Case Study
Case Study
Back Taxes, Failed DIY Installment Agreement, and Identity Verification Hold
Problem
Solution
We examined the taxpayer’s account history and determined which years were still collectible, which had expired, and where IRS communication had stalled the case. We guided the taxpayer on how to fix the installment agreement and explained that several older balances were no longer legally collectible. We also helped them complete the necessary identity verification at an IRS office.
Outcome
We helped the taxpayer resolve the stalled agreement and remove the identity verification hold. The taxpayer also gained clarity on older balances that were no longer enforceable, allowing them to focus only on what was truly owed.
Lesson Learned
Attempting to negotiate with the IRS without understanding relevant tax code provisions can lead to costly mistakes. Missteps in communication can pause, but not eliminate, the collection process, enabling interest and penalties to continue accruing. Ignoring IRS notices can also leave accounts frozen for years. Proper representation prevents these problems and ensures taxpayers do not inadvertently extend their own collection period.
Case Study
Retirement Withdrawal, Property Payoff, and Escalating IRS Collection Notices
Problem
After losing a job, a client withdrew their entire 401(k), paid off their home, and lived on the remaining funds without paying the required federal and state taxes. As a result, the client received escalating IRS notices, including lien and levy warnings. The client was hoping for an Offer in Compromise but became overwhelmed.
Solution
We evaluated the client’s financial situation and determined they did not qualify for an Offer in Compromise because of the value of their assets, even though their cash reserves were depleted. We discussed realistic options, and the client ultimately chose to sell certain assets to satisfy the tax liabilities, preventing more serious consequences.
Outcome
We successfully secured penalty abatement and helped the client avoid liens on their property and levies on their financial accounts, enabling them to resolve their liabilities without forced IRS action.
Lesson Learned
IRS notices should never be ignored. As the IRS follows its structured escalation timeline, options become more limited the further the process advances. Major financial decisions, such as retirement withdrawals, should always be reviewed with a tax professional beforehand. DIY tax resolution often leads to avoidable complications, while experienced representation ensures taxpayers understand all available options and the consequences of each path.
Case Study
Multi-State Liens for an
Elderly Taxpayer with Dementia
Problem
An elderly taxpayer living with dementia had accumulated multiple state tax liens over a 10-year period. The taxpayer’s legal guardian, who had moved the taxpayer to another state, needed to sell the taxpayer’s home but had no access to prior financial records and could not navigate the complex lien and tax history.
Solution
We conducted a full investigation into each lien, tracing back a decade of estimated assessments, substitute filed returns, and state tax actions. We identified what was owed, why the tax had been assessed, and presented detailed resolution options to the guardian.
Outcome
With our guidance, the guardian successfully worked with the state to have the outstanding tax liabilities resolved through the sale of the property, allowing the transaction to move forward.
Lesson Learned
In this case, the state had issued substitute returns due to unfiled tax returns, assessments that do not expire like standard filings. Because the original tax years were more than 10 years old, records were difficult to obtain, but the Missouri DOR ultimately closed the case. This situation underscores the importance of filing tax returns even when payment isn’t possible. Filing starts the statute of limitations clock; failing to file means collections remain open indefinitely, and penalties for not filing exceed penalties for not paying.
A taxpayer with multiple years of back taxes attempted to resolve the debt alone and also had an IRS identity verification hold on several returns. Their DIY installment agreement was set up incorrectly, unintentionally extending the collection statute by more than four years.