Married couple earning ~$31,100/year with just over $25,000 in IRS liabilities - installment agreement or OIC?

What are his long-term propsects? Are we talking about an eventual return to work or disability?

The statute is 10 years from assessment, which was probably late because of unfiled returns. When will the statutes expire?

On the surface, pending answers to the inserted questions, it looks to me more like a hardship currently not collectible. (Can't pay from existing assets or make payments from current income.)

I'd stay away from an Offer since that would extend the statute, and expiration of the statute is their best friend at this point.

What Phil Marti said. And,

Prepare a Form 433-A Collection Information Statement and apply the financial standards shown here:

Ensure taxpayers are in full compliance with filing requirements and have sufficient withholding or estimated payments to offset current year taxes.

Anticipate the filing of a Notice of Federal Tax Lien if not already done.

If allowable expenses exceed income, they have no assets of value, and no prospects for future financial improvement, plead their financial hardship situation to the Service.

What statute? The statute of audit or assess additional tax, or the statute to collect tax?

Collection is the pertinent one here.

Okay, thanks so far for everyone's assistance.

I have some more information.

Whether or not the husband will be going back to work I don't know but it doesn't look like it for the foreseeable future.

I just obtained a copy of the federal tax lien which was filed in August 2004. There was no property specified in the lien, however, I assume because there was nothing to lien. However, on the lien I noticed the "Date of Assessment" as December 1998. Does that mean in December 2008, that's it? The lien gets released and taxes can't be collected anymore?

Also, a Levy on Wages, Salary and Other Income was filed in August

Also, does this stay on their credit report if the taxes are never paid, even after the ten-year statute has run? Even though 10 years is a long time, being completely relieved of liability for the taxes seems too good to be true.

No property is specified on the notice because the Federal tax lien attaches to all the taxpayer's property, including after-acquired.

Yup, that's how it works, assuming there hasn't been some intervening action, such as a bankruptcy or offer in compromise, to extend it.

Yes, it will remain on their credit reports for some time after it's released. They should get their credit reports about 6 months after the collection period expires to make sure that the credit reports have been updated to show that the lien is no longer active. Reporting agencies are much better at picking up liens than they are satisfactions.

A routine Notice of Federal Tax Lien (NFTL) doesn't identify specific property, nor is it required to. It attaches all property and rights to property of the taxpayer, owned or after acquired. That said, it attaches personalty anywhere, but realty only against third parties with actual or constructive knowledge of the lien (usually perfected by recording in the jurisdiction where the real property is located.)

However, on the lien I

Unless extended by voluntary waiver, OIC, litigation, taxpayer out of the country, etc, the collection statute expires 10 years from date of assessment, after which the lien is no longer enforceable.

The original NFTL filing stays forever in the public records where it was recorded, and available to all who care to view it. The NFTL document contains wording that, absent refiling, the lien is self-releasing after the 10 year statute. How long the credit bureau maintains the information, and how creditors treat it, is up to them and their rules.

So at this point, does it make sense to just "wait it out" and hope a levy doesn't happen in the meantime, since there are only three months to go? Should I prepare the 433-A then send it in to IRS Collections or will that draw attention to it?

I knew there was something I was forgetting to ask. Why is this debt an issue at this time? Ordinarily an account this close to statute expiration would be sitting in inactive status waiting to disappear. Has there been an inquiry from the IRS, or is the taxpayer the only one worried?

In short, unless IRS has initiated contact, leave it alone.

The only communication they've received from the IRS in recent years has been notices that their federal refunds in subsequent years were being intercepted. The last important notice they received from the IRS was in 2004, when they received a Notice to File Federal Lien.

First thing to do is file the tax returns; I believe that will start the statute of limitation running, and anyway it is required to file an OIC.

Once the returns are filed, I would help them fill out an OIC and pick one of the payment options besides the 20% down. They will pay for the OIC form and send in the first month's payment with the OIC. Keep in mind they will have to continue to send in the monthly payment even though they won't hear from the IRS for 9-12 months. So print up a year's worth of payment vouchers for them.

What they owe is essentially irrelevant in this case, the IRS will want whatever they're able to pay.

Uh.. .file what returns? The tax for 1993 and 94 is already assessed, and apparently no question as to liability. And even if you wanted to amend those so to speak, what expense records would he have that far back?

Phil's advice is on point. with that income IRS probably has the case "on hold", i.e. CNC, esp since last "action" except the taking of refunds, was notice of tax lien back in 2004. Hunch here is that tax was assessed around 1998 or so, which is about the time frame when IRS would have "noticed" it and made the SFR's, so just wait it out.

ChEAr$, Harlan Lunsford, EA n LA

For an OIC, the taxpayer must file the returns for the year(s) in question. The IRS assessment is not sufficient.

My question is, if there is no statute of limitation for not filing a return, couldn't they still be on the hook for not filing?

The tax liability was based on a return filed by the taxpayer or on a substitute for return (SFR) prepared by the IRS. An IRS SFR assessment IS sufficient to begin the 10 year collection statute. If this is an SFR, the Service has no need to pursue a filed return.

You are correct that an OIC can't be processed unless all required returns have been filed. In this case, though, the consensus of opinion is that, since the collection statute is about to expire, the OP should not submit an OIC, but should simply let the statute run to expiration in December. What better compromise of the liability (from the taxpayer's point of view) than to have it wiped out for no additional consideration?

Of course they're still on the hook for not filing. However I can't see any possibility of an OIC, given the facts we have.

ChEAr$, Harlan

Hi there,

Thanks again for all of your help here. This is all so foreign to me. Their 1993 and 1994 returns were filed, although they may not have had the correct information on them when they filed them. My question is, as far as "waiting it out" goes, will there be any sort of confirmation, any sort of notice received after they are no longer obligated to pay the tax, or should I file a Request for Abatement after December?

AFAIK nothing will be issued, it just goes away. There's nothing to abate, so nothing to request be abated.

The notice of lien "self-releases" on the date noted on the original filing without IRS issuing any futher paperwork. As mentioned before, do check credit reports about 6 months later to make sure it's being shown as released.

You can request (from IRS) transcripts of the balance due account periods a couple of months after statute expiration. They should show systemically generated TC 608s to clear the balances due and zero out the accounts.