Interpretation of IRS collection letter ??

[Ladynred]

What is the name of your state? TN

I don't know if anyone can help with this one, but I'm crossing my fingers that someone can

My fiance has a collection letter from the IRS, stating that he owes back taxes in the amount of approx $11K. From what *I* can determine, it appears to me that he did not file his 1990 tax return. I have found out that, if this is the case, he can file the 1990 return (has to get details from SSA because his old employer doesn't have the info anymore) and be rid of a lot of this 11K.

However, this is what confuses me about the form on the letter.
In the first box of the "account summary", the type of tax is listed as 1040a. Then Period Ending says :12/31/1990, the next 3 boxes gives the Assessed Balance, then Statutory Additions (8.5K !), and the 3rd is the Total Due.

Below this, in another box, there are 2 entries for type of tax, and period ending. One says "1040, 12/31/1994", the other says "1040, 12/31/1995". Neither of these has any $$ amounts in them.

Its the bottom part that confuses me. Since it lists no money due, why are the 94 and 95 dates listed at all ??

Does anyone know ?

Thanks !

 

[Ladynred]

Nobody knows ? Sigh.... guess I find a taxpayer advocate then....

 

[abezon]

Do not file that return until you consult a tax attorney. The IRS must assess a deficiency within 3 years of the tax return's due date or the date the return was filed or they lose the right to collect any money. (You also lose the right to file for a refund.)

I can't tell without reading the letter what his specific situation is, but he should definitely spend a couple hundred bucks to see if the tax is even collectable. If the collectability of the tax is in doubt, he can make an Offer In Compromise of $1 and the IRS might accept it! His attorney can tell him more.

Also, you need to file an Injured Spouse form if you file jointly with your husband so the IRS doesn't take your refund to pay his back taxes.

 

[Ladynred]

VERY interesting information, thank you !!!! I don't know when they first started 'chasing' him for this 1990 return, but what you're saying is if they didn't start by April 15, 1993, they may not be able to collect it ??? That would be great. Is there any way we can find out when they first assessed the deficiency or does the tax attorney do that ??

Thanks.. I'll look into it. As for the spouse angle.. we're not married .. yet.

 

[abezon]

April 15, 1994. The 1990 return was due 4/15/91. Three years after that is 4/15/94. The IRS has to disclose all the details including dates.

For more on Offers In Comprimise, check here: http://www.taxprophet.com/faq/981213.htm

 

[kat1963]

LR, I have a good one for you. Just been going thru this with 1990 & 1991 taxes, also for 11,000...yeah, go figure. Contacting the IRS to obtain the figures they used to determine taxes owed was fruitless (we don't keep them that long???HUH? You can collect, but your can't verify??? STUPID). Anyhow, the company DH worked for didn't have copies of the w-2's either (he would have gotten refunds for both years). Problem here is they have already collected their 11,000. Finally ended up contacting a tax advocate, now we are getting somewhere. She sent up tax forms for both years with his established income. Apparently there is trouble obtaining what his income withholding was, but she's working on it, thank heavens.
Just sharing. Good Luck to your bf!
KAT

 

[Ladynred]

Thanks for the info Kat.

I have found out that the Social Security Adminsitration DOES have ALL the detailed info from past payroll deductions that far back. That includes ALL deductions, not just social security and medicare amounts. You have to call and ask for the detailed report, I think the woman said its about $15 to get it and takes several weeks. ONLY the taxpayer can request this, they wouldn't even talk to me about it other to tell me that they DO have all the info for 1990 and how much it would cost to get it.

Maybe that'll help your advocate get the details ?? Just one question, if you don't mind.. how much (ballpark) is it costing for the Advocate ??

Thanks !

 

[artygal]

There is NO statute of limitations for income tax fraud (which is assumed to be the case when taxable income is under reported by 25% or more).

If there was taxable income in 1990, but no tax return was filed and no tax was paid, then this may be considered tax evasion/tax fraud. Hence, no statute of limitations. Further, this is considered a criminal offense, with penalties to include interest, monetary penalties, and even jail time.

You don't say where you "learned" that by merely filing the 1990 return, much of the $11,000 due would "go away". From your comments, it appears that about $8,500 is interest and penalties, with the remaining $2,500 being tax due. This is probably NOT correct.

To reduce the amount due, the tax payer would need to make an "offer in compromise." However, the IRS is not very generous with these and it is unlikely any of the $11,000 will "go away". Furthermore, interest and penalties will continue to accrue until the $11,000 tax and previous interest and penalties are paid. So the amount due is more likely to increase, rather than decrease.

To make matters even more serious, there are probably state income taxes that were never filed and paid.

 

[Ladynred]

Where I "learned" that a lot of the penalties and interest would 'go away' was from the IRS !!! I called to ask about getting a copy of the 1990 forms and the IRS guy on the phone, a person I was transferred to specifically to answer my questions about it, btw, is the one who gave me that information.

Since this happened a LONG time before I knew him, I don't know WHY he didn't file the return, but I can tell you there was no *deliberate* tax evasion, fraud, or criminal intent.. key word here being INTENT. I DO know that he was going through a very bad time for 2-3 years so it could be that it just fell through the cracks.. I don't know and, at this point, I'm not going to ask him. ALL of his other tax returns have been filed since then as we're all forced to do (so Congress can piss it away on stupid sh*t). If he was a deliberate 'tax evader' then he would not be filing a LOT of tax returns not just ONE from 12 years ago !!

The amount of the tax 'due', as per the IRS person I spoke to, was calculated by the IRS from the highest possible tax w/o ANY deductions he would normally be entitled to on a 1040, so the amount of $2500 taxes 'due', as far as the IRS's methods are concerned, IS correct, the rest being penalties and interest. Once we get his W-2 information from the SSA, and actually DO the 1990 1040, I'm certain it will show that he owed very little, if any, tax, his income then was not that much and he had dependents.

Your assumptions about state taxes also being 'evaded' is totally incorrect, he has NO outstanding state taxes owed.. so your wrongful assumptions that my fiance is some kind of tax evading deadbeat or criminal is way off-base and, I might add, rather rude. I can't answer for him on his lapse in filing the 1990 FEDERAL return, or ask him why he may have filed state taxes and not FED.. its quite possible that his ex-wife took care of the state taxes, I don't know and at this point, I don't care, the FED is the problem to deal with now.

I am trying to get some information /clarification so that I can help him get this resolved. If it means a tax lawyer or a taxpayer advocate has to be hired, then so be it, but I like to have as much information as possible before either route is pursued.

 

[abezon]

OK, a couple of comments.

1) Tax fraud means filing a return knowing it contains false information with intent to avoid taxes. Failing to file a return because you're too depressed to deal with it is not fraud, so the 3 year statute of limitations applies. The key fact he needs to know is the exact date the IRS assessed the tax liability of $2500. If they assessed it after the statute of limitations, they're out of luck. If they just waited until now to collect it, they have a case.

2) Interest & penalties are only levied on taxes due. If he ends up with a refund, there is no interest or penalties. If he has a smaller balance due, the interest & penalties go down accordingly. Also, since the IRS asked him to file a return, the 3 year statute of limitations on refunds might be waived and he could actually get a refund.


Good luck. Let us know what happens after he files the return.

 

[Ladynred]

Thanks

Question then .. would I be able to find out from the IRS when they assessed the $2500 tax ?? Would they know or, better still, would they tell me ?? If we could find that out, then it would be very helpful in knowing just how to proceed.

I don't know that the IRS has 'asked' him to file a return, other than the perennial 1040 we all have to file. I have the 1990 forms, all we're lacking is the withholding details from the SSA to fill out the return (they are sooooooooooooo sloooooooooooooww). Based on his income in 1990 (from the SSA general earning statement), since he had 2 dependents at that time, I'd be really surprised if he owed anything, and I'd bet he would have been due a refund.

Anybody know if taxpayer advocates are expensive or what the customary charges are ??

Thanks !!!

 

[abezon]

They have to disclose when the tax was assessed and if he filed any extensions that would have given them more time to assess the tax.

I think the taxpayer advocates are IRS employees. They might even be free. Let us know when you find out.