OIC with IRS and then filing Chapter 7

[bobbieyomama]

i have an offer in compromise with the irs for 2005/2006 taxes.....will i be able to discharge these in my chapter 7...the taxes that were owed and ...that are included in the offer in compromise qualify for all the "BKY Rules" for discharge

[bobbieyomama]

so...for me all of the bankruptcy rules to discharge taxes apply....but i did an offer in compromise (for 48 months) almost 2 years ago...will I be able to get the balance of the OIC (or original amount of taxes due) discharged in my chapter 7...and if yes...do I cliam the full amount originally due or the balance of the OIC on my chapter 7 paperwork

[HHM]

I created a different thread for your question since it wasn't on point with where you posted it.

Did the IRS accept the OIC? If yes, what is the status of your payments, have you completed the OIC or are you still making payments?

[HHM]

You may have a problem with BK code section 507(a)(8)

(8) Eighth, allowed unsecured claims of governmental units, only to the extent that such claims are for—
(A) a tax on or measured by income or gross receipts for a taxable year ending on or before the date of the filing of the petition—
(i) for which a return, if required, is last due, including extensions, after three years before the date of the filing of the petition;
(ii) assessed within 240 days before the date of the filing of the petition, exclusive of—
(I) any time during which an offer in compromise with respect to that tax was pending or in effect during that 240-day period, plus 30 days; and

You will need a fairly knowledgeable attorney to determine if your taxes are truly dischargeable? An Offer in compromise pauses the time periods from the date it was proposed to the date it is complete (in this case, since you are a rare bird that got an OIC accepted, the end date is when you complete payments, for most others, the end date is when the OIC is rejected by the IRS)

[bobbieyomama]

Yes irs accepted the oic...in march 2010...a 48 month plan...and i am current on payments....
All bk code section 507(a)(8) items do apply

[bobbieyomama]

CODE 507 (A)(8) READS
(IN REGARDS TO OIC...

(ii) assessed within 240 days, plus any time plus 30
days during which an offer in compromise with respect to
such tax that was made within 240 days after such assessment
was pending, before the date of the filing of the petition;

SO IN MY CASE THE oic WAS ACCEPTED MORE THAN 240 DAYS AGO PLUS THE 30 REQUIRED DAYS

[bobbieyomama]

I beleive the 240 plus 30 days apply to the date of acceptance of the oic...not the date payments are completed...right???

[biotechsolution]

No....you can't file bankruptcy within 240 days of ending your OIC, which for you would be cancelling it. You MUST wait the 240 days +30 before you file your Chapter 7 to have the taxes elgible for discharge.
Where a bankruptcy filing would 'toll' the 2 year and 3 year time periods a OIC doesn't 'toll' the time in which you are in the OIC.
But you will have to wait out the 240+30 days after you OIC has ended before those taxes are dischargable. DON"T FILE TO SOON.

[bobbieyomama]

biotechsolution....your reply is very confusing..

where you say .".But you will have to wait out the 240+30 days after you OIC has ended before those taxes are dischargeable"

if i wait til oic has ended...the liability will BE PAID...and therefore nothing left to discharge!!!

[HHM]

The point is, you need to hire an attorney experienced in analyzing tax discharge cases, because you have this huge tolling event that pauses the time lines for discharge eligibility. No one hear can tell you that your tax is dischargeable, all we can tell you is you have this giant red flag.

But, bitotech is right, (I quoted the statute for you), it says pending and in effect, it is the "in effect" phrase that hurts you because while your making payments, your OIC is "in effect.

[LadyInTheRed]

The way I read it, you should count the number of days between the date the tax was assessed and the date of filing BK. Subtract from that number the number of days between the date your OIC was accepted and the filing of your BK (assuming the OIC is still in effect on the date of filing). If the result is more than 270 days, the tax is dischargeable.

The language is confusing and I'm not sure I understand it. Ask an experienced BK attorney.

[biotechsolution]

This is from personal experience.
You would have to 'cancel' the OIC. THEN wait the 240+30 days to file your BK petition to have the taxes elgible for discharge. THe collection process is 'tolled' while you are in the OIC agreement BUT unlike a BK the entire OIC isn't 'tolled' just the 240+30 days period. That is why you have to wait that periold out before you can file your BK.
DON'T file until you cancel your OIC and wait out the 270 days otherwise the taxes are dischargable.

[bobbieyomama]

I like your response...it amazes me the different ways people interpret and answer each question....
did you see biotechsolution's response...he is sayingi would have to wait til after the OIC is done...well then there would be no need for discharge of taxes if OIC is complete...and what do the above mean by Toll of time

[HHM]

what do the above mean by Toll of time

It means this. Let's say you knew you were going to owe a ton of tax for 2010 (because of the, hindsight, very stupid decision, to do a 401(k) withdrawal to try to stay afloat) and you file your taxes at the last minute on October 15, 2011 and will owe $30,000 in income tax, that you don't have. For the sake simplicity, let's just set aside the 3 year rule and the 2 year rule (as if they didn't exist), and focus on the 240 day rule (which is the one at issue). To discharge that tax, you must wait at least 240 days from the day the tax was assessed. The tax return was filed and assessed Oct 15. That 240 days is up on Jun 12, 2012 (note, you don't count the day of the event).

HOWEVER, let's say you submitted an Offer in Compromise on January 1, 2012. So, at the time you submitted the OIC, only 78 days had passed since the assessment (not 240), the filing of the OIC PAUSES the clock on counting the 240 days. The average OIC takes about 9 months for the IRS to accept or reject, so let's say tom taxpayer gets his OIC rejected on Sept 1, 2012. On that date, the 240 day clock will start running again, making it so this tax cannot be discharged in bankruptcy until March 13, 2013 (162 + 30 days), not June 12, 2012 as above if no OIC was submitted.

The good news is, you are probably okay because an OIC only tolls the 240 day rule, so if the tax returns were filed relatively on time, so based on the facts you have presented, the OIC you submitted should be a non-issue.

[biotechsolution]

You don't have to wait until your OIC is done. You can cancel the OIC at anytime. The reason why you have to wait the 240+30 days is to allow the IRS time to collect the taxes before you file your BK.
It's the same reason why all dischargeable taxes require a waiting period (3 or 2 years) before you can file a Bankruptcy. It's to allow the IRS a chance to collect on the taxes.
In theory the IRS puts on hold all collection activities when you are in an OIC, that is why you can't cancel your OIC and file your BK immediately.

An example: Say your taxes were only at the 2 year 6 month mark and not eligble for discharge yet. You could file a OIC, most are never excepted but take at least 6 months or much longer to process. During that period the IRS has stopped all collection activities on outstanding debt. You hit the 3 year mark, then file your BK and discharge the tax. Essentially the IRS is left out, no chance to collect the tax.
Before Young v. United States (2002) the IRS would toll the entire time you were in the OIC against the 3-year look back period. Now it only tolls the 240+30 day period.

Bottom line is if you want your taxes elgible for discharge you must wait 240+30 days after you cancel your OIC to discharge the taxes. You don't have finish the OIC you can cancel it at anytime.

How much tax are we talking??