Offer in Compromise for a High Income Taxpayer

In this case our client owed approximately $4,000,000 of taxes, which accrued during years when he earned several hundred thousand dollars per year. Before he came to our office he paid $2,000,000 to the government. When he came to us he had nothing left except his family home, some retirement funds and other miscellaneous assets. His annual earnings dropped substantially. He was willing to pay everything he had to the government, but they wanted more. They wanted him to sell his home and acquire a smaller one, and to cease paying for his daughter’s college education at a prominent university. He was not willing to do that. The IRS was not willing to accept an offer in compromise otherwise. They therefore demanded that he pay the tax debt in full by an installment agreement. The problem was that the monthly payment was so high that he would again have to sell his home and discontinue the college tuition payments. They offered no other alternative. He was in a dilemma because he only had two options and both required him to sell him home and stop tuition payments.

 

We cited a little known section of the Internal Revenue Manual that allowed a taxpayer to settle an offer in compromise for the amount that the taxpayer would have had to pay the IRS if he had filed a bankruptcy.

 

This was a kind of hypothetical bankruptcy. In this case if our client had filed a bankruptcy several older tax years would not have to be paid, thus, the amount he ultimately paid in the offer in compromise did not include the value of his home and he was permitted to continue to pay for his daughter’s college tuition.

 

 

Vacated Judgment As If It Had Never Been Entered

In this case, our client had a Judgment filed against him by the NJ Division of Taxation as a responsible person of a closely held corporation which he owned. Sales and Use taxes for several quarters were not paid by the corporation, and the Division of Taxation filed a Judgment again him as a responsible person. Our client could lose his job if the existence of the judgment surfaced since he was employed in a sensitive position. The taxpayer had a former attorney who negotiated with the deputy attorney general to try to get the Judgment removed, but was unsuccessful.

We determined that the judgment may have been filed prematurely because a document was filed with the Conference and Appeals Office appealing the fact that he was a responsible person. However, the document may have been defective.

 

We filed in the Superior Court a motion to vacate and cancel the Judgment as if it had never been issued. A Superior Court Judge agreed that the Judgment had been filed prematurely and issued an Order vacating and canceling the Judgment as if it had never been issued.

This was a major win because satisfaction of the judgment, that is, paying it, would not have been sufficient to alleviate our client’s problem since it would have continued to show up on his credit searches. Having the Judgment vacated and cancelled as if it had never been issued was like threading a needle and was precisely what was needed because all traces of the issuance of the judgment were removed, and nothing appeared on our client’s prospective credit searches.

 

Unfiled Tax Returns For Multiple Years - Tax Amnesty 

In this case our client had not filed tax returns for over 10 years. He operated a small business which provided plumbing services. He was very worried about the possibility of being prosecuted criminally. To ameliorate that possibility we applied on behalf of our client for admission into the domestic voluntary disclosure program, which by its terms provides a taxpayer with a comfortable degree of certainty that criminal prosecution will not be recommended by the Internal Revenue Service.

 

All of his income was from legal sources so we prepared his tax returns and filed them with the assigned IRS Agent. Our client cooperated in determining the correct amount of his tax liability and he made good faith arrangements to pay his tax, interest and penalties by an offer in compromise. Once paid the matter was fully resolved.