]

oic

One final point. Your concern about filing an adversary action in bankruptcy court is a good one. I am in the same boat and really am not sure. I have talked to the irs and was told that if the bankruptcy results in a discharge they will look at your situation and determine if your taxes are dischargeable or not.

Guess if they decide against you you could always go back to bankruptcy court, reopen your bankruptcy and have the court rule on the dischargeablility of the taxes. It seems to me giving the irs the opportunity to say yep you don`t have to pay saves you time and money. Also if you want to contest the matter you always can.

Having said that my experience with the irs makes me suspect they are not very trustworthy. It maybe better to go ahead and go to war now.

The records I have received from them do not appear accurate and maybe doing it while the petitiion is active is really the best way to go.

[quest42]

Thanks, I appreciate all the candid input. Just what I needed to know.