Tax Seminar #3 – December 3 2012

zicklin.baruch.cuny.edu

Workbook - Zicklin School of Business

The Zicklin Tax Seminar Series

Tax Seminar #3 December 3, 2012

Table of Contents/Agenda

1. *Examination, Tax Practice and Procedure …………………………………………………………………….

o 9:00 a.m. - Bryan Skarlatos, Kostelanetz & Fink, LLP

2. IRS Offers in Compromise: An Updated Case Study ………………………………………………………3

o 10:25 a.m. - E. Martin Davidoff, E. Martin Davidoff & Associates

3. Alternatives in a Collection Matter ………………………………………………………………………………81

o 1:55 p.m. - E. Martin Davidoff

4. Collections: Liens and Levies ……………………………………………………………………………………..183

o 2:20 p.m. - Frank Agostino, Agostino & Associates and

Yvonne Cort, Karen J. Tenenbaum, P.C.

5. Circular 230 and You: Do I “Due” Diligence? ..……………………………………………………………227

o 3:30 p.m. - Howard J Bookbinder CPA

6. *What’s New in Taxpayer Advocate Service.…………………………………………………………………….

o 4:20 p.m. - James W. Spisak, Local Taxpayer Advocate, Manhattan, IRS

*Handouts were not available at the time this workbook was produced


2


E. MARTIN DAVIDOFF & ASSOCIATES

CERTIFIED PUBLIC ACCOUNTANTS

353 Georges Road - Suite K

E. Martin Davidoff, CPA, ESQ. P.O. Box 835

Robbin R. Weiner, CPA Dayton, NJ 08810-0835

EMD@taxattorneycpa.com

_____________

OFFER IN COMPROMISE CASE STUDY

TEL: 732-274-1600

FAX: 732-274-1666

Presented to

Zicklin Tax Series #3

Baruch College, NYC

December 3, 2012

by

E. Martin Davidoff

Certified Public Accountant

Attorney at Law

Page

Table of Contents.................................................................... 1

About the Speaker ................................................................... 2

Offer in Compromise Statistics ......................................................... 3

June 2012 Offer In Compromise Article Regarding Significant Changes & IRS Guidance Memo . . 4 - 9

CPA Magazine Article regarding 20% Down Payment Requirement on Lump Sum Offers ......... 10

Offer in Compromise Case Study Facts ................................................ 11

Offer in Compromise Case Study Questions ............................................ 12

Form 433-A(OIC) Collection Information Statement for Wage

Earners and Self-Employed Individuals ............................................ 13 - 19

Rider with Respect to Stocks, Investments, and IRAs ..................................... 20

Rider Regarding Personal Liabilities .................................................. 21

Substitute Section 6 for Budget .................................................. 22 - 24

Form 656 for Forms 1040 Taxes .................................................. 25 - 28

Form 656 for Trust Fund Taxes ...................................................... 29

Sample OIC Transmittal Letter, Table of Contents & Checklist ........................ 30 - 33

Collection Financial Standards. .................................................... 34 - 38

Real Estate Valuation - Online Example ................................................. 39

Example Rider for Complex Real Estate Ownership........................................ 40

IRM 5.8.5.18 - Future Income (10/22/2010) .......................................... 41 - 43

IRM 5.8.5.20.3 - Transportation Expenses (10/22/12010). ................................... 44

Excerpts From Selected Slides. .................................................... 45 - 46

Form 656 Instruction Booklet/433-B(OIC) - Selected Pages (2011 Revision). ............... 47 - 58

Rules of Engagement with the IRS Articles 1-6. ....................................... 59 - 66

Article Regarding CDP Hearings & CAP Apeals....................................... 67 - 68

Selected Slides Regarding New OIC Rules. .......................................... 69 - 77

© Copyright 2012 E. Martin Davidoff (U.S.A.) All rights reserved

3


ABOUT THE SPEAKER

E. Martin Davidoff is a Certified Public Accountant and an Attorney at Law with an office in Dayton,

New Jersey. Mr. Davidoff is licensed to practice both professions in New York and New Jersey and

is active in many associations.

Mr. Davidoff served as President (2008-2009) of the American Association of Attorney - Certified

Public Accountants (“AAA-CPA") . Mr. Davidoff is also the founder of the Internal Revenue Service

Liaison Committee and Chairman of the IRS Liaison Sub-Committee on Legislative Affairs of the

AAA-CPA. As such, he meets regularly with the Internal Revenue Service on a national level.

Selected every year from 2004 through 2010 as one of the Top 100 Most Influential People in

Accounting by Accounting Today, it was noted that “Davidoff’s views on issues affecting tax practice

are heard at the highest levels of government.” CPA Magazine has also chosen Mr. Davidoff as one

of the Top 50 IRS Practitioners of 2008 and one of the Top 40 Tax Advisors To Know During a

Recession in 2009.

He is currently serving as Financial Expert on the Board of Directors and Audit Committee for

BioClinica, Inc., a publicly held leading global provider of integrated, technology-enhanced, clinical

trial services.

As a member of the AICPA's Tax Division, he has served on the Tax Legislative Liaison Committee.

He completed two years on the Executive Committee of the New Jersey Society of Certified Public

Accountants (“NJSCPA”), having served as the organization's Secretary and as Vice President for

Taxation and Legislation. Mr. Davidoff has also served as President of the Middlesex/Somerset

chapter of the NJSCPA and as the chairman of the NJSCPA Federal Taxation and Membership

Committees. Mr. Davidoff is a member of the tax section of the New Jersey Bar Association.

Among the honors he has received are the 1998/1999 New Jersey Society of CPAs Distinguished

Service Award for his dedicated service and commitment to the Society; the SBA 1997 Accountant

Advocate of the Year for New Jersey and Region II (New York, New Jersey, Virgin Islands, and

Puerto Rico) after having served as a delegate leader at the 1986 and 1995 White House Conferences

on Small Business and the 1998 Nicholas Maul Leadership Award from the Middlesex County

Regional Chamber of Commerce.

Mr. Davidoff received his undergraduate degree from Massachusetts Institute of Technology, an

MBA from Boston University Graduate School of Management, and a JD from the Washington

University School of Law. He is a frequent lecturer, authors a regular column in CPA Magazine and

co-authored the New Jersey S-Corporation bill. Mr. Davidoff regularly testifies before federal and

tax agencies and legislatures regarding the impact of legislation and tax agency policies on small

business and tax practitioners.

Mr. Davidoff is also Founder and Executive Director for Make-A-Smile Foundation, Inc., a charity

holiday shopping spree benefitting underprivileged children for over 25 years.

4


5


Offers in Compromise Improving

E. Martin Davidoff, CPA, Esq.

On May 21 st , the IRS announced major revisions to the Offer in Compromise program

(http://www.irs.gov/newsroom/article/0,,id=257542,00.html). A major impact of such revisions

is to enable high-income/low-net-asset individuals a much greater opportunity to resolve their tax

debts through the Offer in Compromise (“OIC”) program. Here is why. Offers in compromises

are analyzed based upon one’s equity in assets and future net income. Prior to the May 21st

announcement, taxpayers had to include as part of their offer an amount equal to 48-60 months

of future net income. The May 21 st announcement reduces the multiple to 12-24 months, an

extraordinary reduction!

In his memorandum to subordinates, Scott Reisher, IRS Director of Collection Policy,

provided nine pages of interim guidance to the Internal Revenue Manual. The highlights with

respect to the future income component of OIC computations, provide:

• There will be no retirement of the first $400 of auto loan debt. Thus, even if the final

payment of the automobile will take place within the horizon of the current analysis, the

first $400 will be retained in the budget for evaluating the offer (5.8.5.17).

• Payments of student loans guaranteed by the federal government for post - high school

education will now be allowed (5.8.5.20.4).

• The IRS will continue to allow $200 per month for older (over 6 years old) or highmileage

(over 75,000 miles) motor vehicles as an additional operating expense above and

beyond the vehicle operating costs standards set forth on the IRS website. Up until the

May 21 st announcement, this additional $200 would NOT be allowed if the taxpayer had

a monthly automobile loan payment. Under the new standard, the additional $200 in

operating costs will no longer be tied to the absence of a car payment. 1

• Clarification that expenses for state and local income tax installment agreements will be

treated as allowable expenditures in proportion to the balance due to the state and/or

locality as compared to the amount due to the IRS (5.8.5.20.4(7)). Form 433-A(OIC) has

been revised to include a line item specifically for delinquent state and local taxes. The

new rules are detailed and intricate. Accordingly, if you are dealing with a state tax debt,

you should review the new guidance carefully.

• Future income is clearly defined in 5.8.5.23 as:

a. If the offer will be paid within 5 months, then only 12 months of future

income will be required; and

b. If the offer will be paid in more than 5 months but within 24 months, then

only 24 months of future income will be required.

Compare this to the previous standards of 48 and 60 months, respectively.

1 Note that the $200 of additional automobile operating expenses is only allowed in an offer environment. It is not

allowed in determining the amount of an acceptable installment agreement or in determining whether a taxpayer

qualifies for CNC (currently not collectible) status.

6


• Payments of more than 24 months (previously over the life of the statute) are no longer

available! In practice, I had never used this alternative. But, it had always been an option

I would have used in certain circumstances (i.e. large amount of assets, but little excess

monthly income).

In addition to addressing the future income component of Reasonable Collection Potential

(“RCP”) 2 , the interim guidance addresses the net fair market value of assets as follows:

• The equity in income producing assets will no longer be added to the RCP of viable

ongoing businesses unless such assets are not critical to the business operations (IRM

5.8.5.5.1). In some situations, this is a material change which eliminates what many

believed to be a double-counting of assets. Two of the examples provided are particularly

instructive:

“Example (5) A real estate salesman has a vehicle with $30,000 in equity. The vehicle is

used to transport clients and assists in the production of income. The taxpayer's net

monthly disposable income is $3,000. The equity in the vehicle generally will not be

included in the RCP.

“Example (6) The same salesman in the previous example only has net monthly

disposable income of $500 per month. Consider including the equity in the vehicle, yet

allow for the impact the loss of the vehicle may have on the taxpayer's income.”

• There is a substantial write-up on revisions to IRM 5.8.5.16 regarding dissipation of

assets. The dissipation rules appear to be narrowed and better defined. Generally the

time-frame is limited to three years. Specifically, the new guidance states: “if the offer is

submitted in 2012, any asset dissipated prior to 2010 should not be included.” The new

rules appear to focus on intentional attempts to avoid the payment of tax. Yet, the rules,

along with the examples, make it clear that transfers taking place more than three years

prior to the submission of an offer in stating that it “may (emphasis added) be appropriate

to include” a dissipated asset in the offer computation if the transfer and/or sale occurred

within six months before or after the assessment of the tax liability. The new rules are

worth reading as they provide significant guidance and several examples. It is my opinion

that the net impact is that dissipated assets will still be an issue in the OIC arena and that

the extent of such is still somewhat unknown.

• The first $3,450 per car will, generally, be excluded from net equity computations of

vehicles owned by taxpayers. This exclusion is limited to two cars per household.

See http://www.irs.gov/pub/newsroom/interim_guidance_memo_for_offer_in_compromise.pdf

for Mr. Reisher’s memorandum.

2 RCP is the minimum amount acceptable as an offer. RCP is defined by the IRS as the total of taxpayer’s realizable

value in real and personal assets, and his/her future net income. Realizable value is, essentially, gross value less

secured debt. For example, unsecured credit card debt is usually not considered. In addition, the IRS will discount

valuations based upon “Quick Sale Value”. Future net income is based upon a forecast of the excess of gross

income over allowable expenses food, clothing, housing, transportation, medical and taxes over a minimum of

12/24 months (formerly 48/60 months).

7


New Form 433 A Changes:

Below is a listing of changes to form 433-A (OIC) (new revision date is 05/12) which I have

compiled through a visual comparison of the old and new forms:

1. Line item for “Delinquent State and Local Taxes” in personal budget (53).

2. Addition of field for Fax Number.

3. A box for “Cash” has been added within Cash and Investments sections for both personal

(Section 3) and business (Section 4) assets. Previously, there was no process to report

cash holdings.

4. A section for Accounts Receivable has been added to Section 4 on business assets.

5. The line for “Additional Household Income” was removed from Section 6. However, a

new yes/no question has been added (“Are there additional sources of income used to

support the household, e.g. non-liable spouse or roommate, for example.”).

6. The term “minimum payment on credit card” has been added to the food, clothing and

miscellaneous section of the Monthly Household Expenses. Note that the Collection

Financial Standards were revised on April 2, 2012 in anticipation of the May 21 st

announcement and include minimum credit card payments and the Internet costs

discussed below.

7. The term “Internet” has been added to the housing and utilities section of Monthly

Household Expenses.

8. Revision of Section 7 to take into account the lower multiples on future monthly income

(12/24 vs. 48/60).

9. In Section 8, other information, the term “County Filed” referring to bankruptcies has

been changed to “Location Filed”.

10. The question “Have you been party to a lawsuit?” has been changed to “Are you or have

you been party to a lawsuit?”.

11. The checklist has been expanded to include “Verification of State/Local Tax Liability, if

applicable”, while deleting the term “Accountant's depreciation schedules, if applicable”.

8


Reduced Offers Examples:

One of the most significant changes is the multiple to be used by the IRS in computing the

Future Net Income component of Reasonable Collection Potential (“RCP”). The following

examples illustrate that policy change with respect to offers paid within five months of

acceptance, wherein the multiple is reduced from 48 to 12.

Example #1:

Taxpayer owes $125,000 to the IRS

Taxpayer earns $80,000 per year.

• We agree with IRS that the Taxpayer can afford to pay $750 per month to the

IRS.

• We agree with the IRS that the Taxpayer has $40,000 in realizable value of

his/her assets.

Under the old rules the acceptable offer (RCP) would have been $76,000, computed by

multiplying the $750 by 48 ($36,000) and adding the $40,000.

Under the new rules the acceptable offer (RCP) will now be $49,000, computed by

multiplying the $750 by 12 ($9,000) and adding the $40,000.

Example #2:

Taxpayer owes $400,000 to the IRS

Taxpayer earns $250,000 per year.

• We agree with IRS that the Taxpayer can afford to pay $4,000 per month to the

IRS.

• We agree with the IRS that the Taxpayer has $5,000 in realizable value of his/her

assets.

Under the old rules the acceptable offer (RCP) would have been $197,000, computed by

multiplying the $4,000 by 48 ($192,000) and adding the $5,000.

Under the new rules the acceptable offer (RCP) will now be $53,000, computed by

multiplying the $4,000 by 12 ($48,000) and adding the $5,000.

The result in this example #2 appears too good to be true. And, although on the face of

the matter, the computations work, the IRS is likely to use its general rule that the

acceptance of the offer would “not be in the best interests of the government” as a reason

for rejecting such an offer.

In addition, if the full payment of the tax can be made within the statute of limitations to

collect the tax (usually ten years from the filing of the return), then the offer will be rejected. So,

in example #2, if the remaining time on the statute to collect the tax is 100 months or more, the

offer will be rejected as the Taxpayer could pay the entire tax over the 100 months ($4,000 times

100 months equals $400,000, which is the tax due).

Each case will be considered based upon its own individual facts and circumstances.

9


May 21, 2012

Control Number: SBSE-05-0512-041

Expiration: May 21, 2013

Impacted: IRM 5.8.5

MEMORANDUM FOR DIRECTORS, COLLECTION AREA OPERATIONS

(CALIFORNIA, GULF STATES, AND SOUTH ATLANTIC)

DIRECTORS, CAMPUS COMPLIANCE OPERATIONS

(BROOKHAVEN AND MEMPHIS)

FROM:

SUBJECT:

Scott D. Reisher /s/ Scott D. Reisher

Director, Collection Policy

Interim Guidance Memorandum for Offer in Compromise

Defined in IRM 5.8.5, Financial Analysis

The purpose of this memorandum is to provide expanded guidance to IRM 5.8.5. Significant

changes in this memorandum include defining equity in an on-going business, evaluation of

money in bank accounts, reducing the equity in a vehicle, dissipated assets, retired debt,

student loans, allowance for delinquent state and local income tax liabilities, and the future

income multiplier. The attached updates will be incorporated in the next revision of Internal

Revenue Manual (IRM) 5.8.5, Financial Analysis, and are effective May 21, 2012.

This memorandum supersedes Interim Guidance Memorandums SBSE-05-0212-010, Offer in

Compromise Streamline Offer Processes for Field Offer Specialists, and SBSE-05-0511-026,

Centralized Offer in Compromise Streamline Offer Processes. However, the expectation is

that you will continue to:

• Rely on internal record checks to determine ownership and equity in real and personal

property, including motor vehicles,

• Use the telephone as your primary form of contact,

• Accept oral testimony, unless the information provided appears to be questionable,

and

• Use the quick notes, when appropriate.

10


2

If you have any questions, please contact me, or a member of your staff may contact Diane

Morris, Senior Program Analyst. COIC personnel should direct any questions through the

appropriate management chain.

Attachments: (1)

cc: Chief, Appeals

Director, Field Collection

Director, Campus Compliance Services

Director, Filing and Payment Compliance

Assistant Division Counsel, SBSE

National Taxpayer Advocate

www.irs.gov

11


How Taxpayers Can Be

Exempted from 20% Payment

Offers in Compromise

12

The IRS will use current

income “ for purposes of determining

whether there should be

a 20 percent TIPRA payment.


IRS

Representation

Advisor

E. Martin Davidoff, CPA, Esq.

L

Last July when Congress enacted changes in the law (IRC §7122)

on Offers in Compromise, the most significant aspect of the

legislation was the requirement of a 20 percent down payment

on lump sum offers and the payment of monthly installments

on deferred periodic payment offers Tax Increase Prevention and

Reconciliation Act (TIPRA payments).

By the time this column is published, the IRS is likely to have

come out with new forms and guidance with respect to these

rules. Based on conversations with the IRS, I believe the guidance

will be along the following lines:

1. Taxpayers whose income falls at or below 250 percent of the

DHS poverty guidelines are exempt from the $150 application

fee and TIPRA payments.

2. Forms used for offers were redesigned and new forms added:

• Form 656 will continue to be used for most offers.

• Form 656-L will be used to process offers as to doubt and

as to liability.

• Forms 656-A will be used to process lump sum payments

and claims for exemption from such payments.

• Form 656-PPV will be used to submit monthly periodic

payments while the offer is pending.

3. Forms 433-A and 433-B also are being redesigned. These

forms will continue to be used to secure financial data from

taxpayers for use in offers and in determining amounts collectible

through levy or installment agreements.

4. If an offer is increased through the filing of an amended form

656, 20 percent of the increased offer amount must be submitted

prior to any further consideration of the offer.

The 250 percent guideline provides a huge opportunity to taxpayers.

When considering whether a taxpayer qualifies for such

consideration, the IRS will look at the taxpayer’s income at the

time the offer is submitted! In my opinion, this is surprising and

may allow taxpayers to eliminate the 20 percent TIPRA payment

by the timing of their offers.

Remember that an offer will be accepted by the IRS if the

amount equals or exceeds the taxpayer’s Reasonable Collection

Potential (RCP), defined by the IRS as the total of the taxpayer’s

realizable value in real and personal assets, and his/her future

net income.

Realizable value is, essentially, gross value less secured debt.

For example, unsecured credit card debt is usually not considered.

In addition, the IRS will discount valuations based on

“Quick Sale Value.” In New Jersey, that generally means a 20

percent discount for residential property from its true fair market

value.

Future net income is based on a forecast of the excess of gross

income over allowable expenses food, clothing, housing, transportation,

medical and taxes over a minimum of 48 months.

For the most part, other expenses such as alimony, life and disability

insurance, child care, and the cost of tax representation,

also are allowable. The expenses are defined by guidelines published

by the IRS, although the guidelines provide some certainty

in the determination, there is room for negotiation.

Since future net income is gross income less allowable expenses,

the starting point for computing future net income is gross

income. By policy, the IRS will not merely accept one’s current

income as a predictor of future income. Absent special circumstances,

the IRS’s first attempt at computing gross income will be

to take the higher of the taxpayer’s current income as evidenced

by paycheck stubs or financial statements, and a three-year average

of the taxpayer’s income based on the immediate prior three

years.

As a result, the announcement that the IRS will use the current

income for purposes of determining whether there should

be a 20 percent TIPRA payment, is surprising and refreshing. I

believe that this approach is correct. The unanswered question

is what will happen if the taxpayer’s income level changes while

the offer is pending? Will he or she then be required to pay in

the 20 percent? I suspect this issue will only come up at the time

an amended offer is submitted or the taxpayer is asked to update

his/her financial information.

E. Martin Davidoff, CPA, Esq. is a sole proprietor with more

than 25 years’ experience practicing as a CPA and tax attorney

in Dayton, N.J. He is the founder and current chairman of

the IRS Tax Liaison Committee of the American Association of

Attorney-CPAs and currently serves as its vice president. Further

information about Davidoff’s upcoming speaking engagements can

be found by emailing lisa@copeseminars.com.

10 For Practitioners … By Practitioners April/May 2007


FACTS

OFFER IN COMPROMISE CASE STUDY

John Doe was the sole stockholder and principal officer of J.J. Smith, Inc.. through June 30,

2008, at which time the company ceased operations. At that time, the corporation owed $450,000

in U.S. Payroll taxes, interest, and penalties, of which $242,000 represented trust funds. In addition,

the corporation had unpaid New Jersey Sales, Use and Gross Income Tax Withholding of $12,500,

inclusive of interest and penalties totaling $3,500. The corporation also owes unemployment taxes

of $2,400 attributable, ratably, to the first 6 months of 2008.

John is married to Jane Doe. As of today, all income tax returns for John and Jane have been

filed through 2011. Taxes are due for the years 2006 through 2009 of $84,000 to the U.S. Treasury

in connection with the jointly-filed returns for those years.

John and Jane come to you for advice seeking to do offers in compromise with the tax

authorities after hearing all those radio ads of yours for the 1-800-IhaveFriendsintheIRS telephone

number. Their financial information is set forth in the accompanying Form 433-A. Note that all of

the assets, except the insurance policy are Jane Doe’s and the credit card debt is joint. No Form

433-B has been prepared as J.J. Smith, Inc. is no longer in business and has no assets. Its charter

was revoked on May 31, 2008 for non-filing of New Jersey Secretary of State filings.

Upon further investigation, and securing a judgment/lien search, you find:

• New Jersey has a judgment for the $12,500 against John Doe personally;

• The IRS has liens against the Does for 2006 - 2009 income taxes;

• The IRS has assessed and has liens for $200,000 of the $242,000 in trust funds

against Mr. Doe individually (the remaining $42,000 is attributable to $14,000 per

month for the June, 2008 quarter);

Further questioning reveals that the Does will owe $12,000 to the U.S. Treasury and $1,500

to the State of New Jersey for taxes attributable to the year that will be ending on December 31,

2012. The tax returns have not yet been filed and neither amount has been included on the Form

433-A. Also, although no tax is due on 2010 and 2011, it is clear from your review of the filed

returns for the years that there are positions of significant audit risk on those returns.

13


OFFER IN COMPROMISE CASE STUDY (continued)

QUESTIONS

1. How do you advise the Does regarding their personal tax returns and liabilities for the years 2010,

2011, 2012, and 2013?

2. What is the impact of the May 31, 2008 termination of the Corporation’s status?

3. In the course of your interview, the Does advise you that the automobile owned by Jane, the 2003

Volvo, is on its last legs and that they would like to lease or purchase another automobile, if that

is possible in light of their debts to the tax authorities. What, if any, impact will such a purchase

have on their offer. They ask you for advice on whether to purchase the new automobile before

or after their offer in compromise is considered.

4. Prior to submitting the offers in compromise, what, if any, actions need to be taken by the

Internal Revenue Service and the New Jersey Division of Taxation?

5. Mr. Doe inquires about using his paid up life insurance to pay off the debt due to his credit card.

The credit card company has offered to forgive the $10,429 debt if Mr. Doe pays $7,000 by then

end of the current month. How do you advise?

6. Your retainer is $5,000 for your services. Mr. Doe is considering borrowing the money from his

mother. How do you advise the Does to pay it?

7. What if Jane successfully argues that she is an innocent spouse with respect to 2006 - 2009, and

hence, has no liability for those years?

8. Should the taxpayer be thinking about acquiring medical insurance?

14


Form 433-A (OIC)

(Rev. May 2012)

Use this form if you are

An individual who owes income tax on a Form 1040, U.S.

Individual Income Tax Return

An individual with a personal liability for Excise Tax

An individual responsible for a Trust Fund Recovery Penalty

Department of the Treasury — Internal Revenue Service

Collection Information Statement for Wage Earners and

Self-Employed Individuals

An individual who is personally responsible for a

partnership liability

An individual who is self-employed or has self-employment

income. You are considered to be self-employed if you are in

business for yourself, or carry on a trade or business.

Wage earners Complete sections 1, 3, 4 (Box 1), 6, and 7 including signature line on page 7.

Self-employed individuals Complete all sections and signature line on page 7

Note: Include attachments if additional space is needed to respond completely to any question.

Section 1

Personal and Household Information

Last Name First Name Date of Birth (mm/dd/yyyy) Social Security Number

Doe John J. 08/05/1946 123-45-6789

Marital status Home Address (Street, City, State, ZIP Code)

Do you:

X Married 123 Main Street

X Own your home Rent

Unmarried Anywhere, NJ 08666

Other (specify e.g., share rent, live with relative, etc.)

County of Residence

Employer's Name

Occupation

Primary Phone

Middlesex, NJ 732-274-1600

Secondary Phone

xxxxxxx

Fax Number Attorney fax

732-274-1666

ABC Janitorial, LLC

Manager

How Long?

Mailing Address (if different from above or Post Office Box number)

Employer's Address (Street, City, State, ZIP Code)

Provide information about your spouse.

Spouse's Last Name First Name Date of Birth (mm/dd/yyyy) Social Security Number

Occupation

Employer's Name

10 years

Provide information for all other persons in the household or claimed as a dependent.

Name Age Relationship

P.O. Box 123

Anywhere, NJ 08666-0123

5555 Route 1 - Suite R

Monmouth Junction, NJ 08852

Doe Jane 12/29/1965 987-65-4321

Clothing Designer

XYZ Consulting, Inc.

xxxxxxx

Attorney phone

Employer's Address (Street, City, State, ZIP Code)

123 Mockingbird Lane

Dayton, NJ 08810

Claimed as a dependent

on your Form 1040?

Contributes to

household income?

John Doe, Jr. 11 Son X X

Mary Doe 7 Daugher X X

Yes No Yes No

Yes No Yes No

Yes No Yes No

Yes No Yes No

Section 2

Self-employed Information

If you or your spouse is self-employed, complete this section.

Is your business a sole proprietorship (filing Schedule C)?

Yes No

Name of Business

Address of Business (If other than personal residence)

Business Telephone Number

Employer Identification Number Business Website

Trade Name or dba

ISA

Description of Business Total Number of Employees Frequency of Tax Deposits Average Gross Monthly

Payroll $

15

www.irs.gov Form 433-A (OIC) (Rev. 5-2012)


Section 2 (Continued)

Self-employed Information

Do you or your spouse have any other business interests?

Business Address (Street, City, State, ZIP code)

Yes (Percentage of ownership: ) No

Business Name

Page 2 of 7

Business Telephone Number

Business Identification Number

Type of business (Select one)

Partnership LLC Corporation Other

Section 3

Personal Asset Information

Cash and Investments (domestic and foreign)

Use the most current statement for each type of account, such as checking, savings, money market and online accounts, stored value cards (such as, a

payroll card from an employer), investment and retirement accounts (IRAs, Keogh, 401(k) plans, stocks, bonds, mutual funds, certificates of deposit), life insurance

policies that have a cash value, and safe deposit boxes. Asset value is subject to adjustment by IRS based on individual circumstances. Enter the total

amount available for each of the following (if additional space is needed include attachments).

If any line item is zero or less, enter "0". Do not enter negative numbers on this form.

Cash Checking Savings Money Market Online Account Stored Value Card

Bank Name

Account Number

PNC Bank, Princeton NJ 1000-5678 (1a) $

275

X

X

Checking Savings Money Market Online Account Stored Value Card

Bank Name

Account Number

Fleet Bank, Rocky Hill NJ 1000-0123 (1b) $

100

Total value of bank accounts from attachment (1c) $

Investment Account: Stocks Bonds Other

Name of Financial Institution

Account Number

Current Market Value

X

SEE RIDER #1 SEE RIDER #1

$ X .8 = $

Investment Account: Stocks Bonds Other

Name of Financial Institution

Account Number

Add lines (1a) through (1c) = (1) $

Less Loan Balance

$ = (2a) $

7,773 6,218 0 6,218

375

Current Market Value

$ X .8 = $

Less Loan Balance

$ = (2b) $

Total of investment accounts from attachment. [current market value X.8 less loan balance(s)] (2c) $

Add lines (2a) through (2c) = (2) $

Retirement Account: 401k IRA Other

X

Name of Financial Institution

Account Number

SEE RIDER #1 SEE RIDER #1

6,218

Current Market Value

$ X .7 = $

6,277

Less Loan Balance

$ = (3a) $

6,277

Retirement Account: 401k IRA Other

Name of Financial Institution

Account Number

Current Market Value

$ X .7 = $

Less Loan Balance

$ = (3b) $

Total of investment accounts from attachment. [current market value X .7 less loan balance(s)] (3c) $

Add lines (3a) through (3c) = (3) $

16

6,277

www.irs.gov Form 433-A (OIC) (Rev. 5-2012)


Section 3 (Continued)

Cash value of life insurance policies

Name of Insurance Company

Current Cash Value

$

Total of life insurance policies from attachment.

$

Personal Asset Information

Less Loan Balance

Policy Number

East River Savings Bank 63-0123456

$ = (4a) $

Less Any Loan Balance(s)

$ = (4b) $

Add lines (4a) through (4b) = (4) $

Real Estate (Enter information about any house, condo, co-op, time share, etc. that you own or are buying)

Property Address (Street Address, City, State, ZIP Code) Primary Residence Yes No

Residence

123 Main Street

Anywhere, NJ 08666

How is property titled? (joint tenancy, etc.)?

Joint

Current Market Value

Date Purchased

County and Country

Description of Property

Less Loan Balance (Mortgages, etc.)

$ X .8 = $

$ Total Value of Real Estate = (5a) $

Property Address (Street Address, City, State, ZIP Code) Primary Residence Yes No

Date Purchased

County and Country

Page 3 of 7

20,000 7,293 12,707

AnyCounty, USA

10/23/1990

12,707

410,000 328,000 322,000 6,000

How is property titled? (joint tenancy, etc.)?

Description of Property

Current Market Value

$ X .8 = $

Less Loan Balance (Mortgages, etc.)

$ Total Value of Real Estate = (5b) $

Property Address (Street Address, City, State, ZIP Code) Primary Residence Yes No

Date Purchased

County and Country

How is property titled? (joint tenancy, etc.)?

Description of Property

Current Market Value

$ X .8 = $

Less Loan Balance (Mortgages, etc.)

$ Total Value of Real Estate = (5c) $

Total value of property(s) from attachment [current market value X .8 less any loan balance(s)] (5d) $

Add lines (5a) through (5d) = (5) $

Vehicles (Enter information about any cars, boats, motorcycles, etc. that you own or lease)

Vehicle Make & Model Year Date Purchased Mileage Lease

Loan

Monthly Lease/Loan

Amount $

Current Market Value

Less Loan Balance

$ X .8 = $

$

Total value of vehicle (if the vehicle

is leased, enter 0 as the total value) = (6a) $

Vehicle Make & Model Year Date Purchased Mileage X Lease Monthly Lease/Loan

Loan Amount $ 375

Current Market Value

Less Loan Balance

$ X .8 = $

$

Total value of vehicle (if the vehicle

is leased, enter 0 as the total value) = (6b) $

Vehicle Make & Model Year Date Purchased Mileage Lease Monthly Lease/Loan

Loan Amount $

Current Market Value

$ X .8 = $

Less Loan Balance

$

Total value of vehicle (if the vehicle

is leased, enter 0 as the total value) = (6c) $

Volvo-Wagon S40 2003 2003 75,000

www.irs.gov Form 433-A (OIC) (Rev. 5-2012)

** Exclusion Allowed 17

6,000

9,162 7,330 ** 3,450 3,880

Nissan 2011 N/A 58,685

N/A


Section 3 (Continued)

Personal Asset Information

Page 4 of 7

Total value of vehicles listed from attachment [current market value X .8 less any loan balance(s)] (6d) $

Other valuable items (artwork, collections, jewelry, items of value in safe deposit boxes, etc).

Add lines (6a) through (6d) = (6) $

3,880

Description of asset:

Current Market Value

$ X .8 = $

Description of asset:

Current Market Value

$ X .8 = $

Less Loan Balance

$ = (7a) $

Less Loan Balance

$ = (7b) $

Total value of valuable items listed from attachment [current market value X .8 less any loan balance(s)] (7c) $

Add lines (7a) through (7c) = (7) $

Section 4

Business Asset Information (for Self-Employed)

List business assets such as bank accounts, tools, books, machinery, equipment, business vehicles and real property that is

owned/leased/rented. If additional space is needed, attach a list of items. Do not enter a number less than zero.

NONE

Cash Checking Savings Money Market Online Account Stored Value Card

Bank Name

Account Number

Checking Savings Money Market Online Account Stored Value Card

Bank Name

Account Number

(8a) $

(8b) $

Total value of bank accounts from attachment (8c) $

Description of asset:

Add lines (8a) through (8c) for total bank account(s) = (8) $

Current Market Value

$ X .8 = $

Description of asset:

Current Market Value

$ X .8 = $

Less Loan Balance

$ = (9a) $

Less Loan Balance

$ = (9b) $

Total value of assets listed from attachment [current market value X .8 less any loan balance(s)] (9c) $

Add lines (9a) through (9c) = (9) $

IRS allowed deduction for professional books and tools of trade (10) $ [4,290]

Enter the value of line (9) minus line (10). If less than zero enter zero. = (11) $

Notes Receivable

Do you have notes receivable? Yes No

If yes, attach current listing which includes name and amount of note(s) receivable.

Accounts Receivable

Do you have accounts receivable? Yes No

If yes, you may be asked to provide a list of the Account(s) Receivable.

Do not include amount on the lines with a letter beside the number.

Add lines (1) through (8), and line (11) and enter the amount in Box 1 =

Box 1 Available Equity in Assets

$

35,457

18

www.irs.gov Form 433-A (OIC) (Rev. 5-2012)


Section 5

Business Income and Expense Information (for Self-Employed)

Page 5 of 7

Note: If you provide a current profit and loss (P&L) statement for the information below, enter the total gross monthly income on line 18 and

your monthly expenses on line 30 below. Do not complete lines (13) - (17) and (19) - (29). You may use the amounts claimed for income and

expenses on your most recent Schedule C; however, if the amount has changed significantly within the past year, a current P&L should be

submitted to substantiate the claim.

Business Income (You may average 6-12 months income/receipts to determine your Gross monthly income/receipts.)

Gross receipts (13) $

Gross rental income (14) $

Interest income (15) $

Dividends (16) $

Other income (17) $

Gross Monthly Business Income - Add lines (13) through (17) = (18) $

Business Expenses (You may average 6-12 months expenses to determine your average expenses.)

Materials purchased (e.g., items directly related to the production of a product or service) (19) $

Inventory purchased (e.g., goods bought for resale) (20) $

Gross wages and salaries (21) $

Rent (22) $

Supplies (items used to conduct business and used up within one year, e.g., books, office supplies, professional equipment,

etc.) (23) $

Utilities/telephones (24) $

Vehicle costs (gas, oil, repairs, maintenance) (25) $

Business Insurance (26) $

Current Business Taxes (e.g., Real estate, excise, franchise, occupational, personal property, sales and employer's portion

of employment taxes) (27) $

Other secured debts (not credit cards) (28) $

Other business expenses (include a list) (29) $

Section 6

Total Monthly Business Expenses - Add lines (19) through (29) = (30) $

Box 2 Net Business Income

Subtract line (30) from line (18) and enter the amount in Box 2 = $

Monthly Household Income and Expense Information

Enter your household's gross monthly income. The information below is for yourself, your spouse, and anyone else who contributes to your

household's income. The entire household includes spouse, significant other, children, and others who contribute to the household. This is necessary

for the IRS to accurately evaluate your offer.

Monthly household income

Primary taxpayer

Wages

Social Security

$

Spouse

Wages

+ $

Social Security

Pension(s)

+ $ =

Pension(s)

Total primary taxpayer

income (31) $

$

+ $

+ $ = Total spouse income (32) $

Interest and dividends (33) $

Distributions (such as, income from partnerships, sub-S Corporations, etc.) (34) $

Net rental income (35) $

Net business income from Box 2 (36) $

Child support received (37) $

Alimony received (38) $

Box 3 Total Household Income

Add lines (31) through (38) and enter the amount in Box 3 = $

Are there additional sources of income used to support the household, e.g. non-liable spouse, roommate, etc. Yes No

19

See attachment to

this section which is

incorporated herein

8,005

www.irs.gov Form 433-A (OIC) (Rev. 5-2012)


Section 6 - (Continued)

Monthly Household Income and Expense Information

Page 6 of 7

Monthly Household Expenses

Enter your average monthly expenses.

Note: Expenses may be adjusted based on IRS Collection Financial Standards. The

standards may be found at irs.gov.

Food, clothing, and miscellaneous (e.g., housekeeping supplies, personal care products , minimum payment on credit card).

A reasonable estimate of these expenses may be used. (41) $

Housing and utilities (e.g., rent or mortgage payment and average monthly cost of property taxes, home insurance,

maintenance, dues, fees and utilities including electricity, gas, other fuels, trash collection, water, cable television and internet,

telephone, and cell phone). (42) $

Vehicle loan and/or lease payment(s) (43) $

Vehicle operating costs (e.g., average monthly cost of maintenance, repairs, insurance, fuel, registrations, licenses,

inspections, parking, tolls, etc.). A reasonable estimate of these expenses may be used. (44) $

Public transportation costs (e.g., average monthly cost of fares for mass transit such as bus, train, ferry, taxi, etc.). A

reasonable estimate of these expenses may be used. (45) $

Health insurance premiums (46) $

Out-of-pocket health care costs (e.g. average monthly cost of prescription drugs, medical services, and medical supplies like

eyeglasses, hearing aids, etc.) (47) $

Court-ordered payments (e.g., monthly cost of any alimony, child support, etc.) (48) $

Child/dependent care payments (e.g., daycare, etc.) (49) $

Life insurance premiums (50) $

Current taxes (e.g., monthly cost of federal, state, and local tax, personal property tax, etc.) (51) $

See attachment to

this section which is

incorporated herein

Other secured debts (e.g., any loan where you pledged an asset as collateral not previously listed, government guaranteed

Student Loan). (52) $

Delinquent State and Local Taxes (53) $

Section 7

Add lines (41) through (53) and enter the amount in Box 4 =

Subtract Box 4 from Box 3 and enter the amount in Box 5 =

Calculate Your Minimum Offer Amount

Box 4 Household Expenses

$

7,644

Box 5 Remaining Monthly Income

$

361

The next steps calculate your minimum offer amount. The amount of time you take to pay your offer in full will affect your minimum offer amount.

Paying over a shorter period of time will result in a smaller minimum offer amount.

If you will pay your offer in 5 months or less, multiply "Remaining Monthly Income" (Box 5) by 12 to get "Future Remaining Income" (Box 6).

$

Enter the total from Box 5 here

Box 6 Future Remaining Income

X 12 =

361 $

4,332

If you will pay your offer in more than 5 months, multiply "Remaining Monthly Income" (Box 5) by 24 to get "Future Remaining Income" (Box 7).

$

Enter the total from Box 5 here

X 24 =

$

Box 7 Future Remaining Income

Determine your minimum offer amount by adding the total available assets from Box 1 to amount in either Box 6 or Box 7.

Enter the amount from Box 1 here

Do Not Enter a Number Less Than Zero

$

35,457

+

Enter the amount from either Box 6 or Box 7

$

4,332

=

$

Offer Amount

Must be more than zero

39,789

If you have special circumstances that would hinder you from paying this amount, explain them on Form 656,

Offer in Compromise, page 2, "Explanation of Circumstances."

20

www.irs.gov Form 433-A (OIC) (Rev. 5-2012)


Section 8

Other Information

Page 7 of 7

Additional information IRS needs to

consider settlement of your tax debt. If you

or your business are currently in a

bankruptcy proceeding, you are not eligible

to apply for an offer.

Are you the beneficiary of a trust, estate, or life insurance policy?

Yes

No

Are you currently in bankruptcy?

Yes

X

X

No

Have you filed bankruptcy in the past 10 years?

Yes

Discharge/Dismissal Date (mm/dd/yyyy) Location Filed

X

No

Are you or have you been party to a lawsuit?

Yes

X

No

If applicable, date the lawsuit was resolved: (mm/dd/yyyy)

In the past 10 years, have you transferred any assets for less than their full value?

Yes

X

No

If applicable, date the asset was transferred: (mm/dd/yyyy)

Section 9

Have you lived outside the U.S. for 6 months or longer in the past 10 years?

Yes X No

Do you have any funds being held in trust by a third party?

Yes No If yes, how much $ Where:

X

Signatures

Under penalties of perjury, I declare that I have examined this offer, including accompanying documents, and to the best of my knowledge it

is true, correct, and complete.

Signature of Taxpayer

Date (mm/dd/yyyy)

Signature of Taxpayer

Date (mm/dd/yyyy)

Remember to include all applicable attachments listed below.

Copies of the most recent pay stub, earnings statement, etc., from each employer

Copies of bank statements for the three most recent months

Copies of the most recent statement, etc., from all other sources of income such as pensions, Social Security, rental

income, interest and dividends, court order for child support, alimony, and rent subsidies

Copies of the most recent statement for each investment and retirement account

Copies of the most recent statement from lender(s) on loans such as mortgages, second mortgages, vehicles, etc.,

showing monthly payments, loan payoffs, and balances

List of Notes Receivable, if applicable

Verification of State/Local Tax Liability, if applicable

Documentation to support any special circumstances described in the "Explain special circumstances" section on page 2

of Form 656, if applicable

Attach a Form 2848, Power of Attorney, if you would like your attorney, CPA, or enrolled agent to represent you and you

do not have a current form on file with the IRS.

Privacy Act Statement

The information requested on this Form is covered under Privacy Act and Paperwork Reduction Act Notices which have already been

provided to the taxpayer.

21

www.irs.gov Form 433-A (OIC) (Rev. 5-2012)


Jane Doe

SS#: 123-45-6789

Form 433-A, Section 3

Rider #1

Name of Institution Address Type of Account Account # Balance

Merrill Lynch 333 Phornall Ave. Money Market 11111111 1,059

Edison, NJ

Oppenheimer PO Box 5270 Brokerage 4444444 960

Denver, CO

200 Shares J.J. Smith, Inc. 123 Main Street N/A N/A 0

Anywhere, NJ

208 shares of 5 Hartman Place

Trust Co. of NJ Belle Mead, NJ 5,754

Total Investment Accounts 7,773

Merrill Lynch 333 Phornall Ave. IRA 22222222 6,165

Edison, NJ

Oppenheimer PO Box 5270 IRA 33333333 2,891

Denver, CO

Scudder Trust Co. PO Box 2291 IRA 5555555 1,037

International Growth Boston, MA

Newberger Berman 605 Third Ave. IRA 6666666 920

New York, NY

Subotal - IRA Accounts 11,013

-Less: 5% Allowance for Costs of Liquidation (551)

Net Value before taxes 10,462

-Less: Anticipated Taxes Upon Liquidation (40%) (4,185)

Current Market Value - Retirement Accounts 6,277

Note: Jane Doe is the owner of record or the beneficiary of each of the items above.

22


L:\EMD\433Case11:B

Personal Liabilities of John & Jane Doe 08/17/2012

Form 433-A (OIC)

Rider #2

The following are debts due to tax authorities. Some are secured by liens or judgments. Some are not.

DUE TO INTERNAL REVENUE SERVICE

'FORM 1040

TAX PERIOD

AMOUNT DUE

2006 20,000.00

2007 27,500.00

2008 15,000.00

2009 21,500.00

'TOTAL DUE FORM 1040 84,000.00

TRUST FUNDS (from J.J. SMITH, INC.)

Through 1st Quarter 2008 200,000.00 Already Assessed

2nd Quarter 2008 42,000.00 Not yet Assessed

TOTAL TRUST FUNDS DUE 242,000.00

DUE TO THE STATE OF NEW JERSEY

SALES TAX 12,500.00

TOTAL DUE NJ 12,500.00

The following are miscellaneous amounts owed. Monthly payments are being made to these outstanding balances.

Dr. Tapov 205 E. 64th St New York, NY 4,600.00

Somerset Medical Somerset, NJ 747.00

TOTAL DUE - MISCELLANEOUS 5,347.00

23


433CASE12.123 John & Jane Doe 11/20/2012

L:\EMD\ Section 6 Substitute - Monthly Household Income Page 1 of 2

I.R.S. Form 433A (OIC)

Total Income

Monthly

---------------- ----------------

31 Taxpayer - Wages 3,500

Taxpayer - Social Security ---

Taxpayer - Pension ---

---

32 Spouse - Wages 0

Spouse - Social Security ---

Spouse - Pension ---

33 Interest & Dividends - Spouse 5

34 Distributions (partnerships, S Corporations) 0

35 Net Rental Income 0

36 Net Business Income 4,500

37 Child Support ---

38 Alimony Received ---

---

Other Income (Not a Line Item on new Form 433A (OIC) ---

---

Total Household Income (Box 3) 8,005

24


433CASE12.123 John & Jane Doe 08/17/2012

L:\EMD\ Section 6 Substitute - Monthly Household Expenses Page 2 of 2

I.R.S. Form 433A (OIC)

Living Expenses Total John

---------------

41 Food, Clothing, and Misc. (National Standards) 1,450 634 P

42 Housing & Utilities (J)

-Mortgage 3,324

-Real Estate Taxes 500

-Gas, Electric, & Other Utilities 175

-Insurance 65

-Telephone 75

- Less: Excess over National Standards (1,131)

3,008 1,314 P

43 Vehicle Ownership Costs

-Automobile #1 - Leased 409 409 D

-Automobile #2 - 2003 Volvo 0

409

44 Vehicle Operating Costs

-Automobile Operating Expenses 342 342 T/D

-Automobile Operating Expenses 342

-Over 75,000 Miles or more than 6 years old 200

884

45 Public Transportation Costs 0 0

46 Health Insurance Premiums 0 0

47 Out of Pocket Health Care Costs

-Per Tables - John 144 144 D

-Per Tables - Jane 60 0 D

-Per Tables - Children (2) 120 52 P

-Dental Bills

-Physician Bills

-Eyecare, glasses & contact lenses

-Prescription Medicines

324

48 Court Ordered Payments (e.g. alimony, child support, etc.) 0

49 Child/Dependent Care 0

50 Life Insurance 0 0 D

51 Current Taxes

-U.S. Income (Adjusted for disallowed interest/taxes) 378 165 P

-U.S. FICA (Taxpayer): Using Reduced Rate for 2012 198 198 D

-U.S. FICA (Spouse): Using Reduced Rate for 2012 553 0 D

-New Jersey Gross Income Taxes 170 74 P

-N.J. SUI/SDI 20 20 D

1,319

52 Other Secured Debts 0

53 Deliquent State and Local Taxes

Other Expenses

-Tax Advice & Preparation (J) 150 66 P

-Disability Insurance 100 100 D

250

Total Household Expenses (Box 4) 7,644 3,518

Excess (Shortfall) of Total Income

over Total Expenses (Box 5) 361 (18)

Taxpayer Percentage: 43.7% N/A

Taxpayer Excess (shortfall) 158 (18)

Ability to Pay times 12:

-Family 4,332 N/A

-Taxpayer only 1,896 0

Notes: P = Proportionate to Income; D = Direct; T = IRS Tables

25


433CASE12.123 John & Jane Doe 08/17/2012

L:\EMD\ Section 6 Substitute - Monthly Household Expenses Page 2 of 2

I.R.S. Form 433A (OIC)

Living Expenses Total John

---------------

41 Food, Clothing, and Misc. (National Standards) 1,450 634 P

42 Housing & Utilities (J)

-Mortgage 3,324

-Real Estate Taxes 500

-Gas, Electric, & Other Utilities 175

-Insurance 65

-Telephone 75

- Less: Excess over National Standards (1,131)

3,008 1,314 P

43 Vehicle Ownership Costs

-Automobile #1 - Leased 409 409 D

-Automobile #2 - New Car 525

934

44 Vehicle Operating Costs

-Automobile Operating Expenses 342 342 T/D

-Automobile Operating Expenses 342

-Over 75,000 Miles or more than 6 years old 0

684

45 Public Transportation Costs 0 0

46 Health Insurance Premiums 0 0

47 Out of Pocket Health Care Costs

-Per Tables - John 144 144 D

-Per Tables - Jane 60 0 D

-Per Tables - Children (2) 120 52 P

-Dental Bills

-Physician Bills

-Eyecare, glasses & contact lenses

-Prescription Medicines

324

48 Court Ordered Payments (e.g. alimony, child support, etc.) 0

49 Child/Dependent Care 0

50 Life Insurance (T) 0 0 D

51 Taxes

-U.S. Income (Adjusted for disallowed interest/taxes) 378 165 P

-U.S. FICA (Taxpayer): Using Reduced Rate for 2012 198 198 D

-U.S. FICA (Spouse): Using Reduced Rate for 2012 553 0 D

-New Jersey Gross Income Taxes 170 74 P

-N.J. SUI/SDI 20 20 D

1,319

52 Other Secured Debts 0

Other Expenses

-Tax Advice & Preparation (J) 150 66 P

-Disability Insurance 100 100 D

250

Total Living Expenses 7,969 3,518

Excess (Shortfall) of Total Income

over Total Expenses 36 (18)

Taxpayer Percentage: 43.7% N/A

Taxpayer Excess (shortfall) 16 (18)

Ability to Pay times 12:

-Family 432 N/A

-Taxpayer only 192 0

Notes: P = Proportionate to Income; D = Direct; T = IRS Tables

Notes: P = Proportionate to Income; D = Direct; T = IRS Tables

26


Form 656

(Rev. May 2012)

Department of the Treasury — Internal Revenue Service

Offer in Compromise

Attach Application Fee and Payment (check or money order) here.

Section 1

Your Contact Information

Your First Name, Middle Initial, Last Name

John J. Doe

If a Joint Offer, Spouse's First Name, Middle Initial, Last Name

Jane Doe

Your Physical Home Address (Street, City, State, ZIP Code)

123 Main Street Anywhere, NJ 08666

Mailing Address (if different from above or Post Office Box number)

P.O. Box 123, Anywhere, NJ 08666-0123

Business Name

IRS Received Date

Your Business Address (Street, City, State, ZIP Code)

Social Security Number (SSN)

(Primary)

Section 2

(Secondary)

123-45-6789 987-65-4321

Employer Identification Number

(EIN)

Tax Periods

(EIN not included in offer)

To: Commissioner of Internal Revenue Service

In the following agreement, the pronoun "we" may be assumed in place of "I" when there are joint liabilities and both parties

are signing this agreement.

I submit this offer to compromise the tax liabilities plus any interest, penalties, additions to tax, and additional amounts required by law for the tax type

and period(s) marked below:

X 1040 Income Tax-Year(s) 2006,2007,2008 & 2009

1120 Income Tax-Year(s)

941 Employer's Quarterly Federal Tax Return - Quarterly period(s)

[Consider including 2010, 2011 & 2012]

940 Employer's Annual Federal Unemployment (FUTA) Tax Return - Year(s)

Trust Fund Recovery Penalty as a responsible person of (enter corporation name)

for failure to pay withholding and Federal Insurance Contributions Act taxes (Social Security taxes), for period(s) ending

Other Federal Tax(es) [specify type(s) and period(s)]

Note: If you need more space, use attachment and title it "Attachment to Form 656 dated

attachment.

." Make sure to sign and date the

Section 3

Reason for Offer

X

Doubt as to Collectibility - I have insufficient assets and income to pay the full amount.

Exceptional Circumstances (Effective Tax Administration) - I owe this amount and have sufficient assets to pay the full amount, but due to my

exceptional circumstances, requiring full payment would cause an economic hardship or would be unfair and inequitable. I am submitting a written

narrative explaining my circumstances.

ISA

27

www.irs.gov

Form 656 (Rev. 5-2012)


Section 3 (Continued)

Reason for Offer

Page 2 of 4

Explanation of Circumstances (Add additional pages, if needed)

The IRS understands that there are unplanned events or special circumstances, such as serious illness, where paying the full amount or the minimum

offer amount might impair your ability to provide for yourself and your family. If this is the case and you can provide documentation to prove your

situation, then your offer may be accepted despite your financial profile. Describe your situation below and attach appropriate documents to this offer

application.

Section 4

Low Income Certification (Individuals Only)

Do you qualify for Low-Income Certification? You qualify if your gross monthly household income is less than or equal to the amount shown in the

chart below based on your family size and where you live. If you qualify, you are not required to submit any payments during the consideration of your

offer.

Check here if you qualify for Low-Income Certification based on the monthly income guidelines below.

Size of family unit 48 contiguous states and D.C. Hawaii Alaska

1 $2,327 $2,679 $2,910

2 $3,152 $3,627 $3,942

3 $3,997 $4,575 $4,973

4 $4,802 $5,523 $6,004

5 $5,627 $6,471 $7,035

6 $6,452 $7,419 $8,067

7 $7,277 $8,367 $9,098

8 $8,102 $9,315 $10,129

For each additional person, add $825 $948 $1,031

Section 5

Lump Sum Cash

Payment Terms

Check one of the payment options below to indicate how long it will take you to pay your offer in full

Enter the amount of your offer $

X

Check here if you will pay your offer in five or fewer payments:

Enclose a check for 20% of the offer amount (waived if you are an individual and met the requirements for Low-Income certification) and fill in the

amount(s) and date(s) of your future payment(s). Your offer must be fully paid 24 months from the date your offer is accepted.

Total Offer Amount - 20% Initial Payment = Remaining Balance

$ - $ = $

You may pay the remaining balance in one payment after acceptance of the offer or up to five payments.

1) $ paid on the (day), month(s) after acceptance.

2) $ paid on the (day), month(s) after acceptance.

3) $ paid on the (day), month(s) after acceptance.

4) $ paid on the (day), month(s) after acceptance.

5) $ paid on the (day), month(s) after acceptance.

Periodic Payment

Enter the amount of your offer $

$20,100

20,100 4,020 16,080

16,080 28th 5th

Check here if you will pay your offer in full in more than five monthly installments.

Enclose a check for one month's installment (waived if you are an individual and met the requirements for Low-Income certification)

$ is being submitted with the Form 656 and then $ on the (day) of each month thereafter for a

total of

months (may not exceed 23). Total payments must equal the total Offer Amount.

You must continue to make these monthly payments while the IRS is considering the offer. Failure to make regular monthly payments

will cause your offer to be returned.

28

www.irs.gov Form 656 (Rev. 5-2012)


Section 6

Designation of Down Payment and Deposit (Optional)

If you want your payment to be applied to a specific tax year and a specific tax debt, please tell us the tax form

and

Tax Year/Quarter

. If you do not designate a preference, we will apply any money you send in to the governments best interest.

Page 3 of 4

If you are paying more than the required payment when you submit your offer and want any part of that payment treated as a deposit, check the box

below and insert the amount.

X I am making a deposit of $ 4,020 with this offer.

Section 7

2009

Source of Funds and Making Your Payment

Tell us where you will obtain the funds to pay your offer. You may consider borrowing from friends and/or family, taking out a loan, or selling assets.

Loans from family/friends and/or liquidation of assets.

1040

Include separate checks for the payment and application fee.

Make checks payable to the "United States Treasury" and attach to the front of your Form 656, Offer in Compromise. All payments must be in U.S.

dollars. Do not send cash. Send a separate application fee with each offer; do not combine it with any other tax payments, as this may delay

processing of your offer. Your offer will be returned to you if the application fee and the required payments are not properly remitted, or if your check is

returned for insufficient funds.

Section 8

Offer Terms

By submitting this offer, I/we have read, understand and agree to the following terms and conditions:

Terms, Conditions, and Legal

Agreement

IRS will keep my payments,

fees, and some refunds.

a) I request that the IRS accept the offer amount listed in this offer application as payment of my outstanding tax

debt (including interest, penalties, and any additional amounts required by law) as of the date listed on this form. I

authorize the IRS to amend Section 2 on page 1 in the event I failed to list any of my assessed tax debt. I

understand that my offer will be accepted, by law, unless IRS notifies me otherwise, in writing, within 24 months of

the date my offer was received by IRS.

b) I voluntarily submit the payments made on this offer and understand that they are not refundable even if I

withdraw the offer or the IRS rejects or returns the offer. Unless I designated how to apply the required

payment (page 3 of this application), the IRS will apply my payment in the best interest of the government,

choosing which tax years and tax liabilities to pay off. The IRS will also keep my application fee unless the offer is

not accepted for processing.

c) The IRS will keep any refund, including interest, that I might be due for tax periods extending through the

calendar year in which the IRS accepts my offer. I cannot designate that the refund be applied to estimated tax

payments for the following year or the accepted offer amount. If I receive a refund after I submit this offer for any

tax period extending through the calendar year in which the IRS accepts my offer, I will return the refund as soon

as possible.

d) The IRS will keep any monies it has collected prior to this offer and any payments that I make relating to this

offer that I did not designate as a deposit. Only amounts that exceed the mandatory payments can be treated as a

deposit. Such a deposit will be refundable if the offer is rejected or returned by the IRS or is withdrawn. I

understand that the IRS will not pay interest on any deposit. The IRS may seize ("levy") my assets up to the time

that the IRS official signs and accepts my offer as pending.

Pending status of an offer

and right to appeal

e) Once an authorized IRS official signs this form, my offer is considered pending as of that signature date and it

remains pending until the IRS accepts, rejects, returns, or terminates my offer or I withdraw my offer. An offer is

also considered pending for 30 days after any rejection of my offer by the IRS, and during the time that any

rejection of my offer is being considered by the Appeals Office. An offer will be considered withdrawn when the

IRS receives my written notification of withdrawal by personal delivery or certified mail or when I inform the IRS of

my withdrawal by other means and the IRS acknowledges in writing my intent to withdraw the offer.

f) I waive the right to an Appeals hearing if I do not request a hearing within 30 days of the date the IRS notifies

me of the decision to reject the offer.

I must comply with my future

tax obligations and

understand I remain liable for

the full amount of my tax

debt until all terms and

conditions of this offer have

been met.

g) I will file tax returns and pay required taxes for the five year period beginning with the date of acceptance of this

offer. If this is an offer being submitted for joint tax debt, and one of us does not comply with future obligations,

only the non-compliant taxpayer will be in default of this agreement.

h) The IRS will not remove the original amount of my tax debt from its records until I have met all the terms and

conditions of this offer. Penalty and interest will continue to accrue until all payment terms of the offer have been

met. If I file for bankruptcy before the terms are fully met, any claim the IRS files in the bankruptcy proceedings

will be a tax claim.

i) Once the IRS accepts my offer in writing, I have no right to contest, in court or otherwise, the amount of the tax

debt.

I understand what will

happen if I fail to meet the

terms of my offer (e.g.,

default).

I agree to waive time limits

provided by law.

j) If I fail to meet any of the terms of this offer, the IRS may levy or sue me to collect any amount ranging from the

unpaid balance of the offer to the original amount of the tax debt without further notice of any kind. The IRS will

continue to add interest, as Section 6601 of the Internal Revenue Code requires, on the amount the IRS

determines is due after default. The IRS will add interest from the date I default until I completely satisfy the

amount owed.

k) To have my offer considered, I agree to the extension of the time limit provided by law to assess my tax debt

(statutory period of assessment). I agree that the date by which the IRS must assess my tax debt will now be

the date by which my debt must currently be assessed plus the period of time my offer is pending plus one

additional year if the IRS rejects, returns, or terminates my offer or I withdraw it. (Paragraph (e) of this section

29

www.irs.gov Form 656 (Rev. 5-2012)


Section 8 - (Continued)

Offer Terms

Page 4 of 4

defines pending and withdrawal). I understand that I have the right not to waive the statutory period of

assessment or to limit the waiver to a certain length or certain periods or issues. I understand, however, that the

IRS may not consider my offer if I refuse to waive the statutory period of assessment or if I provide only a limited

waiver. I also understand that the statutory period for collecting my tax debt will be suspended during the time my

offer is pending with the IRS, for 30 days after any rejection of my offer by the IRS, and during the time that any

rejection of my offer is being considered by the Appeals Office.

I understand the IRS may file

a Notice of Federal Tax Lien

on my property.

I authorize the IRS to contact

relevant third parties in order

to process my offer

I am submitting an offer as

an individual for a joint

liability

l) The IRS may file a Notice of Federal Tax Lien during the offer investigation. The IRS may file a Notice of

Federal Tax Lien to protect the Government's interest on offers that will be paid over time. This tax lien will be

released when the payment terms of the accepted offer have been satisfied.

m) By authorizing the IRS to contact third parties including credit bureaus, I understand that I will not be notified of

which third parties the IRS contacts as part of the offer application process, as stated in section 7602(c) of the

Internal Revenue Code.

n) I understand if the liability sought to be compromised is the joint and individual liability of myself and my

co-obligor(s) and I am submitting this offer to compromise my individual liability only, then if this offer is accepted,

it does not release or discharge my co-obligor(s) from liability. The United States still reserves all rights of

collection against the co-obligor(s).

Section 9

Signatures

Under penalties of perjury, I declare that I have examined this offer, including accompanying schedules and statements, and to the best of

my knowledge and belief, it is true, correct and complete.

Signature of Taxpayer/Corporation Name Phone Number Date (mm/dd/yyyy)

Signature of Taxpayer/Authorized Corporate Officer Phone Number Date (mm/dd/yyyy)

Section 10

Paid Preparer Use Only

Signature of Preparer Phone Number Date (mm/dd/yyyy)

Name of Paid Preparer

Preparer's CAF no. or PTIN

Firm's Name, Address, and ZIP Code

Include a valid, signed Form 2848 or 8821 with this application, if one is not on file.

Section 11

Third Party Designee

Do you want to allow another person to discuss this offer with the IRS? Yes No

If yes, provide designee's name

Telephone Number

E. Martin Davidoff, CPA, Esq. 732-274-1600

IRS Use Only

I accept the waiver of the statutory period of limitations on assessment for the Internal Revenue Service, as described in Section 8 (k).

Signature of Authorized Internal Revenue Service Official Title Date (mm/dd/yyyy)

X

Privacy Act Statement

We ask for the information on this form to carry out the internal revenue laws of the United States. Our authority to request this information is Section 7801 of the Internal

Revenue Code.

Our purpose for requesting the information is to determine if it is in the best interests of the IRS to accept an offer. You are not required to make an offer; however, if you

choose to do so, you must provide all of the taxpayer information requested. Failure to provide all of the information may prevent us from processing your request.

If you are a paid preparer and you prepared the Form 656 for the taxpayer submitting an offer, we request that you complete and sign Section 10 on Form 656, and provide

identifying information. Providing this information is voluntary. This information will be used to administer and enforce the internal revenue laws of the United States and may

be used to regulate practice before the Internal Revenue Service for those persons subject to Treasury Department Circular No. 230, Regulations Governing the Practice of

Attorneys, Certified Public Accountants, Enrolled Agents, Enrolled Actuaries, and Appraisers before the Internal Revenue Service. Information on this form may be disclosed

to the Department of Justice for civil and criminal litigation.

We may also disclose this information to cities, states and the District of Columbia for use in administering their tax laws and to combat terrorism. Providing false or

fraudulent information on this form may subject you to criminal prosecution and penalties.

30

www.irs.gov Form 656 (Rev. 5-2012)


Form 656

(Rev. May 2012)

Department of the Treasury — Internal Revenue Service

Offer in Compromise

Attach Application Fee and Payment (check or money order) here.

Section 1

Your Contact Information

Your First Name, Middle Initial, Last Name

John J. Doe

If a Joint Offer, Spouse's First Name, Middle Initial, Last Name

IRS Received Date

Your Physical Home Address (Street, City, State, ZIP Code)

123 Main Street Anywhere, NJ 08666

Mailing Address (if different from above or Post Office Box number)

P.O. Box 123, Anywhere, NJ 08666

Business Name

Your Business Address (Street, City, State, ZIP Code)

Social Security Number (SSN)

(Primary)

(Secondary)

Employer Identification Number

(EIN)

(EIN not included in offer)

123-45-6789

Section 2

Tax Periods

To: Commissioner of Internal Revenue Service

In the following agreement, the pronoun "we" may be assumed in place of "I" when there are joint liabilities and both parties

are signing this agreement.

I submit this offer to compromise the tax liabilities plus any interest, penalties, additions to tax, and additional amounts required by law for the tax type

and period(s) marked below:

1040 Income Tax-Year(s)

1120 Income Tax-Year(s)

941 Employer's Quarterly Federal Tax Return - Quarterly period(s)

940 Employer's Annual Federal Unemployment (FUTA) Tax Return - Year(s)

X

Trust Fund Recovery Penalty as a responsible person of (enter corporation name)

for failure to pay withholding and Federal Insurance Contributions Act taxes (Social Security taxes), for period(s) ending

See Attachment to Form 656

J.J. Smith, Inc.

Other Federal Tax(es) [specify type(s) and period(s)]

Note: If you need more space, use attachment and title it "Attachment to Form 656 dated

attachment.

8/22/2012

." Make sure to sign and date the

Section 3

Reason for Offer

X

Doubt as to Collectibility - I have insufficient assets and income to pay the full amount.

Exceptional Circumstances (Effective Tax Administration) - I owe this amount and have sufficient assets to pay the full amount, but due to my

exceptional circumstances, requiring full payment would cause an economic hardship or would be unfair and inequitable. I am submitting a written

narrative explaining my circumstances.

ISA

31

www.irs.gov

Form 656 (Rev. 5-2012)


E. MARTIN DAVIDOFF

ATTORNEY AT LAW

353 Georges Road - Suite K

P.O. Box 835

Dayton, NJ 08810-0835

EMD@taxattorneycpa.com

_____________

TEL: 732-274-1600

FAX: 732-274-1666

VIA CERTIFIED MAIL # 7008-1234-0000-4567-8888

Brookhaven Internal Revenue Service

Center COIC Unit

P. O. Box 9007

Holtsville, New York 11742-9007

Dear COIC Unit:

September 13, 2012

Re: John Doe & Jane Doe

SS#: 123-45-6789 & 987-65-4321

Forms 1040: 2006, 2007, 2008 & 2009

Trust Fund Recovery / J.J. Smith Inc.

Offer in Compromise

With respect to the above-named Taxpayer, you will find the following enclosed:

1. Form 2848, “Power of Attorney and Declaration of Representation”.

2. A signed Form 656, “Offer in Compromise” for Mr. John Doe.

3. A signed Form 656, “Offer in Compromise” for both Mr. John Doe and Mrs. Jane Doe.

4. In support of Forms 656, you will find Form 433-A (OIC) “Collection Information Statement for Wage Earners and

Self-Employed Individuals.”

5. You will also find back-up information to Form 433-A (OIC). We have included a Table of Contents to the back-up

information for your convenience in locating the documents in support of Form 433-A (OIC).

6. Check # 1111 payable to the United States Treasury, in the amount of $150 representing the application fee for Mr.

John Doe.

7. Check # 1112 payable to the United States Treasury, in the amount of $150 representing the application fee for Mr.

John Doe and Mrs. Jane Doe.

8. Check # 1113 payable to the United States Treasury, in the amount of $200 representing the 20% deposit due on Mr.

John Doe’s offer as outlined in our package.

9. Check # 1113 payable to the United States Treasury, in the amount of $4,020 representing the 20% deposit due on Mr.

John Doe and Mrs. Jane Doe’s offer as outlined in our package.

After you have had the opportunity to review the enclosed materials, PLEASE CALL ME to discuss this case.

Very truly yours,

E. Martin Davidoff

EMD:saf

Encls.

cc: Mr. John Doe & Mrs. Jane Doe (via first class mail w/ encls.)

32


Jim and Kelly Smith

SS#: 123-45-6789 (Jim)

SS#: 987-65-4321 (Kelly)

Form 433-A (OIC)

TAB #

Table of Contents

1 Rent

Primary Residence: 123 Anywhere, NY 14008 USA

-Copies of Rent Payments to Bob Jones:

06/2012, 07/2012, 08/2012,

-Copy of lease agreement

2 Gas: New Jersey Natural Gas

- 12 month summary of bills

- Account Billing History, obtained from New Jersey Natural Gas

- Bill dated 08/31/2012

- Copy of payment dated 09/05/2012, that paid the June, July, and August 2012 bill

3 Electric: Atlantic City Electric

- 9 month summary of bills

- Bill dated 08/28/2012

- Copies of payments:

o 06/25/2012 and 09/04/2012 (for July & August)

4 Water

- Summary of 3 Quarterly Payments

- Copies of payments:

o 03/08/2012, 05/07/2012, 07/31/2012

5 Cable & Internet: Comcast Cable

- 7 month summary of bills

o Bill dated 08/15/2012

- Copies of payments:

o 06/05/2012, 06/18/2012, 07/23/2012, 09/04/2012

6 Telephone: Sprint

- 12 month summary of bills

- Copies of payments:

o 07/02/2012, 07/30/2012, 09/04/2012

7 Vehicle: 2009 Nissan Rogue

- Bill dated 08/19/2012

- Copy of vehicle registration card

- Copies of payments:

o 06/04/2012, 06/26/2012, 07/30/2012

33


Jim and Kelly Smith

SS#: 123-45-6789 (Jim)

SS#: 987-65-4321 (Kelly)

Form 433-A (OIC)

Table of Contents (Continued)

8 Health Insurance

Summary of Payments for Household Members

- Invoice Dated 07/17/2012 (Sandy-daughter)

- Copies of payments (Kelly):

o 06/01/2012, 07/02/2012, 08/01/2012

- Invoice Dated 07/02/2012 (Jim)

- Copies of payments (Jim):

o 06/15/2012, 07/16/2012, 08/15/2012

- Horizon Quote for Kelly based on age and preexisting condition

9 Out of Pocket Medical Expenses (Other than Speech Therapy)

- Summary of Six Months of Medical Expenses (February July)

- Support for Medical Expenses

10 Speech Therapy for Dependent Daughter (Sandy)

- Calculation of Monthly Cost for Speech Therapy

- Invoice Dated 07/31/2012

- Copy of payment dated 08/10/2012

11 Child Care

- End of Year Statement (08/25/2011 09/24/2012)

- Invoice for August 2012

- Copies of payments:

o 06/24/2012, 07/27/2012, 08/24/2012

12 Accident Insurance: Combined Insurance Company of America

- Anniversary Statement Dated 11/12/2011

- Copies of payments:

o 06/01/2012, 07/03/2012, 08/01/2012

13 Bank Statements

- TD Bank, Checking Account# XXX-9999, for the periods:

o 05/18/2012 through 06/17/2012

o 06/18/2012 through 07/17/2012

o 07/18/2012 through 08/17/2012

- TD Bank, Checking Account# XXX-8888, for the periods:

o 05/18/2012 through 06/17/2012

o 06/18/2012 through 07/17/2012

o 07/18/2012 through 08/17/2012

14 Copy of Tax Returns

- 2011 Form 1040

- 2010 Form 1040

- 2009 Form 1040

34


Offer In Compromise Package Logistics Checklist

1. Will there be more than one OIC submitted (i.e. Joint vs. Single)? For a married couple,

there could be as many of 3 for them personally, plus corporate ones.

2. Send out blank signature pages to the client early. Have your client sign at least 3 for each

OIC to be submitted. This allows for errors or amendments in typing on the last page and

saves time trying to have the client come into the office for signatures or sending overnight

packages.

3. Similarly for 433-A (OIC) pages ; get multiple blank signature pages to the client to sign

early.

4. Get checks for payment early. Make sure you create flexibility by either obtaining several

blank checks or funds put into your client trust fund account EARLY. At least one check

for the $150 filing fee and another for the 20% deposit is needed for EACH OIC.

5. Talk with your client regarding extenuating circumstances which can be used to fill in

Section 3 of Form 656 and have them write a description of issues or gather medical

testaments from their doctor.

6. Client Authorization: At a minimum, an email is needed from the client confirming that

they have reviewed the package, that it is accurate, and authorizing you to submit it to the

IRS. Although the form no longer requires it, you may consider having your clients initial

each page.

7. Is the client current with estimated taxes?

NOTE: Check This List

at the BEGINNING

of the Process!!!!

35


National Standards: Food, Clothing and

Other Items

Disclaimer: IRS Collection Financial Standards are intended for use in calculating repayment of

delinquent taxes. These Standards are effective on April 2, 2012 for purposes of federal tax

administration only. Expense information for use in bankruptcy calculations can be found on the

website for the U.S. Trustee Program.

Download the national standards for food, clothing and other items in PDF format for printing. Please

note that the standard amounts change, so if you elect to print them, check back periodically to

assure you have the latest version.

National Standards have been established for five necessary expenses: food, housekeeping

supplies, apparel and services, personal care products and services, and miscellaneous.

The standards are derived from the Bureau of Labor Statistics (BLS) Consumer Expenditure Survey

(CES) and defined as follows:

Food includes food at home and food away from home. Food at home refers to the total

expenditures for food from grocery stores or other food stores. It excludes the purchase of nonfood

items. Food away from home includes all meals and snacks, including tips, at fast-food, take-out,

delivery and full-service restaurants, etc.

Housekeeping supplies includes laundry and cleaning supplies, stationery supplies, postage,

delivery services, miscellaneous household products, and lawn and garden supplies.

Apparel and services includes clothing, footwear, material, patterns and notions for making clothes,

alterations and repairs, clothing rental, clothing storage, dry cleaning and sent-out laundry, watches,

jewelry and repairs to watches and jewelry.

Personal care products and services includes products for the hair, oral hygiene products, shaving

needs, cosmetics and bath products, electric personal care appliances, and other personal care

products.

The miscellaneous allowance is for expenses taxpayers may incur that are not included in any other

allowable living expense items, or for any portion of expenses that exceed the Collection Financial

Standards and are not allowed under a deviation. Taxpayers can use the miscellaneous allowance

to pay for expenses that exceed the standards, or for other expenses such as credit card payments,

bank fees and charges, reading material and school supplies.

Taxpayers are allowed the total National Standards amount monthly for their family size, without

questioning the amounts they actually spend. If the amount claimed is more than the total allowed by

the National Standards for food, housekeeping supplies, apparel and services, and personal care

products and services, the taxpayer must provide documentation to substantiate those expenses are

necessary living expenses. Deviations from the standard amount are not allowed for miscellaneous

expenses. Generally, the total number of persons allowed for National Standards should be the

same as those allowed as exemptions on the taxpayer’s most recent year income tax return.

Expense

One

Person

Two

Persons

Three

Persons

Four

Persons

Food $301 $537 $639 $765

Housekeeping supplies $30 $66 $65 $74

Apparel & services $86 $162 $209 $244

Personal care products &

services

$32 $55 $63 $67

Miscellaneous $116 $209 $251 $300

Total $565 $1,029 $1,227 $1,450

More than four persons

Additional Persons Amount

For each additional person, add to four-person total allowance: $281

References/Related Topics

Collection Financial Standards

Local Standards: Transportation

Page Last Reviewed or Updated: 01-Aug-2012

Local Standards: Housing and Utilities

National Standards: Out-of-Pocket Health Care

36

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/National-

Standards:-Food,-Clothing-and-Other-Items


New Jersey - Local Standards: Housing and Utilities

Disclaimer: IRS Collection Financial Standards are intended for use in calculating repayment of delinquent taxes.

These Standards are effective on April 2, 2012 for purposes of federal tax administration only. Expense information for

use in bankruptcy calculations can be found on the website for the U.S. Trustee Program.

The housing and utilities standards are derived from U.S. Census Bureau, American Community Survey and Bureau of

Labor Statistics data, and are provided by state down to the county level. The standard for a particular county and

family size includes both housing and utilities allowed for a taxpayer's primary place of residence. Generally, the total

number of persons allowed for determining family size should be the same as those allowed as exemptions on the

taxpayer's most recent year income tax return.

Housing and utilities standards include mortgage or rent, property taxes, interest, insurance, maintenance, repairs, gas,

electric, water, heating oil, garbage collection, residential telephone service, cell phone service, cable television, and

internet service. The tables include five categories for one, two, three, four, and five or more persons in a household.

The taxpayer is allowed the standard amount, or the amount actually spent on housing and utilities, whichever is less. If

the amount claimed is more than the total allowed by the housing and utilities standards, the taxpayer must provide

documentation to substantiate those expenses are necessary living expenses.

Maximum Monthly Allowance

County

Housing and

Utilities for a

Family of 1

Housing and

Utilities for a

Family of 2

Housing and

Utilities for a

Family of 3

Housing and

Utilities for a

Family of 4

Housing and

Utilities for a

Family of 5 or

more

Atlantic

County

Bergen

County

Burlington

County

Camden

County

Cape May

County

Cumberland

County

1,786 2,098 2,211 2,465 2,505

2,658 3,122 3,290 3,668 3,727

1,948 2,288 2,411 2,688 2,731

1,786 2,098 2,211 2,465 2,505

1,763 2,071 2,183 2,434 2,473

1,530 1,796 1,893 2,111 2,145

Essex County 2,498 2,934 3,092 3,447 3,503

Gloucester

County

Hudson

County

Hunterdon

County

Mercer

County

Middlesex

County

Monmouth

County

1,838 2,159 2,275 2,537 2,578

2,386 2,802 2,953 3,293 3,346

2,570 3,018 3,180 3,546 3,603

2,053 2,412 2,541 2,833

2,879

2,180 2,560 2,698 3,008

3,056

2,367 2,780 2,929 3,266 3,318

Morris County 2,570 3,018 3,180 3,546 3,603

Ocean County 1,897 2,229 2,348 2,618 2,661

Passaic

County

2,396 2,814 2,965 3,306 3,360

Salem County 1,628 1,912 2,015 2,247 2,283

Somerset

County

Sussex

County

2,467 2,897 3,053 3,404 3,459

2,121 2,491 2,625 2,926 2,974

Union County 2,421 2,844 2,997 3,341 3,395

Warren

County

2,050 2,408 2,537 2,829 2,874

References/Related Topics

Collection Financial Standards

Local Standards: Transportation

Local Standards: Housing and Utilities

Last updated August 1, 2012

37


Local Standards: Transportation

Disclaimer: IRS Collection Financial Standards are intended for use in calculating repayment of delinquent taxes.

These Standards are effective on April 2, 2012 for purposes of federal tax administration only. Expense information for

use in bankruptcy calculations can be found on the website for the U.S. Trustee Program.

Download the transportation standards in PDF format for printing. Please note that the standard amounts change, so if

you elect to print them, check back periodically to assure you have the latest version.

The transportation standards for taxpayers with a vehicle consist of two parts: nationwide figures for monthly loan or

lease payments referred to as ownership costs, and additional amounts for monthly operating costs. The operating

costs include maintenance, repairs, insurance, fuel, registrations, licenses, inspections, parking and tolls (These

standard amounts do not include personal property taxes).

Ownership Costs

The ownership costs, shown in the table below, provide the monthly allowances for the lease or purchase of up to two

automobiles. A single taxpayer is normally allowed one automobile. For each automobile, taxpayers will be allowed the

lesser of:

a.

b.

the monthly payment on the lease or car loan, or

the ownership costs shown in the table below.

If a taxpayer has no lease or car loan payment, the amount allowed for Ownership Costs will be $0.

Operating Costs

In addition to Ownership Costs, a taxpayer is allowed Operating Costs, by regional and metropolitan area, as shown in

the table below. For each automobile, taxpayers will be allowed the lesser of:

a.

b.

the amount actually spent monthly for operating costs, or

the operating costs shown in the table below.

Public Transportation

There is a single nationwide allowance for public transportation based on Bureau of Labor Statistics expenditure data

for mass transit fares for a train, bus, taxi, ferry, etc. Taxpayers with no vehicle are allowed the standard amount

monthly, per household, without questioning the amount actually spent.

If a taxpayer owns a vehicle and uses public transportation, expenses may be allowed for both, provided they are

needed for the health and welfare of the taxpayer or family, or for the production of income. However, the expenses

allowed would be actual expenses incurred for ownership costs, operating costs and public transportation, or the

standard amounts, whichever is less.

If the amount claimed for Ownership Costs, Operating Costs or Public Transportation is more than the total allowed by

the transportation standards, the taxpayer must provide documentation to substantiate those expenses are necessary

living expenses.

Public Transportation

National $182

Ownership Costs

One Car

Two Cars

National $517 $1034

Operating Costs

One Car

Two Cars

Northeast Region $278 $556

Boston $277 $554

New York $342

$684

Philadelphia $299 $598

Midwest Region $212 $424

Chicago $262 $524

Cleveland $226 $452

Detroit $295 $590

Minneapolis-St. Paul $216 $432

South Region $244 $488

Atlanta $256 $512

Baltimore $250 $500

38

Dallas-Ft. Worth $277 $554


One Car Two Cars

Houston $312 $624

Miami $346 $692

Washington, D.C. $270 $540

West Region $236 $472

Los Angeles $295 $590

Phoenix $291 $582

San Diego $301 $602

San Francisco $306 $612

Seattle $192 $384

For Use with Allowable Transportation Table

The data for the Operating Costs section of the Transportation Standards are provided by Census Region and

Metropolitan Statistical Area (MSA). The following table lists the states that comprise each Census Region. Once the

taxpayer’s Census Region has been ascertained, to determine if an MSA standard is applicable, use the definitions

below to see if the taxpayer lives within an MSA (MSAs are defined by county and city, where applicable). If the

taxpayer does not reside in an MSA, use the regional standard.

MSA Definitions by Census Region

Northeast Census Region: Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut,

Pennsylvania, New York, New Jersey

MSA

Boston

COUNTIES

in MA: Bristol, Essex, Hampden, Middlesex, Norfolk, Plymouth, Suffolk, Worcester

in NH: Hillsborough, Merrimack, Rockingham, Strafford

in CT: Windham

in ME: York

New York

in NY: Bronx, Dutchess, Kings, Nassau, New York, Orange, Putnam, Queens, Richmond, Rockland,

Suffolk, Westchester

in NJ: Bergen, Essex, Hudson, Hunterdon, Mercer, Middlesex, Monmouth, Morris, Ocean, Passaic,

Somerset, Sussex, Union, Warren

in CT: Fairfield, Litchfield, Middlesex, New Haven

in PA: Pike

Philadelphia

in PA: Bucks, Chester, Delaware, Montgomery, Philadelphia

in NJ: Atlantic, Burlington, Camden, Cape May, Cumberland, Gloucester, Salem

in DE: New Castle

in MD: Cecil

Midwest Census Region: North Dakota, South Dakota, Nebraska, Kansas, Missouri, Illinois, Indiana, Ohio, Michigan,

Wisconsin, Minnesota, Iowa

Chicago

MSA

COUNTIES (unless otherwise specified)

in IL: Cook, DeKalb, DuPage, Grundy, Kane, Kankakee, Kendall, Lake, McHenry, Will

in IN: Lake, Porter

in WI: Kenosha

Cleveland

Detroit

Minneapolis-St.

Paul

in OH: Ashtabula, Cuyahoga, Geauga, Lake, Lorain, Medina, Portage, Summit

in MI: Genesee, Lapeer, Lenawee, Livingston, Macomb, Monroe, Oakland, St. Clair,

Washtenaw, Wayne

in MN: Anoka, Carver, Chisago, Dakota, Hennepin, Isanti, Ramsey, Scott, Sherburne,

Washington, Wright

in WI: Pierce, St. Croix

South Census Region: Texas, Oklahoma, Arkansas, Louisiana, Mississippi, Tennessee, Kentucky, West Virginia,

Virginia, Maryland, District of Columbia, Delaware, North Carolina, South Carolina, Georgia, Florida, Alabama

MSA

Atlanta

Baltimore

Dallas-Ft.

Worth

Houston

Miami

COUNTIES (unless otherwise specified)

in GA: Barrow, Bartow, Carroll, Cherokee, Clayton, Cobb, Coweta, DeKalb, Douglas, Fayette, Forsyth,

Fulton, Gwinnett, Henry, Newton, Paulding, Pickens, Rockdale, Spalding, Walton

in MD: Anne Arundel, Baltimore, Carroll, Harford, Howard, Queen Anne’s, Baltimore city

in TX: Collin, Dallas, Denton, Ellis, Henderson, Hood, Hunt, Johnson, Kaufman, Parker, Rockwall,

Tarrant

in TX: Brazoria, Chambers, Fort Bend, Galveston, Harris, Liberty, Montgomery, Waller

in FL: Broward, Miami-Dade

39Last

Revised: August 1, 2012


National Standards: Out-of-Pocket Health Care

Disclaimer: IRS Collection Financial Standards are intended for use in calculating repayment of delinquent taxes.

These Standards are effective on April 2, 2012 for purposes of federal tax administration only. Expense information for

use in bankruptcy calculations can be found on the website for the U.S. Trustee Program.

Download the out-of-pocket health care standards in PDF format for printing. Please note that the standard amounts

change, so if you elect to print them, check back periodically to assure you have the latest version.

The table for health care expenses, based on Medical Expenditure Panel Survey data, has been established for

minimum allowances for out-of-pocket health care expenses.

Out-of-pocket health care expenses include medical services, prescription drugs, and medical supplies (e.g.

eyeglasses, contact lenses, etc.). Elective procedures such as plastic surgery or elective dental work are generally not

allowed.

Taxpayers and their dependents are allowed the standard amount monthly on a per person basis, without questioning

the amounts they actually spend. If the amount claimed is more than the total allowed by the health care standards,

the taxpayer must provide documentation to substantiate those expenses are necessary living expenses. Generally,

the number of persons allowed should be the same as those allowed as exemptions on the taxpayer’s most recent

year income tax return.

The out-of-pocket health care standard amount is allowed in addition to the amount taxpayers pay for health insurance.

Out-of-Pocket Costs

Under 65 $60

65 and Older $144

References/Related Topics

Collection Financial Standards

Local Standards: Transportation

Local Standards: Housing and Utilities

National Standards: Food, Clothing and Other Items

Page Last Reviewed or Updated: August 3, 2012

http://www.irs.gov/Businesses/Small-Businesses-&-SelfEmployed/

National-Standards:--Out-of-Pocket-Health-Care

40


Print Email Reports Export Reports

This data set was prepared on 06/30/2009 as electronic file number 68706342 .

204 SANDFORD

NEW BRUNSWICK,NJ 08901

Owner: KEY MANAGEMENT CO County: MIDDLESEX, NJ

Value $313,000 Confidence 46

Highest Reasonable $349,000

Lowest Reasonable $277,000

Forecasted Standard

Deviation

20

This property is a SFR

Success - Valuation Successful.

Reported Property Information

Sale Date 07/01/1987 APN

13-00238-

0000-00020

Sale Price $171,000 Census Tract

Sale Code Full Year Built

Loan Amount Living Area (sf)

Prior Sale Date 12/1977 Lot Area (sf) 2,700

Prior Sale Price $40,500 Total Rooms

Prior Sale Code Undefined Bedrooms

Assessed Date 2009 Baths

Assessor's Value $135,400 Stories 2

Assessor's Land Value $23,400 A/C

Assessor's Improvement Value Pool

Neighborhood Sales for

204 SANDFORD

NEW BRUNSWICK,NJ 08901

The following properties are recently reported sales found in the immediate vicinity of the subject property.

These properties, and others, are believed to be full value transfers or may represent an estimate of sale.

Sale 1 - 228 POWERS, NEW BRUNSWICK NJ 08901 (Radius: 0.00 miles)

Sale Date 10/01/2008 APN Assessed $135,900

Sale Price $275,000 Owner A/C

Loan Amount Year Built Pool

Prior Sale Date Rooms / / Fireplace

Prior Sale Price Living Area (sf) 2,536 Parking

- - Lot Area (sf) 2,500 Stories 2

41


L:\EMD\433Case11.123 08/16/2012

Harris & Ronnnie Masters

Form 433-A (OIC)

Sample Rider

Section 3- Real Estate

1st 2nd 1st Mortgage 2nd Mortgage

Property Location Lendor Year Purchase Current Mortgage Mortgage Amount of Monthly Monthly

Description Full Address Full Address Purchased Price FMV Balance Balance Equity Payment Payment

Primary Residence 7 Mickey Mantle Way See Below 2005 525,000 475,000.00 (333,783.73) (112,500.00) 28,716.27 2,648.76 286.27

Spavinaw, OK

City Residence 16 Whitey Ford Drive See Below 2003 139,500 199,000.00 (179,190.44) 19,809.56 1,504.91

Astoria, NY

Beach House 1 Bobby Richardson St. See Below 1999 125,000 140,000.00 * (76,313.00) ** 63,687.00 793.00

(One-Half Ownership) Sumter, South Carolina

NOTE: FMV TO BE ADJUSTED FOR 20% QUICK SALE VALUE

814,000.00 (589,287.17) (112,500.00) 112,212.83 4,946.67 286.27

*NOTE: Current FMV represents Taxpayers' 50% interest in property.

**NOTE: Taxpayer is responsibile for 62.414% of mortgage balance based upon a 2003

refinancing of $145,000 from which the Taxpayer took $36,000 ($34,000 cash and $2,

000 cost of financing).

Mortgage Holders:

47 Steepleview Drive

4 Maplewood

Road 62 Stockton Avenue

First Mortgage First Mortgage First Mortgage

Wells Fargo Home Mortgage Wells Fargo Home Mortgage Chase

P.O. Box 11701 P.O. Box 11701 P.O. Box 78148

Newark, NJ 07101-4701 Newark, NJ 07101-4701 Phoenix, AZ 85062-8148

866-234-8271 866-234-8271 800-848-9136

Second Mortgage Second Mortgage

JP Morgan Chase PNC Bank

1111 Polaris Parkway (Formerly National City)

West Chester, PA 19382 P.O. Box 856177

Louisville, KY 40285

(877) 762-9122

42


Internal Revenue Manual - 5.8.5 Financial Analysis

Page 1 of 3

5.8.5.18 (10-22-2010)

Future Income

1. Future income is defined as an estimate of the taxpayer's ability to pay based on an analysis of gross income, less necessary living expenses,

expenses, for a specific number of months into the future. See IRM 5.8.5.23(2) table for calculation.

2. As a general rule, the taxpayer’s current income should be used in the analysis of future ability to pay.

Note:

This may include situations where the taxpayer’s income is recently reduced based on a change in occupation or employment status.

3. Consideration should be given to the taxpayer's overall general situation including such facts as age, health, marital status, number and age

of dependents, level of education or occupational training, and work experience.

4. Situations that may warrant placing a different value on future income than current or past income indicates are discussed in the table below.

Additionally, securing a future income collateral agreement based on the taxpayer’s earnings potential may be appropriate and are discussed

in more detail in IRM 5.8.5.19 and IRM 5.8.6, Collateral Agreements.

If… Then…

Income will increase or decrease or

current necessary expenses will

increase or decrease

A taxpayer is temporarily or recently

unemployed or underemployed

Adjust the amount or number of payments to what is expected during the appropriate number of

months.

Use the level of income expected if the taxpayer were fully employed and if the potential for

employment is apparent. Each case should be judged on its own merit, including consideration of

special circumstances or ETA issues.

A taxpayer is unemployed and is not

expected to return to their previous

occupation or previous level of

earnings

Example:

Unemployed The taxpayer is a construction worker who currently is not employed due to lack of

work during the winter months. Since this loss of employment during the winter is normal for the

taxpayer, use of the taxpayer’s previous annual income or you may income averaging to accurately

determine the taxpayer’s income.

Example:

Underemployed The taxpayer is a teacher and is currently employed at a lesser paying job, yet will

begin or return to work as a teacher when the school year begins in the fall, the taxpayer is considered

to be currently underemployed. Use the anticipated income once the taxpayer is fully employed.

Contact the taxpayer to discuss the expected future level of income. When considering future income,

also allow anticipated increases in necessary living expenses and/or applicable taxes.

Note:

Each case should be judged on its own merit, including consideration of special circumstances or ETA

issues.

A taxpayer is long-term unemployed Do not income average. The taxpayer’s current income should be used in the future income

calculation. If there is a verified expectation the taxpayer will be securing employment then the use of

anticipated future income may be appropriate. Anticipated future income should not be used in

situations where the future employment is uncertain.

Example:

A taxpayer is long-term

underemployed

Taxpayer has been unemployed for over one year. There are currently no employment opportunities

for the taxpayer and the household is living on one income. Use of the taxpayer’s current income with

a future income collateral agreement is appropriate.

Do not income average. Use the taxpayer’s current income.

Example:

A taxpayer has an irregular

employment history or fluctuating

income

The taxpayer was previously employed in a manufacturer plant making $75,000 per year. There are

currently no opportunities for the taxpayer to secure employment making the same rate of pay as their

prior job. Their income is now $25,000 per year with no anticipated increase. Use the current income

only.

Average earnings over the three prior years. The use of a time period other than three years should be

the exception and only when specific circumstances are present.

Example:

http://www.irs.gov/irm/part5/irm_05-008-005.html

43

The taxpayer is a stock broker whose income in 2007 was $150,000 and income in 2008 was $25,000.


Internal Revenue Manual - 5.8.5 Financial Analysis

Page 2 of 3

A taxpayer is in poor health and their

ability to continue working is

questionable

A taxpayer is close to retirement and

has indicated they will be retiring

In this case, you should consider income averaging the prior three years or secure a future income

collateral agreement if the offer is accepted.

Note:

This practice does not apply to wage earners. Wage earners should be based on current income

unless the taxpayer has unique circumstances.

Reduce the number of payments to the appropriate number of months it is anticipated the taxpayer will

continue working. Consider special circumstance situations when making any adjustments.

Example:

Taxpayer has a serious health issue and it is anticipated they will be unable to work after six months.

Use the taxpayer’s current income for six months then reduce their income to the anticipated amount

they will be receiving after they are unable to work.

If the taxpayer can substantiate retirement is imminent, adjust the taxpayer’s future earnings and

expenses accordingly. If it cannot be substantiated, base the calculation on current earnings. At this

point, it may be appropriate to discuss other options available to the taxpayer, for example an

installment agreement.

Example:

(1) The taxpayer is 65 years of age and has indicated they will retire at the age of 66. They provide

copies of documents that have been submitted to their employer discussing their retirement date. Use

the taxpayer’s current income until the taxpayer’s anticipated retirement date, then adjust the

taxpayer’s income to reflect the amount expected in retirement.

Example:

A taxpayer will file a petition for

liquidating bankruptcy

(2) The taxpayer is 62 years of age, the taxpayer is in good health, and their income has remained

stable for the past three years. The taxpayer states they would like to retire at age 65. Use the

taxpayer’s current income and if the RCP exceeds the offer amount, discuss the option of securing an

installment agreement until the taxpayer actually retires, at which time an offer may be appropriate.

Consider reducing the value of future income. The total value of future income should not be reduced

to an amount less than what could be paid toward non-dischargeable periods, or what could be

recovered through bankruptcy, whichever is greater. When considering a reduction in future income,

also consider the intangible value to the taxpayer of avoiding bankruptcy. Refer to IRM 5.8.10.2.

5. Judgment should be used in determining the appropriate time to apply income averaging on a case by case basis. All circumstances of the

taxpayer should be considered when determining the appropriate application of income averaging, including special circumstances and ETA

considerations. Below are some examples of when income averaging may or may not be appropriate.

Example:

(1) Taxpayer’s spouse has not worked for over two and one-half years and has no expectations of returning to work. Do not average income

for the spouse's past employment.

Example:

(2) Taxpayer has been unemployed for over one year and provided proof that Social Security Disability is the sole source of income. Do not

apply income averaging in this case but use current income to determine the taxpayer’s future ability to pay.

Example:

(3) The taxpayer was incarcerated and unable to work for the past four years and provided proof that a relative is paying for all expenses,

including child support payments. The taxpayer has no skills or promise of work in the near future but is planning on attending trade school to

improve his chances of getting a job. Do not include income prior to the incarceration. In this case, since the taxpayer has no skills or

promise of employment, their future income value may be determined to be zero. Consideration should be given whether it would be in the

best interest of the government to accept the offer or reject the offer in favor of other case resolutions.

Example:

(4) The taxpayer recently began working after several months of unemployment. Use the most recent three months pay statements to

determine future income. Since the taxpayer is a wage earner, the use of income averaging over the prior three years of income is not

appropriate.

6. In situations where the taxpayer’s income does not appear to meet their stated living expenses the difference should not be included as

additional income to the taxpayer, unless there are clear indications additional income not included on the collection information statement is

being received and will continue to be received by the taxpayer. Discussion with the taxpayer/POA and a review of documents submitted by

the taxpayer must take place to determine the appropriateness of including an additional amount in the calculation of future income.

Verification of the source of unexplained bank deposits or statements from the source of gifts may be required to correctly determine the

http://www.irs.gov/irm/part5/irm_05-008-005.html

44


Internal Revenue Manual - 5.8.5 Financial Analysis

Page 3 of 3

taxpayer’s current income. Telephone contact is recommended to expedite the case processing.

Example:

(1) The taxpayer has been receiving gifts from their parents to meet current living expenses for the past six months. The taxpayer has no

guaranteed right to the funds in the future and the amount does not appear to be based on the transfer of assets to the parents. The gift

amount should not be included as income.

Example:

(2) The taxpayer has been receiving an amount each month that only began recently, which they state is a gift from a friend. Further research

has determined the taxpayer is in business with the friend and the amount is from their business. This amount should be included as income

to the taxpayer. Additionally, consideration should be given to referring the taxpayer and the business income tax return to Examination.

Example:

(3) The taxpayer had gambling winnings over a period of time, but is not consistent. Do not include those winnings as additional income on

the IET. This does not apply to professional gamblers.

Example:

(4) The collection information statement (CIS) submitted by the taxpayer included $3.000.00 of monthly income, which is verified by

paystubs. The CIS submitted by the taxpayer includes $4,000.00 of expenses. An additional $1,000.00 should not be added to the taxpayer’s

income based solely on the fact it appears the taxpayer has been meeting the living expenses included on the CIS. Discussion with the

taxpayer or representative is necessary to clarify the discrepancy prior to including the amount as additional income.

7. Employees need to exercise good judgment when determining future income. The history must be clearly documented and support the

known facts and circumstances of the case and include analysis of the supporting documents. Each case needs to be evaluated on its own

particular set of facts and circumstances. The history must clearly explain the reasoning behind our actions.

5.8.5.19 (10-22-2010)

Future Income Collateral Agreements

1. In some instances, it may be difficult to calculate the taxpayer’s anticipated income. While the use of income averaging is one method

available and should be used when averaging the taxpayer’s income provides a reasonable calculation of the taxpayer’s future earnings

potential, it may also be appropriate to use the taxpayer’s current income and

http://www.irs.gov/irm/part5/irm_05-008-005.html

45


Internal Revenue Manual - 5.8.5 Financial Analysis

Page 1 of 1

5.8.5.20.3 (10-22-2010)

Transportation Expenses

1. Transportation expenses are considered necessary when they are used by taxpayers and their families to provide for their health and welfare

and/or the production of income. Employees investigating OICs are expected to exercise appropriate judgment in determining whether

claimed transportation expenses meet these standards. Expenses that appear excessive should be questioned and, in appropriate situations,

disallowed.

2. The transportation standards consist of nationwide figures for loan or lease payments referred to as ownership costs and additional amounts

for operating costs broken down by Census Region and Metropolitan Statistical Area. Operating costs include maintenance, repairs,

insurance, fuel, registrations, licenses, inspections, parking and tolls.

3. Ownership Expenses Expenses are allowed for purchase or lease of a vehicle. Taxpayers will be allowed the local standard or the amount

actually paid, whichever is less, unless the taxpayer provides documentation to verify and substantiate that the higher expenses are

necessary. Generally, auto loan or lease payments will not continue as allowed expenses after the terms of the loan/lease have been

satisfied. However, depending on the age or condition of the vehicle, the complete disallowance of the ownership expense may result in a

transportation expense allowance that does not adequately meet the necessary expenses of the taxpayer. See paragraph (5) below for the

definition and allowances of an older vehicle.

4. Operating Expenses Allow the full operating costs portion of the local transportation standard, or the amount actually claimed by the

taxpayer, whichever is less, unless the taxpayer provides documentation to verify and substantiate that the higher expenses are necessary.

Substantiation for this allowance is not required.

5. In situations where the taxpayer has a vehicle that is currently over six years old or has reported mileage of 75,000 miles or more, an

additional monthly operating expense of $200 will generally be allowed per vehicle.

Example:

(1) The taxpayer who has a 1998 Chevrolet Cavalier with 50,000 miles, will be allowed the standard of $231 per month plus $200 per month

operating expense (because of the age of the vehicle), for a total operating expense allowance of $431 per month.

Example:

(2) The taxpayer has a 1995 Ford Taurus, with 90,000 reported miles. The vehicle was bought used, and the auto loan will be fully paid in 30

months, at $300 per month. In this situation, the taxpayer will be allowed the ownership expense until the loan is fully paid; i.e., $300 plus the

allowable operating expense of $231 per month, for a total transportation allowance of $531 per month. After the auto loan is "retired" in 30

months, the ownership expense is not applicable; however, at that point, the taxpayer will be allowed a $200 operating expense allowance, in

addition to the standard $231, for a total operating expense allowance of $431 per month.

6. If a taxpayer claims higher amounts of operating costs because he commutes long distances to reach his place of employment, he may be

allowed greater than the standard. The additional operating expense would generally meet the production of income test and therefore be

allowed if the taxpayer provides substantiation.

7. If the amount claimed is more than the total allowed by any of the transportation standards, the taxpayer must provide documentation to

verify and substantiate that those expenses are necessary. All deviations from the transportation standards must be verified, reasonable and

documented in the case history.

http://www.irs.gov/irm/part5/irm_05-008-005.html

46


E. Martin Davidoff Offer in Compromise

Federal & State Tax Summary

John

Jane

2008-2011 $84,000 (joint) $84,000

2012 U.S. $12,000 (joint) $12,000

2012 N.J. $1,500 (joint) $1,500

Trust Funds

IRS $242,000 -----

N.J.

$12,500

-----

Net Realizable Value

John

Jane

Bank Acct $375

Investments $6,218

Retirement $6,277

Life Insurance $12,707

Auto $3,880

Home @ 80% ______ $6,000

Totals $12,707 $22,750

\/

Joint Total $35,457

47


Partially Adjusted R.C.P.

As Is

With New Auto

Monthly Excess $361 $36

12 Times Factor $4,332 $432

Assets/Equity $35,457 $35,457

R.C.P. $39,789 $35,889

Final Adjusted R.C.P.

R.C.P.- New Auto $35,889

Eliminate Equity in Auto ($3,880)

Revised R.C.P. $32,009

Credit Card Payoff ($7,000)

Revised R.C.P. $25,009

Use Life Ins for Fees ($5,000)

Final R.C.P. $20,009

Note: Initial R.C.P. $39,789

48


Form 656 Booklet

Offer in

Compromise

CONTENTS

■ What you need to know.............................

....................................................... 1

■ Paying for your offer....................................

..................................................... 2

■ How to apply ....................................................................................................

3

■ Completing the application package ................................................................ 3

■ Important information .......................................................................................

4

■ Removable Forms - Form 433-A (OIC), Collection Information Statement

for Wage Earners and Self-Employed, Form 433-B (OIC), Collection

Information Statement for Business, Form 656, Offer in Compromise ............ 5

■ Application Checklist......................................................................................

23

IRS contact information

If you have questions regarding qualifications for an offer in compromise, please call our toll-free

number at 1-800-829-1040. You can get forms and publications by calling 1-800-TAX-FORM

(1-800-829-3676), or by visiting your local IRS office or our website at www.irs.gov.

Taxpayer resources

You may also seek assistance from a professional tax assistant at a Low Income Taxpayer Clinic, if

you qualify. These clinics provide help to qualified taxpayers at little or no charge. IRS Publication

4134, Low Income Taxpayer Clinic List, provides information on clinics in your area and is available

through the IRS website at www.irs.gov, by phone at 1-800-TAX-FORM (1-800-829-3676), or at

your local IRS office.

49


WHAT YOU NEED TO KNOW

What is an offer?

An offer in compromise (offer) is an agreement between you (the taxpayer)

and the IRS that settles a tax debt for less than the full amount owed. The offer

program provides eligible taxpayers with a path toward paying off their debt

and getting a “fresh start.” The ultimate goal is a compromise that suits the best

interest of both the taxpayer and the IRS. To be considered, generally you must

make an appropriate offer based on what the IRS considers your true ability to

pay.

Submitting an offer application does not ensure that the IRS will accept your

offer. It begins a process of evaluation and verification by the IRS, taking into

consideration any special circumstances that might affect your ability to pay.

Generally, the IRS will not accept an offer if you can pay your tax debt in full via

an installment agreement or a lump sum.

This booklet will lead you through a series of steps to help you calculate an

appropriate offer based on your assets, income, expenses, and future earning

potential. The application requires you to describe your financial situation in

detail, so before you begin, make sure you have the necessary information and

documentation.

Are you eligible?

Bankruptcy

Before you submit your offer, you must (1) file all tax returns you are legally

required to file, (2) make all required estimated tax payments for the current

year, and (3) make all required federal tax deposits for the current quarter if you

are a business owner with employees.

If you or your business is currently in an open bankruptcy proceeding, you are

not eligible to apply for an offer. Any resolution of your outstanding tax debts

generally must take place within the context of your bankruptcy proceeding.

If you are not sure of your bankruptcy status, contact the Centralized Insolvency

Operation at 1-800-973-0424. Be prepared to provide your bankruptcy case

number and/or Taxpayer Identification Number.

Doubt as to Liability

Other important facts

If you have a legitimate doubt that you owe part or all of the tax debt, you will

need to complete a Form 656-L Offer in Compromise (Doubt as to Liability).

The Form 656-L is not included as part of this package. To submit a Doubt as to

Liability offer, you may request a form by calling the toll free number 1-800-829-

1040, by visiting a local IRS office, or at www.irs.gov.

Penalties and interest will continue to accrue during the offer evaluation

process.

You cannot submit an offer that is only for a tax year or tax period that has not

been assessed.

The law requires the IRS to make certain information from accepted offers available

for public inspection and review. These public inspection files are located in

designated IRS Area Offices.

A Notice of Federal Tax Lien (lien) gives the IRS a legal claim to your property

as security for payment of your tax debt. The IRS may file a Notice of Federal

Tax Lien during the offer investigation. However, unless a jeopardy situation

exists, a request for a Notice of Federal Tax Lien will usually not be made until a

final determination has been made on the offer.

If your business owes trust fund taxes, and responsible individuals may be

held liable for the trust fund portion of the tax, you are not eligible to submit

1

50


an offer unless the trust fund portion of the tax is paid or the Trust Fund

Recovery Penalty determinations have been made on all potentially responsible

individual(s). Trust fund taxes are the money withheld from an employee’s

wages, such as income tax, Social Security, and Medicare taxes.

The IRS will keep any refund, including interest, for tax periods extending

through the calendar year that the IRS accepts the offer. For example, if your

offer is accepted in 2012 and you file your 2012 Form 1040 showing a refund,

IRS will apply your refund to your tax debt.

The IRS may keep any proceeds from a levy served prior to you submitting an

offer. The IRS may levy your assets up to the time that the IRS official signs

and accepts your offer as pending. If your assets are levied after your offer is

pending, immediately contact the IRS person whose name and phone number is

listed on the levy.

If you currently have an approved installment agreement with IRS and are

making installment payments, then you may stop making those installment agreement

payments when you submit an offer. If your offer is returned for any reason,

your installment agreement with IRS will be reinstated with no additional fee.

PAYING FOR YOUR OFFER

Application fee

Offers require a $150 application fee.

EXCEPTION: If you are submitting an individual offer and meet the Low

Income Certification guidelines (see page 2 of Form 656, Offer in Compromise),

you will not be required to send the application fee.

Payment options

Submitting an offer requires the selection of a payment option as well as

sending an initial payment with your application. The amount of the initial

payment and subsequent payments will depend on the total amount of your offer

and which of the following payment options you choose.

Lump Sum Cash: This option requires 20% of the total offer amount to be paid

with the offer and the remaining balance paid in five or fewer payments within 24

months of the date your offer is accepted.

Periodic Payment: This option requires the first payment with the offer and the

remaining balance paid, within 24 months, in accordance with your proposed

offer terms. Under this option, you must continue to make all subsequent

payments while the IRS is evaluating your offer. Failure to make these

payments will cause your offer to be returned.

The length of the payment option you choose may affect the amount of the offer

we will accept. Generally, an offer paid within five months of acceptance will

require a lesser amount. In all cases, your offer amount must be paid within 24

months of the date the offer is accepted. Your offer amount cannot include a

refund we owe you.

If you meet the Low Income Certification guidelines, you will not be

required to send the initial payment, or make the monthly payments during

the evaluation of your offer but you will still need to choose one of the

payment options.

If your offer is returned or not accepted, any required payment(s) made with the

filing of your offer and thereafter, will not be refunded. Your payment(s) will be

applied to your tax debt.

2

51


If you do not have sufficient cash to pay for your offer, you may need to consider

borrowing money from a bank, friends, and/or family. Other options may include

borrowing against or selling other assets. NOTE: If retirement savings from an

IRA or 401k plan are cashed out, there will be future tax liabilities owed as a

result. Contact the IRS or your tax advisor before taking this action.

Future tax obligations

If your offer is accepted, you must continue to file and pay your tax obligations

that become due in the future. If you fail to file and pay any tax obligations that

become due within the five years after your offer is accepted, your offer may

be defaulted. If your offer is defaulted, all compromised tax debts, including

penalties and interest, will be reinstated.

HOW TO APPLY

Application process

The application involves sending:

• Form 656 (Offer in Compromise)

• Completed Form 433-A (OIC), Collection Information Statement for Wages

Earners and Self-Employed Individuals, if applicable

• Completed Form 433-B(OIC), Collection Information Statement for Businesses,

if applicable

• $150 application fee, unless you meet low income certification

• Initial offer payment, unless you meet low income certification

If you and your spouse owe

joint and separate tax debts

If you have joint tax debt(s) with your spouse and also have an individual tax

debt(s), you and your spouse will send in one Form 656 with all of the joint tax

debt(s) and a second Form 656 with your individual tax debt(s), for a total of two

Forms 656.

If you and your spouse have joint tax debt(s) and you are also each responsible

for an individual tax debt(s), you will each need to send in a separate Form 656.

You will complete one Form 656 for yourself listing all your joint and separate

tax debts and your spouse will complete one Form 656 listing all his or her joint

and individual tax debts, for a total of two Forms 656.

If you and your spouse/ex-spouse have a joint tax debt and your spouse/

ex-spouse does not want to submit a Form 656, you on your own may submit a

Form 656 to compromise your responsibility for the joint debt.

Each Form 656 will require the $150 application fee and initial down payment

unless your household meets the Low Income Certification guidelines (See

page 2 of Form 656, Offer in Compromise).

COMPLETING THE APPLICATION PACKAGE

Step 1 Gather your information

To calculate an offer amount, you will need to gather information about your

financial situation, including cash, investments, available credit, assets, income,

and debt.

You will also need to gather information about your average gross monthly

household income and expenses. The entire household includes spouse,

significant other, children, and others that reside in the household. This is

necessary for the IRS to accurately evaluate your offer. In general, the IRS

will not accept expenses for tuition for private schools, college expenses,

charitable contributions, and other unsecured debt payments as part of

the expenses calculation.

3

52


Step 2 Fill out the Form 433-A

(OIC), Collection Information Statement

for Wage Earners and Self-

Employed Individuals

Step 3 Fill out Form 433-B(OIC),

Collection Information Statement

for Businesses

Step 4 Attach required documentation

Fill out the Form 433-A(OIC) if you are an individual wage earner and/or a

self-employed individual. This will be used to calculate an appropriate offer

amount based on your assets, income, expenses, and future earning potential.

You will have the opportunity to provide a written explanation of any special

circumstances that affect your financial situation.

Fill out the Form 433-B(OIC) if your business is a Corporation, Partnership,

Limited Liability Company (LLC) classified as a corporation, single member

LLC, or other multi-owner/multi-member LLC. This will be used to calculate an

appropriate offer amount based on your business assets, income, expenses,

and future earning potential. If you have assets that are used to produce income

(for example, a tow truck used in your business for towing vehicles), you may be

allowed to exclude equity in these assets.

You will need to attach supporting documentation with Form(s) 433-A(OIC)

and 433-B(OIC). A list of the documents required will be found at the end of

each form. Include copies of all required attachments, as needed. Do not send

original documents.

Note: A completed Form 433-A(OIC) and/or Form 433-B(OIC) must be included

with the Form 656 application.

Step 5 Fill out Form 656, Offer in

Compromise

Fill out Form 656. The Form 656 identifies the tax years and type of tax you

would like to compromise. It also identifies your offer amount and the payment

terms.

The Low Income Certification guidelines are included on Form 656. If you are

an individual and meet the guidelines, check the Low Income Certification box in

Section 4, on Form 656.

Step 6 Include initial payment and

$150 application fee

Include a check, cashier’s check, or money order for your initial payment based

on the payment option you selected (20% of offer amount or first month’s installment).

Include a separate check, cashier’s check, or money order for the application

fee ($150).

Make both payments payable to the “United States Treasury.” All payments must

be made in U.S. dollars.

If you meet the Low Income Certification guidelines, the initial payment and

application fee are not required.

Make a copy of your application package and keep it for your records.

Step 7 Mail the application

package

Mail the application package to the appropriate IRS facility. See page 23,

Application Checklist, for details.

IMPORTANT INFORMATION

After you mail your application,

continue to:

File all federal tax returns you are legally required to file.

Make all required federal estimated tax payments and tax deposits that are due

for current taxes, and make all required periodic offer payments.

Reply to IRS requests for additional information within the timeframe specified.

Failure to reply timely to requests for additional information could result in the

return of your offer without appeal rights.

4

53


Form 433-B (OIC)

(Rev. May 2012)

Department of the Treasury — Internal Revenue Service

Collection Information Statement for Businesses

Complete this form if your business is a

Corporation

Partnership

Limited Liability Company (LLC) classified as a corporation

If your business is a sole proprietorship (filing Schedule C), do not use

this form. Instead, complete Form 433-A (OIC) Collection Information

Statement for Wage Earners and Self-Employed Individuals.

Other multi-owner/multi-member LLC

Single member LLC

Include attachments if additional space is needed to respond completely to any question.

Section 1

Business Information

Business Name

Employer Identification Number

Business address (street, city, state, zip code)

County of Business Location

Description of Business and dba or "Trade Name"

Primary Phone

Secondary Phone

Mailing address (if different from above or Post Office Box number)

( )

-

( )

-

Business website address

Fax Number

( )

Federal Contractor

Yes No

-

Total Number of Employees

Does the business outsource its payroll processing and tax return

preparation for a fee?

Yes No If yes, list provider name and address in box below

(Street, City, State, ZIP Code)

Frequency of tax deposits

Average gross monthly payroll

$

Provide information about all partners, officers, LLC members, major shareholders (foreign and domestic), etc., associated with the

business. Include attachments if additional space is needed.

Last Name First Name Title

Percent of Ownership and annual salary Social Security Number

Home address (Street, City, State, ZIP Code)

Primary Phone

Secondary Phone

( )

-

( )

-

Last Name First Name Title

Percent of Ownership and annual salary

Social Security Number

Home address (Street, City, State, ZIP Code)

Primary Phone

Secondary Phone

( )

-

( )

-

Last Name First Name Title

Percent of Ownership and annual salary

Social Security Number

Home address (Street, City, State, ZIP Code)

Primary Phone

Secondary Phone

( )

-

( )

-

Catalog Number 55897B

www.irs.gov

54

Form 433-B (OIC) (Rev. 5-2012)


Section 2

Business Asset Information

Page 2 of 6

Gather the most current statement from banks, lenders on loans, mortgages (including second mortgages), monthly payments, loan balances, and

accountant's depreciation schedules, if applicable. Also, include make/model/year/mileage of vehicles and current value of business assets. To

estimate the current value, you may consult resources like Kelley Blue Book (www.kbb.com), NADA (www.nada.com), local real estate postings of

properties similar to yours, and any other websites or publications that show what the business assets would be worth if you were to sell them. Asset

value is subject to adjustment by IRS. Enter the total amount available for each of the following (if additional space is needed, please include attachments).

If any line item is zero or less, enter "0". Do not enter negative numbers on this form.

Cash Checking Savings Money Market Online Account Stored Value Card

Bank Name

Account Number

Checking Savings Money Market Online Account Stored Value Card

Bank Name

Account Number

Checking Savings Money Market Online Account Stored Value Card

Bank Name

Account Number

(1a) $

(1b) $

(1c) $

Total value of bank accounts from attachment (1d) $

Add lines (1a) through (1d) = (1) $

Investment Account: Stocks Bonds Other

Name of Financial Institution

Account Number

Current Market Value

$ X .8 = $

Investment Account: Stocks Bonds Other

Name of Financial Institution

Account Number

Less Loan Balance

$ = (2a) $

Current Market Value

$ X .8 = $

Less Loan Balance

$ = (2b) $

Total of investment accounts from attachment. [current market value X.8 less loan balance(s)] (2c) $

Add lines (2a) through (2c) = (2) $

Notes receivable

Do you have notes receivable? Yes No

If yes, attach current listing which includes name and amount of note(s) receivable.

Accounts Receivable

Do you have accounts receivable? Yes No

If yes, you may be asked to provide a list of name and amount of the Account(s) Receivable.

Catalog Number 55897B www.irs.gov Form 433-B (OIC) (Rev. 5-2012)

55


Section 2 (Continued)

Business Asset Information

Page 3 of 6

If the business owns more properties, vehicles, or equipment than shown in this form, please list on an attachment.

Real Estate (Buildings, Lots, Commercial Property, etc.)

Property Address (Street Address, City, State, ZIP Code) Property Description Date Purchased

Do not use negative numbers.

County and Country

Current Market Value

Less Loan Balance (Mortgages, etc.)

$ X .8 = $

$ Total Value of Real Estate = (3a) $

Property Address (Street Address, City, State, ZIP Code) Property Description Date Purchased

County and Country

Current Market Value

$ X .8 = $

Less Loan Balance (Mortgages, etc.)

$ Total Value of Real Estate = (3b) $

Total value of property(s) listed from attachment [current market value X .8 less any loan balance(s)] (3c) $

Add lines (3a) through (3c) = (3) $

Business Vehicles (cars, boats, motorcycles, trailers, etc.). If additional space is needed, list on an attachment.

Vehicle Make & Model Year Date Purchased Mileage or Use Hours

Lease Monthly Lease/Loan Amount

Loan $

Current Market Value

$ X .8 = $

$

Less Loan Balance

Total value of vehicle (if the vehicle

is leased, enter 0 as the total value) =

Vehicle Make & Model Year Date Purchased Mileage or Use Hours

(4a) $

Lease Monthly Lease/Loan Amount

Loan $

Current Market Value

$ X .8 = $

$

Less Loan Balance

Total value of vehicle (if the vehicle

is leased, enter 0 as the total value) =

Vehicle Make & Model Year Date Purchased Mileage or Use Hours

(4b) $

Lease Monthly Lease/Loan Amount

Loan $

Current Market Value

Less Loan Balance

Total value of vehicle (if the vehicle

is leased, enter 0 as the total value) =

$ X .8 = $

$

(4c) $

Total value of vehicles listed from attachment [current market value X .8 less any loan balance(s)] (4d) $

Other Business Equipment

Add lines (4a) through (4d) = (4) $

Current Market Value

$ X .8 = $

$

Less Loan Balance

Total value of equipment

(if leased, enter 0 as the total value) = (5a) $

Total value of equipment listed from attachment [current market value X .8 less any loan balance(s)] (5b) $

IRS allowed exemption for professional books and tools of trade - (5c) $ [4,290]

Total value of all business equipment =

Add lines (5a) and (5b) minus line (5c), if number is less than zero, enter zero = (5) $

Do not include the amount on lines with a letter beside the number.

Add lines (1) through (5) and enter the amount in Box 1 =

Box 1 Available Equity in Assets

$

56

Catalog Number 55897B www.irs.gov Form 433-B (OIC) (Rev. 5-2012)


Page 4 of 6

Section 3

Business Income Information

Enter the average gross monthly income of your business. To determine your gross monthly income use the most recent 6-12 months documentation

of commissions, invoices, gross receipts from sales/services, etc.; most recent 6-12 months earnings statements, etc., from every other source of

income (such as rental income, interest and dividends, or subsidies); or you may use a most recent 6-12 months Profit and Loss (P&L) to provide the

information of income and expenses.

Note: If you provide a current profit and loss statement for the information below, enter the total gross monthly income in Box 2 below. Do

not complete lines (6) - (10).

Gross receipts (6) $

Gross rental income (7) $

Interest income (8) $

Dividends (9) $

Other income (Specify on attachment) (10) $

Add lines (6) through (10) and enter the amount in Box 2 =

Box 2 Total Business Income

$

Section 4

Business Expense Information

Enter the average gross monthly expenses for your business using your most recent 6-12 months statements, bills, receipts, or other documents

showing monthly recurring expenses.

Note: If you provide a current profit and loss statement for the information below, enter the total monthly expenses in Box 3 below. Do not

complete lines (11) - (20).

Materials purchased (e.g., items directly related to the production of a product or service) (11) $

Inventory purchased (e.g., goods bought for resale) (12) $

Gross wages and salaries (13) $

Rent (14) $

Supplies (items used to conduct business and used up within one year, e.g., books, office supplies, professional

equipment, etc.) (15) $

Utilities/telephones (16) $

Vehicle costs (gas, oil, repairs, maintenance) (17) $

Insurance (other than life) (18) $

Current taxes (e.g., real estate, state, and local income tax, excise franchise, occupational, personal property,

sales and employer's portion of employment taxes, etc.) (19) $

Other expenses (e.g., secured debt payments. Specify on attachment. Do not include credit card payments) (20) $

Add lines (11) through (20) and enter the amount in Box 3 =

Subtract Box 3 from Box 2 and enter the amount in Box 4 =

If number is less than zero, enter zero.

Box 3 Total Business Expenses

$

Box 4 Remaining Monthly Income

$

Catalog Number 55897B www.irs.gov Form 433-B (OIC) (Rev. 5-2012)

57


Section 5

Calculate Your Minimum Offer Amount

The next steps calculate your minimum offer amount. The amount of time you take to pay your offer in full will affect your minimum offer amount.

Paying over a shorter period of time will result in a smaller minimum offer amount.

If you will pay your offer in 5 months or less, multiply "Remaining Monthly Income" (Box 4) by 12 to get "Future Remaining Income."

Enter the amount from Box 4 here

Box 5 Future Remaining Income

X 12 =

$

$

If you will pay your offer in more than 5 months, multiply "Remaining Monthly Income" (from Box 4) by 24 to get "Future Remaining Income."

Page 5 of 6

$

Enter the amount from Box 4 here

X 24 =

$

Box 6 Future Remaining Income

Determine your minimum offer amount by adding the total available assets from Box 1 to amount in either Box 5 or Box 6.

Enter the amount from Box 1 here* Enter the amount from either Box 5 or Box 6

Do not enter a number less than zero +

=

$

$

$

Offer Amount

Must be more than zero

If you have special circumstances that would hinder you from paying this amount, explain them on Form 656, Offer in Compromise, Page 2,

"Explanation of Circumstances."

*You may exclude any equity in income producing assets shown in Section 2 of this form.

Section 6

Additional information IRS needs to

consider settlement of your tax debt. If this

business is currently in a bankruptcy

proceeding, the business is not eligible to

apply for an offer.

Other Information

Is the business currently in bankruptcy?

Yes No

Has the business ever filed bankruptcy?

Yes No

If yes, provide:

Date Filed (mm/dd/yyyy)

Date Dismissed or Discharged(mm/dd/yyyy)

Petition No.

Location Filed

Does this business have other business affiliations (e.g., subsidiary or parent companies)?

Yes No

If yes, list the Name and Employer Identification Number:

Do any related parties (e.g., partners, officers, employees) owe money to the business?

Yes No

Is the business currently, or in the past, a party to a lawsuit?

Yes No If applicable, date the lawsuit was resolved:

In the past 10 years, has the business transferred any assets for less than their full value?

Yes No If applicable, provide date and type of asset transferred:

Has the business been located outside the U.S. for 6 months or longer in the past 10 years?

Yes No

Does the business have any funds being held in trust by a third party?

Yes No If yes, how much $ Where:

Does the business have any lines of credit?

Yes No If yes, credit limit $ Amount owed $

What property secures the line of credit?

Catalog Number 55897B www.irs.gov Form 433-B (OIC) (Rev. 5-2012)

58


Section 7

Signatures

Page 6 of 6

Under penalties of perjury, I declare that I have examined this offer, including accompanying documents, and to the best of my knowledge it

is true, correct, and complete.

Signature of Taxpayer Title Date (mm/dd/yyyy)

Remember to include all applicable attachments from list below.

A current Profit and Loss statement covering at least the most recent 6-12 month period, if appropriate.

Copies of the most recent statement for each bank, investment, and retirement account.

If an asset is used as collateral on a loan, include copies of the most recent statement from lender(s) on loans, monthly

payments, loan payoffs, and balances.

Copies of the most recent statement of outstanding notes receivable.

Copies of the most recent statements from lenders on loans, mortgages (including second mortgages), monthly payments,

loan payoffs, and balances.

Copies of relevant supporting documentation of the special circumstances described in the "Explain special

circumstances" section on page 2 of Form 656, if applicable.

Attach a Form 2848, Power of Attorney, if you would like your attorney, CPA, or enrolled agent to represent you and you

do not have a current form on file with the IRS.

Privacy Act Statement

The information requested on this Form is covered under Privacy Act and Paperwork Reduction Act Notices which have already been

provided to the taxpayer.

Catalog Number 55897B www.irs.gov Form 433-B (OIC) (Rev. 5-2012)

59


APPLICATION CHECKLIST

Review the entire application and verify that it is complete.

Forms 433-A (OIC),

433-B (OIC), and 656

Supporting documentation

and additional forms

Payment













Did you complete all fields and sign all forms?

Did you make an offer amount that is equal to the offer amount calculated

on the Form 433-A (OIC) or Form 433-B (OIC)? If not, did you describe

the special circumstances that are leading you to offer less than the

minimum in the “Explanation of Circumstances” Section 3 of Form 656,

and did you provide supporting documentation of the special circumstances?

Did you select a payment option on Form 656?

If you want to allow the IRS to discuss your offer with another person, did

you complete the “Third-Party Designee” section on the Form 656?

If someone other than you completed the Form 656, did they sign it?

Did you sign and attach the Form 433-A (OIC) if applicable?

Did you sign and attach the Form 433-B (OIC) if applicable?

Did you sign and attach the Form 656?

Did you include photocopies of all required supporting documentation?

If you want a third party to represent you during the offer process, did you

include a Form 2848 or Form 8821 unless one is already on file?

Did you include a check or money order made payable to the “United

States Treasury” for the initial payment? (Waived if you meet Low Income

Certification guidelines—see Form 656.)

Did you include a separate check or money order made payable to the

“United States Treasury” for the $150 application fee? (Waived if you

meet Low Income Certification guidelines—see Form 656.)

Mail your application package to the

appropriate IRS facility

Mail the Form 656, 433-A (OIC) and/or 433-B (OIC), and related financial

document(s) to the appropriate IRS processing office for your state. You may

wish to send it by Certified Mail so you have a record of the date it was mailed.

If you reside in:

Mail your application to:

AK, AL, AR, AZ, CO, FL, GA, HI, ID, KY, LA, MS, MT, NC,

NM, NV, OK, OR, SC, TN, TX, UT, WA, WI, WY

Memphis IRS Center COIC Unit

P.O. Box 30803, AMC

Memphis, TN 38130-0803

1-866-790-7117

CA, CT, DE, IA, IL, IN, KS, MA, MD, ME, MI, MN, MO, ND, Brookhaven IRS Center COIC Unit

NE, NH, NJ, NY, OH, PA, RI, SD, VT, VA, WV; DC, PR, or P.O. Box 9007

a foreign address Holtsville, NY 11742-9007

1-866-611-6191

23

60


Rules of Engagement

in Dealing With the IRS Part I

In practicing before the IRS regarding collection matters, penalty

abatements and examinations, I have found certain "rules of engagement"

helpful.

1. Never volunteer information, unless it is part of a strategy.

The IRS often asks us a lot of questions. To appear cooperative and

move the case along, it is in our best interest to answer all questions

directly, succinctly and narrowly. Answer the question and offer

nothing more. On occasion, you may wish to strategically provide

additional information to the auditor. For instance, sometimes volunteering

information in one area may move the IRS away from asking

questions in other, more difficult, areas. In other situations you

are trying to provide the IRS employee a human perspective on the

client (i.e. Taxpayer's mom died last December after fighting lung

cancer for five years. Taxpayer would visit her every day!).

2. Never provide materials/documents to the IRS that you have not reviewed

carefully — bank statements, paycheck stubs, credit card statements,

etc.

The documents may contain information that is not helpful to your

client. For example, in the context of determining the amount of an

installment agreement, the IRS requests three months of recent bank

statements to support your disclosures in form 433. In such cases, I

will secure six months of recent bank statements from my client and

I will choose which three months of statements to provide the IRS.

In doing so, I will total up the deposits and make sure they are consistent

with my client's representations of income. In following this

process, you should investigate all significant discrepancies. Familiarize

yourself as to whom the checks have been written to, for what

purposes, and in what amounts. In choosing which three months of

statements you are providing the IRS, you are still meeting their requirements,

but you are doing so on your terms and in good defense

of your client.

3. Assert yourself as appropriate.

One way of doing so is to learn how to say phrases such as:

n "Please give me your manager's name and phone number."

n "What is your authority for that position?"

n "Who is your territory manager?"

n "Are you refusing to provide that information to me?"

From first line staffers at the IRS 800 numbers all the way up

to Appeal Officers, I have found that these phrases enable me to

secure a clear chain of command and a true understanding of the

positions the IRS is taking. On several occasions, the IRS has cited

authority — a case or IRM section — for their position that actually

supported my contention. In such situations the IRS representative

had not carefully read the authority or was simply bluffing, figuring

that I would not take the time to read the cited authority. In one

10 I J U N E /J U LY 2 0 1 0 www.cpamagazine.com

61

When calling the IRS be sure

"

to get the ID number of each

and every IRS employee you

speak with ... at the beginning

of each conversation. "

IRS

Representation

Advisor

E. Martin Davidoff, CPA, Esq.

Appeal involving tens of thousands of dollars, the Appeals Officer

told me that there was a case on point supporting the IRS position. I

presumed he was correct and politely asked him to send me the case

before issuing his report. I followed up after the conference with several

phone calls and faxes. After about a month, the Appeals Officer

simply told me he was finding in my favor, never providing the case

on point nor admitting that there was no such case supporting his

position to begin with!

In the rare case that a Revenue Officer refuses to provide me the

name and telephone number of his/her manager, I will say "Let me

make this very clear. I have asked for the name and phone number

of your manager and you are refusing to provide that information

to me. Do I have that right?" Four out of five times such an assertive

technique when making reasonable requests will secure the information

you are seeking. (Those who work on the "800" numbers

are not allowed to provide their managers phone numbers, but still

should provide the name of their manager when asked. They should

offer to provide a manager callback within 48 hours.)

4. Always ask for the full name and employee ID number.

When calling the IRS be sure to get the ID number of each and every

IRS employee you speak with, as well as the correct spellings of their

names. This should be done at the beginning of each conversation,

before the possibility of the call becoming contentious. By doing so,

you will able to backtrack to that individual if you find that behavior

inappropriate or exemplary. Reporting both kinds of behavior to

IRS management will likely make your feedback more effective and

provide you with a reputation as a practitioner who is both fair and

tenacious in representing your clients.

E. Martin Davidoff, CPA, Esq., is a practicing CPA and tax attorney

in Dayton, NJ. He founded the IRS Tax Liaison Committee of the

American Association of Attorney-CPAs and is the immediate past

president of the AAA-CPA. Contact him at emd@taxattorneycpa.com.


Rules of Engagement

in Dealing With the IRS Part II

In practicing before the IRS regarding collection matters, penalty

abatements, and examinations, I have found certain rules of engagement

helpful. For the first four rules of engagement, see the June/July

edition of this magazine.

Assert yourself as appropriate — postscript

Although this was discussed last month, I had an excellent example

today of how important it is to assert yourself on behalf of your clients.

Several weeks ago, the CFO of a company contacted me. His

company owed more than $200,000 in payroll taxes. This is a company

that has $6 million in annual sales and is likely to be paying

the payroll taxes in full. The IRS revenue officer, Ms. Thomson, had

been eager to interview the company's president, Mr. Mays, regarding

the possible assessment of the trust fund recovery penalty (IRC

§6672). During the preliminary call with the CFO, it was agreed

that I would represent Mr. Mays.

Ms. Thomson had set a deadline of May 24 to have this interview,

and Mr. Mays called me on May 21 to engage me. At this

point, Ms. Thomson knew that Mr. Mays was in the process of securing

representation but insisted that the appointment be kept. It

took until May 25 for me to receive the engagement letter, including

a guarantor signature, the retainer and powers of attorney. The CFO

called Ms. Thomson to tell her that the attorney would be engaged

on May 25. She said that the interview must take place between 9

a.m. and 1 p.m. on May 25, and this would be the taxpayer's final

chance. The implication was clear that she would be taking some sort

of enforcement action, but against whom? The company was making

regular payments, and Mr. Mays had not yet been assessed. This

was nothing but a scare tactic, a threat.

On the morning of May 25, we faxed our power of attorney

to Ms. Thomson and left a message on her office phone. It wasn't

until the afternoon that we learned we were supposed to call her cell

phone. By close of business on May 25, we had not heard from her.

What now? (Even if we had reached her, we were merely going

to request more time.) As of close of business, we had not received a

return call. In my mind, Ms. Thomson was a possible loose cannon,

one who did not take seriously one's right to representation.

So, on May 26, my paralegal, Sarah, called the area director to

get the name of Ms. Thomson's manager. She explained the circumstances

and secured the name of the manager. She then left a message

with the manager stating that a threat had been made and that we

could not contact the revenue officer. By the end of the day, we had

heard back from the area director's staff, the territory manager and

Ms. Thomson. The managers who called us were sympathetic and

made it clear that we did the right thing. I believe that we will get the

additional time we require to determine what questions Ms. Thomson

will be posing to my client (probably those on form 4180) and

what my client's answers to those questions will be.

8 I A U G U S T/ S E P T E M B E R 2 0 1 0 www.cpamagazine.com

Explain to the IRS your

"

justification for the extension

of time or change of payment

amount and that you are

interested in working together to

find a successful resolution ... "

IRS

Representation

Advisor

E. Martin Davidoff, CPA, Esq.

The next day, Ms. Thomson insisted on assessing the Trust

Fund Recovery Penalty without an interview. I spoke with the territory

manager, who agreed that the interview will be conducted on

or before June 18. In the meantime, no assessment would be made

against Mr. Mays. I attribute the reasonable extension of time to my

office's proactive approach in contacting the higher-ups at the IRS.

5. Never lie. Period.

This seems simple. You should never make representations to the

IRS that are misleading or untrue. Better to refuse to answer a question

than to lie. In the long run, the IRS learns which practitioners

are reliable and which are not. Once you fall in the latter category,

your cases will become uphill battles.

At the beginning of most tax examinations, the auditor will ask

if there is any income that was not reported on the tax return. If the

answer is yes, I have limited choices. I can provide the information or

I can say, "that is for you to determine"— thus evading the answer

but making no misrepresentation.

6. Do not accept unreasonable timelines.

If the IRS asks for a form 433-A in 14 days, do not agree to do so if

you know you need 30 days. If the IRS asks your client to pay $1,500

by next Friday, do not agree to do so if you believe the client is unable

to do so. Explain to the IRS your justification for the extension

of time or change of payment amount and that you are interested

in working together to find a successful resolution for all. You have

options in nearly all circumstances. You can speak to a manager or

bring the case to Appeals.

More rules of engagement to come next issue.

E. Martin Davidoff, CPA, Esq., is a practicing CPA and tax attorney

in Dayton, NJ. He founded the IRS Tax Liaison Committee of the

American Association of Attorney-CPAs and is a recent past president

of the AAA-CPA. Contact him at emd@taxattorneycpa.com.

62


Rules of Engagement:

Dealing With IRS Installment Plans

IIn practicing before the IRS concerning collection matters, penalty

abatements and examinations, I have found certain rules of engagement

helpful. For previous rules of engagement, see the August/September

edition of this magazine.

7. Do not agree to terms your client cannot meet.

If you believe your client only can pay $500 per month, and the IRS

insists that your client pay $1,000 per month, you should not agree

to the higher amount. By doing so, you are setting up your client for

failure. Rather, you should appeal the decision to a manager or other

administrative level within the IRS.

Usually, the unpalatable terms of an installment agreement deal

with the amount of monthly payments, but occasionally they might

deal with the timing of payments. For example, I have had clients

who have owed substantial amounts to the IRS who received bonuses

at the end of each year. In one case, an attorney could repay

the IRS $60,000 per year. But, a $5,000 per month payment plan

would not work because the attorney received much of her income

in December, January and February of each year through bonuses.

Thus, we negotiated with the IRS to have the payments due

for each December, January and February at a rate of $20,000. Although

the IRS had to manually monitor this particular installment

agreement, they agreed to do so because they understood the logic of

structuring the payments in this manner. Usually, you will not get

a first-level employee to depart from the prescribed monthly installment

formula that is normally used by the IRS. Higher-ups, however,

often will exercise their judgment to bring about a resolution.

8. Current taxes get paid first.

While meeting with clients about IRS collection matters, they are

likely to tell you their tales of woe about how they got into these

predicaments. Hopefully, you will give them excellent advice on how

to resolve their past issues. Maybe the issues can be resolved with

installment agreements or offers in compromise. Perhaps, the clients

will take out equity loans on their homes to pay off the IRS. Regardless

of the resolution, they will not be successful in resolving their IRS

disputes if they are not meeting their current tax obligations.

Quickly, the conversation needs to move to the current tax year

because no long-term resolution will be possible if the client is not

current. Is the client paying his or her personal estimated taxes? Is

the withholding level correct? It is important that you as the advisor

know where the taxpayer stands on the current year. Your goal

is to pay in nearly all of the tax by year-end and no more. Why no

more? Typically, the IRS will seize the excess and apply it “in the best

interests of the government,” which is usually not in your client’s

best interests.

6 I O C T O B E R 2 0 1 0 www.cpamagazine.com

63

Your goal is to pay in nearly

"

all of the tax by year-end

and no more. "

IRS

Representation

Advisor

E. Martin Davidoff, CPA, Esq.

If you are dealing with a client who is also an employer, make

sure that all payroll tax filings have been completed and that the payroll

taxes are being paid timely. I usually will have the client sign up

with a major payroll tax service and opt into their tax-pay service.

Such a service takes out the proper withholding tax with each payroll.

I educate the client that the net payroll should not be paid unless

you have the funds to be sure to pay-in the related payroll taxes.

Many IRS employees understand that current taxes should be

the first concern. Yet, some IRS employees will pressure clients to

pay delinquent taxes first because those are the cases on the IRS employees’

desks. It often takes an aggressive representative to keep the

proper focus.

Often, clients just refuse to stay current on their taxes, claiming

they are unable to do so. They explain that they cannot afford to pay

the mortgage, the auto payments, college, etc., and pay their taxes. In

many instances, these are self-employed individuals. Your approach

with such individuals has to be clear and firm. People often have

to realize that they must change their lifestyles to live within their

current budgets and that current taxes are non-discretionary parts

of those budgets. So, if a client comes in today, I realize he or she

might not be able to pay even the first half of the current year’s taxes.

But, from this day forward, the client must keep current. I encourage

high-income individuals to pay their estimated taxes monthly or

weekly through www.eftps.gov to avoid facing those huge quarterly

estimated tax payments.

More rules of engagement to come next issue.

E. Martin Davidoff, CPA, Esq., is a sole proprietor in Dayton, N.J., with

more than 30 years experience practicing as a CPA and tax attorney. He

founded the IRS Tax Liaison Committee of the American Association of

Attorney-CPAs and is a past president of the AAA-CPA. Contact him at

emd@taxattorneycpa.com.


IRS Rules of Engagement No. 10:

Never Let Deadlines Pass

IIn practicing before the IRS regarding collection matters, penalty

abatements, and examinations, I have found certain rules of engagement

helpful. For previous rules of engagement, see the June/July,

August/September and October editions of this magazine.

9. Meet all commitments made to the IRS … or at least call.

A corollary to the rule of not accepting unreasonable time lines from

the IRS is for the CPA to meet all commitments made to the IRS. If

you insist on reasonable time lines, you should be able to meet such

time lines. In the rare instances that you are unable to meet such

time lines, you must be sure to communicate with the IRS before the

commitment date passes.

Most revenue officers (RO) and agents will work with you as

long as you communicate and make a significant effort to move the

case forward. You may need to speak to a manager before securing a

reasonable time frame, as the IRS appears to provide little discretion

to its front-line telephone collection employees.

In setting time lines or requesting additional time there are techniques

you can use along with your own personal style. Let’s say you

have a client who owes $75,000 and should be able to full-pay the account

in due course. The negotiation with the IRS ultimately comes

to whether the client can liquidate assets through sale or loans and/or

the amount of monthly installment payments.

One of the first requirements of the IRS is to secure financial

information about the taxpayer. For me, the most difficult aspect

for most high-income taxpayers is determining and presenting their

budget to the IRS. Thus, one of the compromises I will make with

a RO will be to provide form 433-A, presenting all but the budget.

This is helpful to the RO because it provides a road map to assets

and employment. In exchange, I will get the time needed to put

together the client’s budget. (See a detailed budget in the April/May

2009 edition.)

How do I convince the IRS to provide more time? Often, I

bring it to a personal level. I recognize that we both are professionals

and need to be reasonable about the demands we place upon ourselves.

To eliminate resistance, I may communicate with the IRS

representative along the following lines:

“As one who has been in practice for many years, I am in the

business of avoiding stress for my clients and myself. When left to

our own resources, we will make your job easier and provide you

with a quality, comprehensive package. I know the demands on my

time and my client’s time and am in the best position to set my own

schedule. I cannot meet the deadline you are asking of me while

exercising my due diligence. I am sure if I provide you the requested

materials in the time line I have laid out, you are not going to be running

out of work. Accordingly, I would appreciate you treating me

6 I N O V E M B E R 2 0 1 0 www.cpamagazine.com

64

Most revenue officers (RO) and


agents will work with you as long

as you communicate and make a

significant effort to move the case

forward. ”

IRS

Representation

Advisor

E. Martin Davidoff, CPA, Esq.

professionally as you would like to be treated.”

In the most absurd cases, I have had the IRS require eight to ten

years of tax returns to be filed in 30 days. The IRS has been waiting

for these returns for eight to ten years, and now it is suddenly urgent

that they get them in 30 days? I will negotiate a schedule to provide

the returns over a period of time that is reasonable for the complexity,

or lack thereof, of the client’s tax returns. My rule of thumb has

been to provide the first two years’ returns within 45 days and then

two more years every 30 days.

10. Do not let appeals deadlines pass without considering action.

Most commitments with the IRS are artificial deadlines set by the

IRS (and, hopefully, the practitioner) to keep the case moving along.

However, some deadlines are critical. You should never just let those

deadlines pass. Examples of such deadlines are the 30-day deadline

to appeal a Revenue Agent Report in an examination context, the

90-day deadline to file a Tax Court Petition, the 30-day deadline to

request a Collection Due Process hearing or the one-year deadline to

request a Collection Due Process Equivalency hearing. Each of these

deadlines requires a written response.

There are also deadlines to appeal the imposition of a penalty

or the denial of a request for abatement. Never allow a deadline to

go by as a result of your indecision or inability to act. Each deadline

requires careful consideration and documentation of the actions you

decide to take or not take.

More rules of engagement to come next issue.

E. Martin Davidoff, CPA, Esq., is a sole proprietor in Dayton, N.J., with

more than 30 years experience practicing as a CPA and tax attorney. He

founded the IRS Tax Liaison Committee of the American Association of

Attorney-CPAs and is a past president of the AAA-CPA. Contact him at

emd@taxattorneycpa.com.


IRS Rules of Engagement:

Under Promise and Over Perform

IIn practicing before the IRS regarding collection matters, penalty

abatements and examinations, I have found certain rules of engagement

helpful. This is the fifth in the series on such rules of engagement,

with the previous four editions appearing in this magazine.

11. Carefully read and fully understand all IRS communications.

The title of this “rule” seems to say it all. However, I am astounded

by the number of taxpayers and practitioners who misread IRS communications.

The first thing to look for in any IRS communications

is whether there is a deadline to take action (i.e. appeal the denial of

a request for penalty abatement). Even if I do not have time to carefully

read the entire communication at first, I quickly peruse it to be

certain that no deadlines will be missed. From time-to-time, the IRS

will request documentation within a short period of time and failure

to do so will create havoc for the client. For example, offer in compromise

specialists will often request additional information within

10 to 14 days. If you don’t provide the requested information by the

due date, the IRS will return the case to you without a decision. This

is worse than a rejection in some respects, because you cannot appeal

the decision to return the case. If you realize at the outset that there

is a short time line, you can then take action to meet the deadline or

speak to someone, including a manager, to request additional time

to gather the information.

It is also key to know how to respond. For example, if the proper

response is an appeal, to what address do I send the appeal? Most

of the time, the communication will provide that information. If it

does not, you should call the telephone number on the notice (or

the practitioner hot line, 866-860-4259) to determine the proper

address (usually, the inside address within the communication). We

will often fax our appeal as well as mail it via Certified Mail, to ensure

timely receipt.

Many IRS letters can be confusing. For example, some letters

state that the IRS has made a decision, but if you provide additional

information within 30 days, they will reconsider. Yet, I have often

seen that same letter include language advising the taxpayer that he/

she had 30 days to appeal the decision (most often in offers in compromise).

A taxpayer may send in the additional information, but

not ask for an appeal. Thus, if the information does not change the

mind of the IRS, the taxpayer has lost the right to go to Appeals!

Many of you are familiar with IRS letter 1058, wherein the IRS

advises the taxpayer of a potential levy and his/her right to a Collection

Due Process Hearing. After a case has remained dormant for

awhile, the IRS may file what is often referred to as a “refresher letter,”

letter 3174. Essentially, this again advises the client of the potential

for levies as well as other enforcement action if full payment is not

timely made. However, there is no formal Appeals mechanism. In

my opinion, a response is necessary to ensure that levy or lien action

is not imminent. The appropriate response is to follow the process

which would lead to a CAP Appeal (form 9423), the first step of

which is to communicate with the source who sent the letter 3174.

6 I TA X S E A S O N 2 0 11 www.cpamagazine.com

65

Such tools are E-Services or the


Practitioner Hot Line to secure

account transcripts or Freedom

of Information requests to secure

other documents (i.e. SFR, AUR

or examination assessments). ”

IRS

Representation

Advisor

E. Martin Davidoff, CPA, Esq.

IRS communications often provide explanations on changes in

tax, interest and/or penalties. Yet, such communications are often

not complete. So, in order for you to “fully understand” a communication,

you may need to use a variety of tools to request such

documentation to enable you to fully understand the notice. Such

tools are E-Services or the Practitioner Hot Line to secure account

transcripts or Freedom of Information requests to secure other documents

(i.e. SFR, AUR or examination assessments).

The bottom line is to read the IRS communication from cover

to cover, making sure that you fully understand how the document

impacts the taxpayer and, if you disagree with that impact, how and

when to reply to the communication.

12. Know your case’s status! Set ticklers and follow-up.

When dealing with IRS controversy matters, you, the practitioner,

should take control and fully understand the procedural context of

the case. Is the case in Appeals? Has the tax been assessed? Can an innocent

spouse claim be timely filed? Can the taxpayer take advantage

of a Collection Due Process Hearing or the equivalency hearing? Is

your case nearing the expiration of the Statute of Limitations on IRS

collections? Once you understand the procedural context, then set

forth a plan of action and execute that plan.

Never just wait for the IRS to contact you. You should set ticklers

and time lines for anticipated contacts. Depending upon your

situation and your strategy, you may wish to push the case to a conclusion

aggressively. If your hope is that the IRS will be quiet and go

away, that should be a strategic decision, not as a result of indecision.

At our office, after we have made contact with the IRS, we “tickler”

a follow-up to check the status of the case. When the “tickler” pops

up, we then decide whether contact with the IRS is appropriate and,

if so, we decide upon the best manner of contacting the IRS.

For example, at the time we submit an offer in compromise

package on behalf of a client to the IRS, we also set a tickler of 30

days to make certain that the case has been received and assigned. If

we have heard nothing in that time frame, we call the OIC unit to

Continued on page 13


Save Thousands of Dollars By Running

Examination Results Through Tax Software

Continued from page 6

which the case was sent (usually Holtsville, NY for us). After the call,

we evaluate the discussion and set a new tickler.

Another example, would be securing an installment agreement.

We monitor the case to ensure that the IRS is not placing levies or

liens on the case while the request for an installment agreement is

pending. Also, many clients wish to have some finality to their situation

as quickly as possible. So, we will set ticklers and make contacts

to keep the case moving along. After each conversation with the IRS

we inquire on the best time to make contact again and use that information

as one point of reference in setting the next tickler.

13. Confirm all examination computations through tax software.

In the past year, I have saved two clients thousands of dollars by

merely running the tax examination results through our tax software.

I had a ‘hunch’ on each matter that there were some errors in the initial

return preparation or in the computations by the IRS. So, I ran

the original return and the adjustments (as a 1040-X) through my

tax software. I found that there were computational errors as a result

of passive loss computations, the AMT, depreciation and net operating

loss carryovers. (It should be noted that the original returns were

not prepared by our firm.) The results were so significant that I have

made it a rule to check the computations on all examinations. We

also check the more complicated interest and penalty computations

using a program by TValue entitled TaxInterest.

The first step is to make certain that we ensure that there were

no errors in the original return. Through that process, you can discover

and evaluate errors in the return, the correction of which will

benefit your client. The complexity of the passive loss rules, the AMT

and the combination of the two provide a significant opportunity for

tax savings. Then we add the agreed-to changes in income to arrive

at a revised tax liability.

The IRS will usually not have a problem correcting errors such

as those described above. The settlements we reach with them are

usually related to under-reported income or disallowed deductions.

The ultimate tax is merely a computation. The IRS software for examinations

does not have the sophistication of the IRS tax processing

computers or our software. Accordingly, it is not unusual for the IRS

to fail to pick-up a passive loss carryover, for example, which gets

freed up with the disallowance of current year deductions on rental

real estate.

More rules of engagement to come next issue.

E. Martin Davidoff, CPA, Esq., is a sole proprietor in Dayton, N.J., with

more than 30 years experience practicing as a CPA and tax attorney. He is a

past president of the AAA-CPA. Contact him at emd@taxattorneycpa.com.

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By Practicing CPAs ... For Practicing CPAs TA X S E A S O N 2 0 11 I 13


Dealing with the IRS Regarding

Collections, Penalty Abatements

and Examinations

In practicing before the IRS regarding collection matters,

Ipenalty abatements and examinations, I have found certain rules

Iof engagement helpful. This is the sixth and final in the series of

Iarticles in this magazine on such rules of engagement.

14. Be Realistic With Your Client.

Promise only what you know you can deliver, which will

frequently result in your delivering more than anticipated.

Throughout our communications with our client, we

promise only what we know we can accomplish. Our goal is

to establish trust with our clients and referral sources, while

establishing reasonable expectations in the minds of our clients.

Since much of our success depends upon our advocacy skills in

working with a variety of individual decision-makers at the IRS,

we are often able to deliver more than our clients anticipate.

15. Confirm all Oral Agreements with the IRS field employees in writing

and request that they sign off.

In collection matters, the IRS often wants information more

quickly than you can provide it with reasonable accuracy.

Accordingly, you often enter into a negotiation with the Revenue

Officer (RO) and establish mutually-agreeable deadlines. For

example, when will back tax returns be filed? When will the form

433-A be completed? How will interim payments, estimated

taxes, and payroll tax deposits be handled? ROs are instructed

to secure form 433-A information (client financial information)

immediately. The assets/liabilities sections of the form 433-A

are often straight-forward and can be completed in a relatively

short timeframe. However, the budget section may take more

time and finesse to present a complete and accurate picture of

the taxpayer’s finances and monthly budget. Accordingly, you

may agree on varying timelines for portions of the form 433-

A in order to satisfy the RO’s need for securing at least some

information quickly. In exchange for meeting the agreed-to

timelines, you should negotiate with the RO to hold off in taking

any collection actions and/or issuing notices that will accelerate

the collection process.

To avoid any possible misunderstandings, you should set

forth the understandings with the RO in writing. You could do

a memorandum to your client’s file. However, if you are dealing

with a RO in the field, why not turn that memorandum into a

letter and ask the RO to sign off on its contents? The worst that

could happen is that the RO will not sign the letter. If the RO

receives the letter and fails to object to its contents, I believe

that such inaction would be considered a tacit agreement to the

letter’s terms. If I am dealing with a RO whom I trust, I often

6 I AUGUST/SEPTEMBER 2011 www.cpamagazine.com

67

In exchange for meeting

"

the agreed-to timelines, you

should negotiate with the RO

to hold off in taking any

collection actions. "

IRS

REPRESENTATION

E. Martin Davidoff, CPA, Esq.

send the confirming letter and ask the RO to call me if any of

the contents are inaccurate. If I do not trust the RO or have no

long-term relationship with the RO, I will often insist that the

RO sign off on the letter or issue their own letter of confirmation

back to me. On occasion, I will go to the manager to secure a

written confirmation from the RO.

In drafting the letter, I take great care to write the

agreement precisely as discussed. I would not want to be accused

of attempting to renegotiate the agreement by using wording

more favorable to my client than our discussion had provided.

Sometimes, in drafting the letter, I will think of something

that had not been discussed that should be included in our

agreement. In such circumstances, I make it very clear that we

had not discussed that aspect and invite the RO to call me if he/

she does not agree with my proposed resolution of the issue.

When dealing with IRS collections through the centralized

telephone sites, securing written confirmation of oral agreements

is nearly impossible. In such cases, I write detailed internal

memoranda. If nothing else, each memorandum should clearly

communicate to your client what has transpired. In lieu of a

memorandum, I will often send a letter to my client summarizing

the case’s status. Both the memorandum and the client letter

serve the purpose of documenting what has transpired and

communicating the status of the matter to your client.

16. When you win, say “thank you” and “good-bye.”

■ The Appeals Officer agrees to waive your client’s penalty;

■ The Criminal Investigation Division decides not to

prosecute your client;

■ The IRS telephone assister agrees to accept a favorable

installment agreement; or

■ The IRS finally agrees to that Offer in Compromise.


All of the above are favorable outcomes for your client.

Some practitioners might ask “what swayed you to see it our

way?” or “how did you come up with that number?” When

the IRS says “you win,” you should simply say “thank you”

and “good-bye.” (Then, of course, do the memorandum to

your file.) For example, I recently received a verbal approval

of a highly favorable installment agreement. I then gave the

IRS manager in this case, the only information he needed,

“I would like the payments to come due on the 28th of each

month, starting next month.” That is all he needed to input

the installment agreement and, at that point, I quickly ended

the call.

17. Pull transcripts and summarize them.

To fully understand a client’s options, it is helpful to prepare a

federal tax summary. A sample of such a summary can be found

below. To prepare such a summary, you must secure Account

Transcripts from the IRS. For practitioners, this can be done

through E-Services or by calling the tax practitioner hotline

(1-866-860-4259). Preparing a federal tax summary using a

spreadsheet program allows you to summarize dozens of pages

from IRS Account Transcripts on one page so you can readily

see the amounts of tax, interest, late filing penalties, late payment

penalties, estimated tax penalties and offsetting payments and

credits for multiple years.

18. Be fully prepared for all meetings…anticipate the unexpected.

I recently represented a client at a tax examination. In

preparing for my meeting with the auditor, I came in

prepared with multiple sets of files. We carefully segregated

the information so that we could answer anticipated questions

narrowly to prevent raising additional issues inadvertently.

The bottom line is that we anticipated virtually all of the

auditor’s potential questions. Our thorough preparation

enabled us to achieve a more favorable and faster result for

our client and minimize her stress. Such preparation is helpful

in the collection area too. Comprehensive form 433 packages

enable us to secure better results. Anticipating weaknesses in

our client’s arguments for penalty abatement hearings enables

us to more effectively address those weaknesses with the

Appeals Officer.

19. Know the tools available to you and your clients’ rights.

Some examples include:

■ Your client has a right to appeal the rejection of his/her

request for an installment agreement;

■ You have the right to discuss your case with a manager,

territory manager, or anyone else up the chain of command;

■ You have the right to go to the Office of Appeals for

Collection Due Process hearings, CAP Appeals, penalty

abatement appeals, and to appeal examination findings;

■ To assist you, you have programs available such as the

Office of Taxpayer Advocate and Fast Track Mediation;

■ You may designate payments as Trust Funds or Deposits

in the Nature of a Cash Bond;

■ You have the right to see, generally, what is in IRS files

through the Freedom of Information Act. You also may see

IRS records of third-party contacts.

Learn all you can about your clients’ rights and what

tools are available within the IRS so you can utilize them most

effectively to benefit your clients.

E. Martin Davidoff, CPA, Esq., is a sole proprietor in Dayton, N.J., with

more than 30 years experience practicing as a CPA and tax attorney. He

founded the IRS Tax Liaison Committee of the American Association of

Attorney-CPAs and is a past president of the AAA-CPA. Contact him at

emd@taxattorneycpa.com.

(IRS Representation Federal Tax Summary)

L\EMD\DOELiab.123 11/12/2004

JOHN DOE

YEARLY SUMMARY OF FORM 1040 TAX LIABILITY

PENALTIES

OVERPYMT

FEES & LATE LATE ESTIMATED TOTAL PAYMENTS & CREDIT BALANCE DATE OF

YEAR TAX INTEREST COLLECTION FILING PAYMENT TAX ASSESSMENTS CREDITS TRANS OUT DUE "1040" TRANSCRIPT

1991 54,056.00 102,817.39 13,514.00 13,514.00 183,901.39 183,901.39 07/23/2004

1992 105,339.00 176,033.26 26,335.00 26,334.75 334,042.01 334,042.01 07/23/2004

1993 57,286.00 68,332.01 52.00 14,321.50 14,315.49 2,400.25 156,707.25 (61,284.75) 95,422.50 09/13/2004

1994 126,939.00 130,383.40 70.00 31,734.75 31,734.75 320,861.90 320,861.90 09/13/2004

1995 131,126.00 111,359.90 32,781.50 32,781.50 308,048.90 308,048.90 09/13/2004

1996 198,387.00 137,665.23 49,596.75 49,596.75 435,245.73 435,245.73 09/13/2004

1997 71,195.00 39,070.53 17,798.75 17,798.75 145,863.03 145,863.03 09/13/2004

1998 94,743.00 41,047.19 23,685.75 23,685.75 183,161.69 183,161.69 09/13/2004

1999 107,016.00 34,493.18 26,754.00 26,754.00 195,017.18 195,017.18 09/13/2004

2000 141,777.00 29,659.32 35,444.25 31,186.10 238,066.67 (22.00) 238,044.67 09/13/2004

2001 86,825.00 13,372.66 20.00 21,706.25 13,023.75 134,947.66 134,947.66 07/23/2004

2002 93,454.00 7,108.98 23,363.50 8,410.86 132,337.34 132,337.34 07/23/2004

2003 63,276.00 0.54 0.00 0.00 1,444.16 64,720.70 (64,728.00) 7.30 0.00 07/23/2004

TOTALS $1,331,419.00 $891,343.59 $142.00 $317,036.00 $289,136.45 $3,844.41 $2,832,921.45 ($126,034.75) $7.30 $2,706,894.00

68By

Tax Practitioners ... For Tax Practitioners AUGUST/SEPTEMBER 2011 I 7


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E. Martin Davidoff, CPA, Esq. Chapter 4

E. Martin Davidoff, CPA, Esq. is a sole proprietor in Dayton, NJ, with more than 30 years experience practicing as a CPA

and tax attorney. He founded the IRS Tax Liaison Committee of the American Association of Attorney-CPAs, and is a past

president of the AAA-CPA.

IRS Appeals in Collection Matters

The most underutilized arm of the

Internal Revenue Service with

respect to Taxpayer collection

issues is the IRS Office of Appeals

(“Appeals”). This office can be used

to appeal threatened levies and liens,

denials of installment agreements, and

denied offers to compromise one’s tax.

Understanding the processes and tools

available is critical to a practitioner’s

success in this specialty.

Generally, Appeals functions are

divided into two categories: i) assessment

issues and ii) collection issues. Appeals’

officers have become specialized and

most officers deal with either assessment

issues or collection issues, but not both.

Appeals of examination findings, trust

fund assessments, and denials of claims

for refund all fall within the area of

assessment issues. Appeals’ officers

working on collection issues are often

referred to as Settlement Officers.

Other than appeals of Offers in

Compromise (“OICs”), there are two

primary procedures to appeal a Tax

Collection matter:

■■

Collection Due Process

(“CDP”) Appeals (form 12153)

■■The Collection Appeals Program

(“CAP”; form 9423)

CAP is the only methodology that can

be used to head off the filing of a Notice

of Federal Tax Lien (“NFTL”). The

CDP Appeal can only be filed in response

to the filing of the NFTL or when a Levy

is threatened by the IRS. That threat

of levy often comes in the form of the

Letter 1058 which states prominently,

“NOTICE OF INTENT TO LEVY

AND NOTICE OF YOUR RIGHT TO

A HEARING.” Providing advance notice

of levy is required by Internal Revenue

Code (“IRC”) §6330. Such notices are

10 I NOVEMBER/DECEMBER 2011 www.taxcpecourse.com

always sent via Certified Mail. OICs

are appealed through a process clearly

delineated on OIC rejection letters and

will not be discussed in this article.

CDP Hearings

The biggest mistake made by taxpayers

and practitioners alike is not responding

to the IRC §6330 notice within the

30 days required to fully protect the taxpayer’s

rights. In such hearings, Appeals

is empowered to consider ALL collection

alternatives. Responding to the §6330

notice is relatively simple. One need only

complete the form 12153. The most recent

revision (March of 2011) provides

comprehensive guidance. Considerations

when dealing with a §6330 notice and

submitting form 12153 are set forth below,

some of which will be more fully discussed

in the next edition of this column.

1 . Determine whether or not to respond

within 30 days. The IRS has developed

a process to consider untimely-filed

requests for CDP hearings. Such

hearings are administrative, not statutory.

Therefore:

a.) The statute of limitations for

the IRS to collect the tax continues

to run; and

b.) The Taxpayer does not have

the right to pursue the matter in

the U.S. Tax Court.

IRS policies are that such administrative

hearings should be equivalent

to the CDP hearing and, as do

CDP hearings, should consider all

collection alternatives. Accordingly,

such administrative hearings have

been named “Equivalent Hearings,”

which can be requested at item #7 of

69

form 12153 up to 1 year after the taxpayer

is provided the §6330 Notice.

So, if a client is not willing

to take the matter to Tax Court,

would there be any reason to file

within 30 days and suspend the

running of the statute of limitations?

One could argue (correctly,

I believe), that the possibility of a

U.S. Tax Court appeal from the

CDP hearing puts added pressure

on Appeals to resolve the matter.

Often, the 30-day period is

gone before the practitioner gets involved.

So, it is important for a practitioner

to obtain IRS account transcripts

to see when the §6330 notice

was issued so that the time to file an

Equivalent Hearing does not pass

by without consideration of action.

When one is deep into the 10-

year IRS limitations period to collect

the tax, filing for a CDP hearing

may be considered risky as the statute

may expire without the hearing

request. This has become rare, as

the IRS has become more consistent

about issuing notices of intent to

levy early in the collection process.

Be careful about missing deadlines.

Sometimes practitioners will

call the Revenue Officer and/or their

manager upon the receipt of a Letter

1058 or other notice of intent to

levy. While negotiating or playing

telephone tag, the deadline to appeal

could go by and weaken your negotiating

position significantly.

2. Consider requesting a face-to-face/inperson

conference at a local Appeals office.

Generally, our office requests

a face-to-face hearing on all form

12153 filings (also referred to as

“CDP requests”). Why not? Our


experience is that we secure better

results when meeting in person.

Our office is located in central New

Jersey. Accordingly, we find any of

three offices (Newark, New York

City, or Philadelphia) relatively

convenient. I believe our flexibility

regarding location makes it easier

for the IRS to grant our requests.

More information on face-to-face

conferences for CDP hearing requests,

and the IRS reluctance to grant requests

for such hearings, will be found

in the next edition of this column.

3. Seek Penalty Abatements. Whenever

there is money due to the IRS, the

abatement of penalties should be a

consideration. Even if you cannot

elaborate on the detail of reasonable

cause within the form 12153 attachment,

you should request abatement

and provide an overview of the reasonable

causes and state clearly that

you are willing to provide additional

substantiation.

4. Clearly State the Desired Results

You want to make clear what you want

the Appeals Officer to do. Accordingly,

your attachment should state

the desired results. That attachment

should also indicate why you were not

able to resolve the problem (i.e. The

Revenue Officer sent the threat to

levy without ever calling the taxpayer

or his/her representative), provide all

pertinent facts, and identify the potential

issues for consideration.

5. Consider requesting that the hearing be

recorded. To preserve a record for the

Tax Court, you may wish to consider

requesting that the hearing be re

corded. You have the right to do so.

By making this request, you will be assured

that the Appeals manager will be

in attendance. I have not used this tool

personally, but I do know it is being

used regularly by practitioners, particularly

in larger, more complex cases.

6. Other technicalities. Include statements

in your attachment that make

it clear that:

■■

You reserve the right to amend

the request;

■■You reserve the right to supplement

the CDP request

■■There shall be no ex-parte

communications (communication to

influence a decision-making official

off the record) between Appeals and

other IRS employees working on the

case, without your express written

permission

■■Don’t forget to include your

power of attorney for the client,

form 2848

7. Who attends? As with nearly all of my

representation before the IRS, I will

attend alone or with a member of my

staff. In the rare instances that my client

attends an IRS conference/hearing,

I make the decision. I have had

situations wherein my clients insisted

on attending. In such instances, consideration

should be given to whether

or not to retain the client. My purpose

in bringing staff is to either provide

training, have someone along

with me who is more knowledgeable

of the factual nuances and intricacies

of the case, and/or someone whose

personality will assist in the resolution

of the matter.

CAP Appeals

CAP Appeals enable a taxpayer/

practitioner to Appeal a specific

action or proposed action of the IRS.

Some considerations with respect to

CAP Appeals:

1. Only the specific action or proposed action is

evaluated by the Settlement Officer.

The Settlement Officer will not

consider all collection alternatives.

However, some Settlement Officers

will tell you that they are only

doing an “administrative review”

to determine whether the IRS

followed the requisite procedures

in deciding to take or threaten the

action being appealed. Under the

Internal Revenue Manual (“IRM”),

this is simply not true in my opinion.

The Settlement Officer is to put

himself/herself in the position of

the IRS employee and determine

whether the action is the appropriate

action to be taken considering all

facts and circumstances.

70

2. CAP is an expedited procedure in which

the Settlement Officer is required to

have the hearing within five days of

his/her receipt. However, one never

knows when the officer will actually

“receive” the case. The five-day rule

brings on unfair and extraordinary

results, often under the pretense

of doing the Taxpayer a ‘favor’ by

expediting the case. For example, you

could receive a call from a Settlement

Officer, have what you believe is

a preliminary conversation to the

hearing, and then be told that the

Settlement Officer is finding in favor

of the IRS action. Effectively, you

may not have realized that you had

the hearing during that conversation!

Accordingly, you need to clarify from

the beginning in all conversations

whether you are having the hearing

or just trying to set up a mutually

convenient time for one. Also, if you

are planning to be away from the

office for an extended period, you

may want to contact Appeals to make

sure that the hearing is not scheduled

while you are unavailable. The

IRS will consider your unavailability

for more than five days,

effectively, a forfeiture of your

hearing rights.

3. Normally, face-to-face hearings will

be permitted in local IRS offices.

However, it is very rare that a Service

Center CAP will be transferred for a

face-to-face hearing.

4. The CAP Program is used to appeal

rejections of installment agreements

(IRC §7122(e)) and proposed

terminations of installment

agreements (IRC 6159(e)).

The details of IRS procedures

and practices relating to Appeals

change frequently. For that reason,

you should regularly refer to Section

8 of the IRM, which covers the

Appeals function of the IRS and can

be found online at: http://www.irs.

gov/irm/part8/index.html. See also

IRS Publications 594 and 1660.

Contact E. Martin Davidoff, CPA, Esq. at

emd@taxattorneycpa.com and his firm’s Web site

can be found at www.taxattorneycpa.com.

By Tax Practitioners ... For Tax Practitioners NOVEMBER/DECEMBER 2011 I 11


R.C.P.

OLD

NEW

Monthly Excess $361 361

48/12 Times $17,328 $4,332

Factor

Assets/Equity $35,457 $35,457

R.C.P. $52,785 $39,789

21

May 21, 2012 OIC Rules

See Draft Article for CPA Magazine in Materials

1. Future Income Factor for “Lump Sum Cash”

Offers reduced from 48 multiple to 12 multiple

2. Future Income Factor for 24-Month “Periodic

Plan” Offers reduced from 60 months to 24

months.

Note: Payments for terms longer than 24 months

are no longer available.

22

71


R.C.P.

OLD

NEW

Monthly Excess $361 361

48/12 Times $17,328 $4,332

Factor

Assets/Equity $35,457 $35,457

R.C.P. $52,785 $39,789

23

May 21, 2012 OIC Rules

Example #1:

Taxpayer owes $125,000 to the IRS

Taxpayer earns $80,000 per year.

• We agree with IRS that the Taxpayer can

afford to pay $750 per month to the IRS.

• We agree with the IRS that the Taxpayer

has $40,000 in realizable value of his/her

assets.

24

72


R.C.P. Example #1

OLD

NEW

Monthly Excess $750 750

48/12 Times $36,000 $9,000

Factor

Assets/Equity $40,000 $40,000

R.C.P. $76,000 $49,000

25

May 21, 2012 OIC Rules

Example #2:

Taxpayer owes $400,000 to the IRS

Taxpayer earns $250,000 per year.

• We agree with IRS that the Taxpayer can

afford to pay $4,000 per month to the IRS.

• We agree with the IRS that the Taxpayer

has $5,000 in realizable value of his/her

assets.

26

73


R.C.P. Example #2

OLD

NEW

Monthly Excess $4,000 4,000

48/12 Times $192,000 $48,000

Factor

Assets/Equity $5,000 $5,000

R.C.P. $197,000 $53,000

27

May 21, 2012 OIC Rules

Example #2:

• Result too good to be true?

• IRS may reject, using “not in the best

interests of the government standard.”

• Offer will be rejected if payment can be made

within the remaining time of the statute.

Note: If statute is 100 months, government will

receive $400,000 over that time. Why would

they accept $53,000?

28

74


May 21, 2012 OIC Rules

• There will be no retirement of the first

$400 of auto loan debt. Thus, even if

the final payment of the automobile

will take place within the horizon of

the current analysis, the first $400 will

be retained in the budget for

evaluating the offer (5.8.5.17).

29

May 21, 2012 OIC Rules

• The IRS will continue to allow $200 per month

for older (over 6 years old) or high-mileage (over

75,000 miles) motor vehicles as an additional

operating expense above and beyond the

vehicle operating costs standards set forth on

the IRS website. Up until the May 21 st

announcement, this additional $200 would NOT

be allowed if the Taxpayer had a monthly

automobile loan payment. Under the new

standard, the additional $200 in operating

costs will no longer be tied to the absence of

a car payment.

30

75


May 21, 2012 OIC Rules

• $200 NOT available for Installment

Agreements! Why?

• The first $3,450 per car will,

generally, be excluded from net

equity computations of vehicles

owned by taxpayers. This exclusion

is limited to two cars per household.

31

May 21, 2012 OIC Rules

• Payments of student loans

guaranteed by the federal

government for post-high school

education will now be allowed

(5.8.5.20.4).

Query: But not College Tuition?

(Probably Not!)

32

76


May 21, 2012 OIC Rules

• State and local income tax installment

agreements will be treated as allowable

expenditures in proportion p to the balance due to

the state and/or locality as compared to the

amount due to the IRS (5.8.5.20.4(7)).

• Form 433-A(OIC) has been revised to include a

line item in the budget (53) specifically for

delinquent state and local taxes.

• The new rules are detailed and intricate.

Accordingly, if you are dealing with a state tax

debt, you should review the new guidance

carefully.

33

May 21, 2012 OIC Rules

• The equity in income producing assets will no

longer be added to the RCP of viable ongoing

businesses unless such assets are not critical to

the business operations (IRM 5.8.5.5.1). In

some situations, this is a material change which

eliminates what many believed to be a double-

counting of assets.

34

77


May 21, 2012 OIC Rules

• “Example (5) A real estate salesman has a

vehicle with $30,000 in equity. The vehicle is

used to transport clients and assists in the

production of income. The taxpayer's net

monthly disposable income is $3,000. The

equity in the vehicle generally will not be

included in the RCP”

35

May 21, 2012 OIC Rules

• “Example (6) The same salesman in the

previous example only has net monthly

disposable income of $500 per month. Consider

including the equity in the vehicle, yet allow for

the impact the loss of the vehicle may have on

the taxpayer's income.”

36

78


May 21, 2012 OIC Rules

Substantial Write-up re: Dissipation

• No look-back prior to 2010 for currentlysubmitted

offers.

• Focus will be upon intentional attempts to

dissipate

• Sales occurring within 6 months of assessment

will get greater attention.

ti

• See the Write-up which narrowed and better

defined the dissipation rules. IRM 5.8.5.16

37

May 21, 2012 OIC Rules

Changes to Collection Financial Standards

• National Standards increased in April by

approximately 5%, now taking into consideration

minimum monthly payments on credit cards.

• Housing Expenses increased in April by

approximately 6% to include internet access.

However, in central NJ, housing allowances are

up 20% since last year’s NYU Forum.

38

79


80


E. MARTIN DAVIDOFF & ASSOCIATES

CERTIFIED PUBLIC ACCOUNTANTS

353 Georges Road - Suite K

E. Martin Davidoff, CPA, ESQ. P.O. Box 835

Robbin R. Weiner, CPA Dayton, NJ 08810-0835

EMD@taxattorneycpa.com

_____________

NAVIGATING THE IRS

Presented at

Zicklin Tax Series #3

Baruch College, NYC - December 3, 2012

E. Martin Davidoff, CPA, Esq.

TEL: 732-274-1600

FAX: 732-274-1666

Cover Page & Table of Contents .................................................... 1

About the Speaker ............................................................... 2

Steps in a Controversy; Tools in Dealing with the IRS................................... 3

The Rules of Engagement in Dealing with the IRS...................................... 4

Alternatives in a Collection Matter; Common Threads to Installment Agreements ............. 5

IRS Tools & Considerations; The Key is Time......................................... 6

Sample Engagement Letters ....................................................7- 10

Sample Forms 2848 & 8821 - Representative Authorizations .........................11- 16

Sample Plan of Action & Status Sheet ...........................................17- 19

Sample Letter 1058 & Request for a Collection Due Process Hearing (Form 12153) .......20- 26

Sample Collection Appeal Request (Form 9423) ...................................27- 29

IRS Appeals in Collection Matters - CPA Magazine Article ..........................30- 31

Sample Penalty Appeal Letter ..................................................... 32

Sample Examination Appeal ...................................................33- 34

Sample Request for Taxpayer Advocate Service Assistance (Form 911) & NJ Form 911 ....35- 37

Sample Letter re Payment of Trust Funds ............................................ 38

Sample Request for Third Party Contacts ............................................ 39

Sample letters to Clients regarding successful Installment Agreement. ..................40- 41

Sample Form 9465-FS, Streamlined Installment Request & Form 433-D ................42- 45

Sample letters to Clients regarding successful Offer In Compromise. ...................46- 47

Sample FOIA Request ........................................................48- 53

Sample Cash Bond...........................................................54 - 55

Federal Tax Summary ........................................................... 56

Transcripts ................................................................57- 59

Quarterly Analysis of client Payroll tax returns filing and statements ...................... 60

Sample Cash Flow Analysis. ... ................................................... 61

Articles on Representation of Clients & Rules of Engagement. ... .....................62- 74

Documents related to the Fresh Start Program .... .................................75- 77

Lien Withdrawls ............................................................78- 100

Identity Theft . . . ..........................................................101 - 102

© Copyright 2012 E. Martin Davidoff (U.S.A.) All Rights Reserved

81


ABOUT THE SPEAKER

E. Martin Davidoff is a Certified Public Accountant and an Attorney at Law with an office in Dayton,

New Jersey. Mr. Davidoff is licensed to practice both professions in New York and New Jersey and

is active in many associations.

Mr. Davidoff served as President (2008-2009) of the American Association of Attorney - Certified

Public Accountants (“AAA-CPA") . Mr. Davidoff is also the founder of the Internal Revenue Service

Liaison Committee and Chairman of the IRS Liaison Sub-Committee on Legislative Affairs of the

AAA-CPA. As such, he meets regularly with the Internal Revenue Service on a national level.

Selected every year from 2004 through 2010 as one of the Top 100 Most Influential People in

Accounting by Accounting Today, it was noted that “Davidoff’s views on issues affecting tax practice

are heard at the highest levels of government.” CPA Magazine has also chosen Mr. Davidoff as one

of the Top 50 IRS Practitioners of 2008 and one of the Top 40 Tax Advisors To Know During a

Recession in 2009.

He is currently serving as Financial Expert on the Board of Directors and Audit Committee for

BioClinica, Inc., a publicly held leading global provider of integrated, technology-enhanced, clinical

trial services.

As a member of the AICPA's Tax Division, he has served on the Tax Legislative Liaison Committee.

He completed two years on the Executive Committee of the New Jersey Society of Certified Public

Accountants (“NJSCPA”), having served as the organization's Secretary and as Vice President for

Taxation and Legislation. Mr. Davidoff has also served as President of the Middlesex/Somerset

chapter of the NJSCPA and as the chairman of the NJSCPA Federal Taxation and Membership

Committees. Mr. Davidoff is a member of the tax section of the New Jersey Bar Association.

Among the honors he has received are the 1998/1999 New Jersey Society of CPAs Distinguished

Service Award for his dedicated service and commitment to the Society; the SBA 1997 Accountant

Advocate of the Year for New Jersey and Region II (New York, New Jersey, Virgin Islands, and

Puerto Rico) after having served as a delegate leader at the 1986 and 1995 White House Conferences

on Small Business and the 1998 Nicholas Maul Leadership Award from the Middlesex County

Regional Chamber of Commerce.

Mr. Davidoff received his undergraduate degree from Massachusetts Institute of Technology, an

MBA from Boston University Graduate School of Management, and a JD from the Washington

University School of Law. He is a frequent lecturer, authors a regular column in CPA Magazine and

co-authored the New Jersey S-Corporation bill. Mr. Davidoff regularly testifies before federal and

tax agencies and legislatures regarding the impact of legislation and tax agency policies on small

business and tax practitioners.

Mr. Davidoff is also Founder and Executive Director for Make-A-Smile Foundation, Inc., a charity

holiday shopping spree benefitting underprivileged children for over 25 years.

82


Steps in a Controversy

1. Initial call with prospective client to find out general nature of their problem and “sell” the firm.

2. Preliminary meeting with client to understand his/her dilemma.

3. Agree to what services you will provide and how you will get paid. Execute an engagement letter. (See

pgs 7 through 10).

4. Get authorization to represent your client (Forms 2848, 8821, Oral TIAA, etc. See IRS publication at

http://www.irs.gov/pub/irs-utl/lvl-auth.pdf for different forms of authorization). (See pgs 11 through 16 and

60 through 64.)

5. Put forth a written Plan of Action with the client and your staff. (See pgs 17 through 19).

6. Put together a list of materials for your client to gather.

7. Transmit authorizations to CAF and to Revenue Officer, if applicable.

8. Get records of account/account transcripts and prepare a federal tax summary. (See pg 54.)

9. Make certain client is staying current on all taxes going forward. Sometimes this may require the client

engaging a payroll tax service with a Tax-Pay service.

10. Follow Plan of Action and gather all materials.

Tools in Dealing with the IRS

1. Going up the chain of command:

North Atlantic (NA) & Central Area (NJ) Managers, SB/SE

- Collections (NA Director) : Reuben D. Priegues: 212-298-2401

- Collections (Central Director) : Drethan Barham: 313-234-2253

- Examination (NA Director): Bryan Inoue: 221-298-2146

- Examination (Central Director): Mary L. Colem 215-861-1372

2. Form 12153, Collection Due Process Hearing (See pgs 20 through 26.)

3. Form 9423, Collection Appeal Request (See pgs 27 through 29.)

4. Appealing denials of Penalty Abatement requests & Examination Findings (See pgs 32 through 34.)

5. Taxpayer Advocate's Office - (Form 911) - (See pgs 35 through 37)

- Manhattan: James Spisak: 212-436-1010

- Brooklyn, NY: Bernadita E. Tehrani: 718-488-3501

- New Jersey Marcie Harrison: 973-921-4376

- Philadelphia Lois Lombardo 215-861-1237

6. Fast Track Mediation/Settlement (See Publication 4167)

7. Designation of Trusts Fund (See pg 38.)

8. Record of Third Party Contacts (See pg 39.)

9. Freedom of Information Requests (“FOIA”) (See pg 46 through 51.)

10. Deposit in the Nature of a Cash Bond (See pgs 52 through 53.)

11. IRS Website & E-Services

12. Your Analysis of the Client’s Situation (see pages 58 & 59 regarding Quarterly Analysis and Cash Flow)

83


The Rules of Engagement in Dealing with the IRS

(See pages 65-72)

1. Never volunteer information, unless it is part of a strategy.

2. Never give materials to the IRS that y ou have not reviewed carefully (e.g. bank statements, paycheck

stubs, etc.).

3. Assert yourself as appropriate. Learn how to say:

“Please give me your full name and employee ID number.”

"Please give me the name and telephone number of your manager."

"Who is the Territory manager?"

"What is your authority for that position?"

"I want to take that issue to Fast Track Mediation"

"Are you refusing to provide that information to me?"

4. Always ask for the full name and employee ID of the IRS representative.

5. Never Lie. Period.

6. Do not accept unreasonable time-lines.

7. Do not agree to terms that your client cannot meet.

• Carefully review and understand your client's budget; and

• Build in additional time, anticipate client delays.

8. Current Taxes Get Paid First!

9. Meet all commitments made to the IRS...or at least call.

10. Do not let Appeal Deadlines pass without preserving your client's rights.

11. Carefully read and fully understand all IRS communications.

12. Set ticklers and followup. Never just wait for the IRS to contact you. Know your case's status.

13. Confirm all examination computation through tax software.

14. Be realistic with your client. Promise less than you expect, deliver more than anticipated.

15. Confirm all oral agreements with the IRS in writing and request that they sign off.

16. When you win, say “thank you” and “goodbye”!

17. Pull transcripts and summarize them. (See page 54.)

18. Be fully prepared for all meetings....anticipate the unexpected.

19. Know your tools and rights (see previous page).

84


Alternatives in a Collection Matter

I. Pay all that is due

• Refinance home

• Loans from family [Can still seek penalty abatement]

• Liquidate assets

II. Pay tax & interest only

• Seek penalty abatement

< Revenue Officer

< Taxpayer Advocate

< Service Center

< Telephone (note script)

< Priority Practitioner Hotline

Note: IRS “rule” to pay all tax prior to considering late payment penalty abatements.

III. Uncollectible status

• Reviewed periodically

IV. Partial pay installment agreement

V. Full-pay installment agreement

• Streamlined: < $25,000 assessed

Pay within 5 years or less

No financial documentation required

VI. Offer in Compromise

VII. Special Considerations

• Bankruptcy

• Expiring Statutes

• Innocent Spouse

• Missing/Misapplied Payments

• Transfer of assets for less than adequate consideration

• Identity Theft

1. Up front consideration

2. Lien Filing or holding off thereon

3. Increasing payments with time

4. Date of Payment/Direct Debit

Common Threads to Installment Agreements

5. Communicate to client in writing (see samples - pgs 40 through 45)

6. The role of Reasonable Collection Potential

85


IRS Tools & Considerations

A. Financial Disclosure:

• Form 433A Form 433A (OIC)

• Form 433B Form 433B (OIC)

• Form 433F Form 9465-FS

B. Liens

C. Levy/Garnishment

D. Primary Considerations

• Keep Current

• Disclose Financial Information

• Plan to deal with debt to the IRS

Time as a Friend

A. Time to determine appropriate course of action

B. Time to get Client to take that action

• Payroll

• Estimates

• Filing of Returns

• Verification of Financial Position

• Documentation of all of the above

The Key is Time

C. Time to get the IRS to come to “our” way of thinking on the case. Specifically, we need time to:

• Present financial information

• Present facts regarding penalty abatement

• Involvement of IRS management

• Involvement of Appeals

• Involvement of the Taxpayer Advocate Service

• File Returns

D. Time for the Statute to Expire

Time as an Enemy

A. Appeal Rights

B. Tax Court Petition Deadlines

C. IRS Arbitrary (non-statutory) Deadlines

D. The next payroll date during garnishment

E. Stress builds with time as matter remains unresolved

86


E. MARTIN DAVIDOFF

ATTORNEY AT LAW

353 Georges Road - Suite K

P.O. Box 835

Dayton, NJ 08810-0835

EMD@taxattorneycpa.com

_____________

TEL: 732-274-1600

FAX: 732-274-1666

VIA E-MAIL May 15, 2012

Mr. Ralph Terry

41 ABC Avenue

Metuchen, New Jersey 08840

Dear Mr. Terry:

RE: Consultation Advice

I am writing this letter to confirm and specify the financial arrangements regarding the services which I will

be providing to you. I will be providing advice to you regarding federal and/or state taxation issues. I may also

provide other services which you request.

My fees are based upon the amount of time required to meet or speak with you and to review and analyze

information that you provide to me. In addition, you will be charged for my or my staff's time with respect to

follow-up calls, meetings and other services requested. My current hourly consultation rate is $XXX. The hourly

rates for my staff range from $XX to $XXX. All rates will increase from time to time consistent with the rates

charged generally to the firm’s tax controversy clients. Also, you will be charged for out-of-pocket expenses

(photocopying, federal express, postage, etc.) As a courtesy for your referral through Mr. Bill Stafford, the first

30 minutes will be free of charge for this initial consultation. If the matter requires extended, involved work, a

separate engagement letter will usually be required, as well as a retainer.

In the unlikely event that it becomes necessary for me to seek legal recourse to receive payment of my fees

through litigation or arbitration, you hereby agree to reimburse me for all out-of-pocket expenses, as well as any

of the time expended by my staff and/or me at the hourly rates then in effect, to secure such payment. For

purposes of our agreement, the term "out-of-pocket expenses" also includes any legal fees and all other expenses

in connection with any attempt (including litigation) to collect my fees. By signing below, you hereby consent

that I may use any information which you provide me to collect any fees due to this firm. Such information

includes income tax returns which we prepare for you or which you provide us.

If the terms outlined in this letter are in agreement with your understanding of our engagement, please

sign this letter and complete the enclosed credit card authorization, if appropriate, to facilitate our phone or inperson

conference, then fax or email these documents back to our office. Your card will be billed at the rates

specified above for the appropriate increment of time for this and future consultation meetings.

I look forward to working with you.

EMD:saf

encls.

Agreed to by:

Ralph Terry

___________

Date

87


E. MARTIN DAVIDOFF

ATTORNEY AT LAW

353 Georges Road - Suite K

P.O. Box 835

Dayton, NJ 08810-0835

EMD@taxattorneycpa.com

_____________

TEL: 732-274-1600

FAX: 732-274-1666

January 5, 2011

BY HAND IN OUR OFFICE

Mr. & Mrs. Mickey Mantle

123 Main Street

Anywhere, New Jersey 08666

Dear Mickey and Merlyn :

I am writing this letter to confirm and specify the financial arrangements regarding the services

which I will be providing to you. I will be representing XYZ Corporation before the Internal

Revenue Service ("IRS") in connection with the assessment and collection of Payroll taxes for the

years 2007 through 2009. I will be representing you, personally, before the IRS in connection with

the assessment and collection of income taxes for the years 2006 through 2008, for trust fund

recovery penalties proposed by the IRS, and for other years and matters in the event that the IRS

expands the scope of its investigation. I many also provide other services which you request.

As we have discussed, our representation is strictly limited to the government agency above.

It is not our practice to investigate beyond this specific agency. However, should you require our

representation on other matters at a later date, we would be glad to consider such requests provided

to us in writing.

My fees are based upon the amount of time required to review and analyze information provided

to me, perform necessary research, carry out additional services in representing you, and complete

additional services which you request. My current hourly rate is $XXX. The hourly rates for my

staff range from $XX to $XXX. All rates will increase from time to time consistent with the rates

charged generally to the firm’s tax controversy clients. In addition, you will be charged for out-ofpocket

expenses (photocopying, federal express, postage, etc.)

I will require an initial retainer of $3,500 prior to commencing work. The $3,500 will be held

in my business account and will be applied towards you final invoice. During the course of our

engagement, you will receive invoices periodically. My invoices are due and payable immediately

upon receipt. There will be a late charge equal to 1.5% per month on any unpaid balances. Please

note that, at our option, the work on your account will cease at anytime after any invoice of ours

remains unpaid for a period of 15 days, unless other mutually satisfactory arrangements have been

made in writing.

88


Mr. & Mrs. Mickey Mantle

January 5, 2011

Page 2

We have also agreed to provide you with additional flexibility with respect to the payment of

fees due to this firm. So long as you make monthly payments of $350 on the first of each month,

commencing with February 1, 2011, we will continue to work on your account and we will waive

any late charges through January 31, 2014. Please note that, even if we have not yet issued our first

invoice, the first payment of $350 is still expected to be made on or before February 1, 2011. Any

balance due and payable as of January 31, 2014 shall become due and payable immediately.

Although you may find it convenient and appropriate that I invoice XYZ Corporation for some

or all of my services, you will be personally responsible for the payment of any of my invoices

issued to the corporation and/or you.

You have a role in assisting us in your representation. It is your obligation to respond timely and

truthfully to our inquiries. Often such inquiries will relate to answering financial related

questions. Other times, our inquiries may relate to facts and circumstances which will assist us in

securing an abatement of taxes or penalties. We reserve the right to terminate this engagement if

you fail to timely respond to our inquiries and/or accurately portray your compliance history and

communications with the taxing authority.

You have the right to terminate our engagement at any time. To do so, please send me your

request to terminate the firm’s services in writing. Of course, I encourage you to speak directly to

me as to the reasons for termination and to assist in the transition of the case to new counsel, if

applicable. Upon receipt of your written request, I will wrap-up services on your account to ensure

that the current status of the case is fully documented and to provide you any documents in our file

that you request. In a reasonable time thereafter, we will issue our final invoice and apply any

remaining retainer against the balance. We will refund any unused portion of your retainer and

expect prompt payment of any balance due after application of the retainer.

In the unlikely event that it becomes necessary for me to seek legal recourse to receive payment

of my fees through litigation or arbitration, you hereby agree to reimburse me for all out-of-pocket

expenses, as well as any of the time expended by my staff and/or me at the hourly rates then in

effect, to secure such payment. For purposes of our agreement, the term "out-of-pocket expenses"

also includes any legal fees and all other expenses in connection with any attempt (including

litigation) to collect my fees. By signing below, you hereby consent that I may use any information

which you provide me to collect any fees due to this firm. Such information includes income tax

returns which we prepare for you or which you provide us.

We are aware that you have been working with Tony Kubek, CPA, with respect to this case. You

hereby acknowledge that we will be working with Tony Kubek and you hereby give us permission

to discuss your case with and provide copies of documents, correspondence and invoices toTony

Kubek, CPA.

You have agreed to comply with all federal and state tax laws going forward on a timely basis.

To that end, you will be placing the payroll with Paychex or Balance Point and authorizing them to

withdraw payroll taxes with each payroll (their "Tax Pay" service).

89


Mr. & Mrs. Mickey Mantle

January 5, 2011

Page 3

If the terms outlined in this letter are in agreement with your understanding of our engagement,

you should sign the enclosed copy of this letter and return it to me as soon as possible with the

$3,500 retainer. By signing below you are each also agreeing to be jointly and individually

responsible for the entire amount of my fees. Should you have any questions concerning this letter

or the fees to be charged, please do not hesitate to contact me.

To facilitate our representation, please find attached:

1. Forms 2848 Power of Attorney which will enable me to represent Mickey Mantle &

Merlyn Mantle (required separately by the IRS for each) before the Internal Revenue

Service

2. Forms 8821 Tax Information Authorization for Mickey Mantle & Merlyn Mantle

(required separately by the IRS for each), which will enable other members of my staff

to discuss your case with the Internal Revenue Service

3. Form 2848 Power of Attorney which will enable us to represent XYZ Corporation

before the Internal Revenue Service

4. Form 8821 Tax Information Authorization for XYZ Corporation, which will enable

other members of my staff to discuss case status with the Internal Revenue Service.

Please sign two copies of each form and return them to us. You may retain the third copy for

your files.

I look forward to working with both of you.

Very truly yours,

EMD:saf

encls.

E. Martin Davidoff

Agreed to by:

Mickey Mantle, Individually and as President

of XYZ Corporation

___________

Date

Merlyn Johnson Mantle

Date

cc: Tony Kubek, CPA

90


E. MARTIN DAVIDOFF & ASSOCIATES

CERTIFIED PUBLIC ACCOUNTANTS

353 Georges Road - Suite K

E. Martin Davidoff, CPA, ESQ. P.O. Box 835

Robbin R. Weiner, CPA Dayton, NJ 08810-0835

EMD@taxattorneycpa.com

_____________

FAX TRANSMITTAL SHEET

TEL: 732-274-1600

FAX: 732-274-1666

DATE: May 15, 2012

TIME:

PLEASE DELIVER THE FOLLOWING PAGES TO:

NAME:

IRS - CAF

TELEPHONE NUMBER: 901-546-4176

TELECOPIER NUMBER: 901-546-4115

TOTAL NUMBER OF PAGES INCLUDING COVER: 4

Following you will find Form 2848 (Power of Attorney and Declaration of Representative)

and Form 8821 (Tax Information Authorization) for John J. Doe to be input into the CAF system.

Please do not hesitate to contact E. Martin Davidoff if you should ha ve any questions or

comments.

Sincerely,

Sarah A. Fields

Enrolled Agent

IF YOU DO NOT RECEIVE ALL THE PAGES OR THERE IS A PROBLEM, PLEASE CALL (732) 274-1600 AND

ASK FOR SARAH.

G Confirmed by: _________

91


Form 2848

(Rev. March 2012)

Department of the Treasury

Internal Revenue Service

Power of Attorney

and Declaration of Representative

Type or print. See the separate instructions.

Part I Power of Attorney

Caution: A separate Form 2848 should be completed for each taxpayer. Form 2848 will not be honored

for any purpose other than representation before the IRS.

1 Taxpayer information. Taxpayer must sign and date this form on page 2, line 7.

Taxpayer name and address

John J. Doe

123 Main Street

Anywhere, NJ 08666

Taxpayer identification number(s)

123-45-6789

Daytime telephone number

732-274-1600 (atty)

OMB No. 1545-0150

For IRS Use Only

Received by:

Name

Telephone

Function

Date / /

Plan number (if applicable)

hereby appoints the following representative(s) as attorney(s)-in-fact:

2

There are a total of 4 representatives. Additional page follows.

Representative(s) must sign and date this form on page 2, Part II.

Name and address

CAF No. --------------------------------------------------------

0000-00-100R

E. Martin Davidoff, CPA, Esq.

PTIN P00000001

------------------------------------------------------------

P.O. Box 835

Telephone No. 732-274-1600

------------------------------------------------

Dayton, New Jersey 08810-0835

Fax No. ---------------------------------------------------------

732-274-1666

Check if to be sent notices and communications

X Check if new: Address Telephone No. Fax No.

Name and address

CAF No. --------------------------------------------------------

0000-00-000R

Robbin R. Weiner, CPA

PTIN P00000000

------------------------------------------------------------

P.O. Box 835

Telephone No. 732-274-1600

------------------------------------------------

Dayton, New Jersey 08810-0835

Fax No. ---------------------------------------------------------

732-274-1666

Check if to be sent notices and communications

Check if new: Address Telephone No. Fax No.

Name and address

CAF No. --------------------------------------------------------

0000-00-0007R

PTIN P00000007

Sarah A. Fields, EA

------------------------------------------------------------

Telephone No. 732-274-1600

P.O. Box 835

------------------------------------------------

Fax No. ---------------------------------------------------------

732-274-1666

Dayton, New Jersey 08810-0835

Check if new: Address Telephone No. Fax No.

to represent the taxpayer before the Internal Revenue Service for the following matters:

3 Matters

Description of Matter (Income, Employment, Payroll, Excise, Estate, Gift, Whistleblower, Tax Form Number Year(s) or Period(s) (if applicable)

Practitioner Discipline, PLR, FOIA, Civil Penalty, etc.) (see instructions for line 3) (1040, 941, 720, etc.) (if applicable) (see instructions for line 3)

Income 1040

Civil Penalty for ABC, Inc (EIN:22-01234567)

N/A

2002 through 2014

All Years Included

1/01/04 through 12/13/10

All Years Included

4 Specific use not recorded on Centralized Authorization File (CAF). If the power of attorney is for a specific use not recorded on CAF,

check this box. See the instructions for Line 4. Specific Uses Not Recorded on CAF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5 Acts authorized. Unless otherwise provided below, the representatives generally are authorized to receive and inspect confidential tax

information and to perform any and all acts that I can perform with respect to the tax matters described on line 3, for example, the authority to

sign any agreements, consents, or other documents. The representative(s), however is (are) not authorized to receive or negotiate any

amounts paid to the client in connection with this representation (including refunds by either electronic means or paper checks). Additionally,

unless the appropriate box(es) below are checked, the representative(s) is (are) not authorized to execute a request for disclosure of tax returns

or return information to a third party, substitute another representative or add representatives, or sign certain tax returns.

Disclosure to third parties; Substitute or add representative(s); Signing a return;

Other actis authorized:

(see instructions for more information)

Exceptions. An unenrolled return preparer cannot sign any document for a taxpayer and may only represent taxpayers in limited situations.

An enrolled actuary may only represent taxpayers to the extent provided in section 10.3(d) of Treasury Department Circular No. 230 (Circular

230). An enrolled retirement plan agent may only represent taxpayers to the extent provided in section 10.3(e) of Circular 230. A registered tax

return preparer may only represent taxpayers to the extent provided in section 10.3(f) of Circular 230. See the line 5 instructions for restrictions

on tax matters partners. In most cases, the student practitioner’s (level k) authority is limited (for example, they may only practice under the

supervision of another practitioner).

List any specific deletions to the acts otherwise authorized in this power of attorney: --------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

92

For Privacy Act and Paperwork Reduction Act Notice, see the instructions. Form 2848 (Rev. 3-2012)

ISA


Form 2848 (Rev. 3-2012) Page 2

6 Retention/revocation of prior power(s) of attorney. The filing of this power of attorney automatically revokes all earlier power(s) of

attorney on file with the Internal Revenue Service for the same matters and years or periods covered by this document. If you do not

want to revoke a prior power of attorney, check here . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

YOU MUST ATTACH A COPY OF ANY POWER OF ATTORNEY YOU WANT TO REMAIN IN EFFECT.

7 Signature of taxpayer. If a tax matter concerns a year in which a joint return was filed, the husband and wife must each file a separate power

of attorney even if the same representative(s) is (are) being appointed. If signed by a corporate officer, partner, guardian, tax matters partner,

executor, receiver, administrator, or trustee on behalf of the taxpayer. I certify that I have the authority to execute this form on behalf of the

taxpayer.

IF NOT SIGNED AND DATED, THIS POWER OF ATTORNEY WILL BE RETURNED TO THE TAXPAYER.

------------------------------------------------------------------------------------- ---------------------- ---------------------------------------------------

Signature Date Title (if applicable)

-------------------------------------------------------- ----------------------------------------------------------------------------------

Print Name PIN Number Print name of taxpayer from line 1 if other than individual

Part II Declaration of Representative

Under penalties of perjury, I declare that:

I am not currently under suspension or disbarment from practice before the Internal Revenue Service;

I am aware of regulations contained in Circular 230 (31 CFR, Part 10), as amended, concerning the practice before the Internal Revenue Service;

I am authorized to represent the taxpayer identified in Part I for the matter(s) specified there; and

I am one of the following:

a

Attorney—a member in good standing of the bar of the highest court of the jurisdiction shown below.

b Certified Public Accountant—duly qualified to practice as a certified public accountant in the jurisdiction shown below.

c Enrolled Agent—enrolled as an agent under the requirements of Circular 230.

d Officer—a bona fide officer of the taxpayer’s organization.

e

f

John J. Doe 56789

Full-Time Employee—a full-time employee of the taxpayer.

Family Member—a member of the taxpayer’s immediate family (for example, spouse, parent, child, grandparent, grandchild, step-parent, stepchild,

brother, or sister).

g Enrolled Actuary—enrolled as an actuary by the Joint Board for the Enrollment of Actuaries under 29 U.S.C. 1242 (the authority to practice before

the Internal Revenue Service is limited by section 10.3(d) of Circular 230).

h Unenrolled Return Preparer—Your authority to practice before the Internal Revenue Service is limited. You must have been eligible to sign the

return under examination and have signed the return. See Notice 2011-6 and Special rules for registered tax return preparers and unenrolled

return preparers in the instructions.

i Registered Tax Return Preparer—registered as a tax return preparer under the requirements of section 10.4 of Circular 230. Your authority to

practice before the Internal Revenue Service is limited. You must have been eligible to sign the return under examination and have signed the

return. See Notice 2011-6 and Special rules for registered tax return preparers and unenrolled return preparers in the instructions.

k Student Attorney or CPA—receives permission to practice before the IRS by virtue of his/her status as a law, business, or accounting student

working in LITC or STCP under section 10.7(d) of Circular 230. See instructions for Part II for additional information and requirements.

r Enrolled Retirement Plan Agent—enrolled as a retirement plan agent under the requirements of Circular 230 (the authority to practice before the

Internal Revenue Service is limited by section 10.3(e)).

IF THIS DECLARATION OF REPRESENTATIVE IS NOT SIGNED AND DATED, THE POWER OF ATTORNEY WILL BE

RETURNED. REPRESENTATIVES MUST SIGN IN THE ORDER LISTED IN LINE 2 ABOVE. See the instructions for Part II.

Note: For designations d-f, enter your title, position, or relationship to the taxpayer in the “Licensing jurisdiction” column. See the instructions for Part II

for more information.

Bar, license, certification

Licensing jurisdiction registration, or

Designation—Insert (state) or other enrollment number

Signature

Date

above letter (ar) licensing authority (if applicable). See

(if applicable) instructions for Part II for

more information.

a New Jersey 0010000000

b New Jersey 002000000

c IRS 00100007-EA

93

Form 2848 (Rev. 3-2012)


Form 8821

Tax Information Authorization

(Rev. October 2011)

Do not sign this form unless all applicable lines have been completed.

Department of the Treasury

Do not use this form to request a copy or transcript of your tax return.

Internal Revenue Service

Instead, use Form 4506 or Form 4506-T.

1 Taxpayer information. Taxpayer(s) must sign and date this form on line 7.

Taxpayer name(s) and address (type or print)

John J. Doe

123 Main Street

Taxpayer identification number

Daytime telephone number

Anywhere, NJ 08666

732-274-1600

2 Appointee. If you wish to name more than one appointee, attach a list to this form.

Name and address

CAF No. 0000-8000R

PTIN

Telephone No.

The Firm of E. Martin Davidoff, Attorney at Law

P.O. Box 835

Dayton, New Jersey 08810-0835

Fax No.

123-45-6789

732-274-1600

732-274-1666

OMB No. 1545-1165

For IRS Use Only

Received by:

Name

Telephone

Function

Date

Plan number (if applicable)

Check if new: Address Telephone No. Fax No.

3 Tax matters. The appointee is authorized to inspect and/or receive confidential tax information in any office of the IRS for the

tax matters listed on this line. Do not use Form 8821 to request copies of tax returns.

(a) (b) (c) (d)

Type of Tax Tax Form Number Year(s) or Period(s) Specific Tax Matters (see instr.)

(Income, Employment, Excise, etc.)

or Civil Penalty (1040, 941, 720, etc.) (see the instructions for line 3)

2002 through 2014

Income 1040 All Years Included

Civil Penalty for ABC, Inc.

1/01/04 through 12/31/10

EIN#: 22-1234567 N/A All Years Included

4 Specific use not recorded on Centralized Authorization File (CAF). If the tax information authorization is for a specific

use not recorded on CAF, check this box. See the instructions on page 4. If you check this box, skip lines 5 and 6 . . . . . . .

5 Disclosure of tax information (you must check a box on line 5a or 5b unless the box on line 4 is checked):

a If you want copies of tax information, notices, and other written communications sent to the appointee on an ongoing

basis, check this box . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note. Appointees will no longer receive forms, publications and other related materials with the notices.

b If you do not want any copies of notices or communications sent to your appointee, check this box . . . . . . . . . . . . . . . . . . .

X

6 Retention/revocation of tax information authorizations. This tax information authorization automatically revokes all prior

authorizations for the same tax matters you listed on line 3 above unless you checked the box on line 4. If you do not want

to revoke a prior tax information authorization, you must attach a copy of any authorizations you want to remain in effect

and check this box . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

To revoke this tax information authorization, see the instructions on page 4.

7 Signature of taxpayer(s). If a tax matter applies to a joint return, either husband or wife must sign. If signed by a

corporate officer, partner, guardian, executor, receiver, administrator, trustee, or party other than the taxpayer, I certify

that I have the authority to execute this form with respect to the tax matters/periods on line 3 above.

IF NOT SIGNED AND DATED, THIS TAX INFORMATION AUTHORIZATION WILL BE RETURNED.

DO NOT SIGN THIS FORM IF IT IS BLANK OR INCOMPLETE.

Signature Date Signature Date

John J. Doe

Print Name Title (if applicable) Print Name Title (if applicable)

56789

PIN number for electronic signature

PIN number for electronic signature

ISA

For Privacy Act and Paperwork Reduction Act Notice, see page 4. Form 8821 (Rev. 10-2011)

94


Excerpts from the Internal Revenue Manual at www.irs.gov

21.3.7.1 (11-17-2010) Third Party Authorization




3. Different types of authorization authority are:

Representative - An individual that the taxpayer has authorized to represent them before the

IRS on a valid Form 2848, Power of Attorney and Declaration of Representative or Form

706, U.S. Estate Tax Return.

Appointee - An individual person or business entity the taxpayer appoints to receive and

inspect confidential tax return information on a valid Form 8821, Tax Information

Authorization.

Designee - An individual person that has been designated to receive and inspect confidential

tax return information through Oral Disclosure Consent (ODC) via telephone or Checkbox

election on a tax return.




21.3.7.5 (11-17-2010)

Form 2848, Power of Attorney and Declaration of Representative and

Form 8821, Taxpayer Information Authorization Overview

1. Form 2848, Power of Attorney and Declaration of Representative can only be granted to an

individual eligible to practice before the Internal Revenue Service (e.g., Attorney, CPA or

Enrolled Agent). For information on Powers of Attorney see IRS Publication 947,

Practice Before the IRS and Power of Attorney.

2. Form 8821, Tax Information Authorization, or equivalent, can appoint any third party to

receive and inspect account information for the tax matter(s) specified.

EMD COMMENT: Form 8821,Tax Information Authorization, or equivalent, can designate

any third party to receive and inspect account information for the tax matter(s) specified.

• Can be granted to an individual.


Can be granted to a business entity or firm (legal, accounting, tax preparation,

etc). When a business is the appointee, authority extends to the employees of

the business.

21.3.7.5.1 (09-23-2011) Essential Elements for Form 2848 and Form 8821

1. There are five essential elements needed to process the Form 2848 and/or Form 8821...




4. Essential elements are:

A. Essential element 1 The taxpayer's dated signature is required. An electronically signed,

printed or stamped signature is not acceptable..




95


Excerpts from the Internal Revenue Manual at www.irs.gov

(Continued)

When the taxpayer signs and dates the Form 2848 before the representative, the signature

dates of the taxpayer(s) and representative(s) must be within 45 days for domestic

authorizations...




B. Essential element 2 - Only applies to Form 2848. The representative's designation,

jurisdiction, signature and date are required. For multiple representatives listed on the

same form, only one signature date is required; however, all representatives must sign the

Form 2848.




C. Essential element 3 - Specific tax matter(s), i.e., type of tax or tax form number, is

required.




D. Essential element 4 - Clear identification of the taxpayer, i.e., name, address, taxpayer

identification number is required. The presence of two of the three identifiers is sufficient.

Research can be done to locate the third identifier.

E. Essential element 5 - Clear identification of the third party, i.e., name and address is

required. A CAF number is not required.

EMD COMMENT: Forms 8821, Tax Information Authorization, for the purpose of addressing

tax matters, do not have to be received within 60 days of the taxpayer's dated signature. See IRM

11.3.3.1.1(4), General Requirements for Disclosure to Designee . The taxpayer must sign and

date a TIA. The third party is not required to sign a TIA.

EMD COMMENT: Our firm’s practice for multiple years (on Forms 8821 or 2848) is to put,

for example: “2003 through 2009

All Years Included”

Instructions for Form 2848 (Rev. March 2012)

& 8821 (Rev. October 2011)

Power of Attorney and Declaration of Representative (Form 2848)

Joint returns. Joint filers must now complete and submit separate individual to receive

and inspect your confidential tax information.

Tax Information Authorization (Form 8821)

Each individual and/or entity must now file and sign a separate Form 8821.

96


97


98


Sample Status Sheet

GOALS of Johnny Blanchard

1) Stop Collection / Levies

2) Penalty Abatement ($40,000)

3) Refund of $6270 for 2001 Form 1040 barred by statute of limitations

4) Refund of $18,100 for 2002 Form 1040 barred by statute of limitations

5) Installment Agreement: $2,000 per month

6) Use FOIA with respect to when IRS received the 2001 and 2002 returns

7) Amount due based on Federal Tax Summary dated 3/26/09:

approximately $146,000

Procedural Status

1058A Notice of Intent to Levy Filed 08/25/08

Form 12153 Request for Due Process or Equivalency Hearing Filed 09/26/08 via fax

IRS Rec'd 09/29/08 via mail

Letter 3172 Notice of Federal Tax Lien Filing & Right to a Hearing Letter Date 09/04/2008

Form 12153 Request for Due Process or Equivalency Hearing Filed 09/26/08 via fax

IRS Rec'd 09/29/08 via mail

2007 Form 1040 Sent via FedEx on 3/18/09 to Hector Lopez, IRS Lisa confirmed receipt 3/19/09

2003, 2004 & 2005 Sent via FedEx on 3/18/09 to Hector Lopez, IRS Lisa confirmed receipt 3/19/09

Equivalent / CDP Hearing Met with Hector Lopez, Settlement Officer April 1, 2009

in Newark. Need additional information

to receive determination.

NOTICE CP59 IRS “Request for Your Tax Return”: 2007 Form 1040 April 13, 2009

Item Due

Due Date or follow-up

Confirmation of Johonny

Blanchard’s engagement with

Jones & Jones CPA

433A

CPAs to send out letter via fax & mail on 4/7/2009. On 4/8/09 Hector

Lopez confirmed receipt of our fax (was due by APRIL 13, 2009).

Client to clarify regarding business transaction (See Memo to file

10/27/08): Per conversation with Mr. Blanchard, he is on his 3 rd or 4 th

buyer for business transaction, now hoping to close sometime in late

March or early April. GAVE COPY OF 433-A completed by

Johonny Blanchard to Hector Lopez of IRS on April 1, 2009.

2008 Form 1040 On Extension, John to send me a copy of the extension

(4/21/09). Return is due October 15, 2009. He needs the K-1

from his company.

Business Transaction as of

4/20/09

Still working with same client since EMD & I spoke with John

on April 1 st regarding the status of the business transaction.

99

W:51\2011_April30_AAACPA_Galloway.Sample Status Sheet.wpd

April 25, 2011


100


E. MARTIN DAVIDOFF

ATTORNEY AT LAW

353 Georges Road - Suite K

P.O. Box 835

Dayton, NJ 08810-0835

EMD@taxattorneycpa.com

_____________

TEL: 732-274-1600

FAX: 732-274-1666

March 1, 2010

VIA CERTIFIED MAIL #7008281000011969999

Internal Revenue Service

ACS Support

P.O. Box 57

Bensalem, Pennsylvania 19020-0057

RE: Bob Turley

SS#: 123-45-6789

Forms 1040; 2005, 2007 and 2008

Forms 941: 3/31/05 through 9/30/08

To Whom It May Concern:

We represent the above-named Taxpayer and are in receipt of your Final Notice of Intent to Levy (Letter

1058) dated January 29, 2010 for the above-referenced Taxpayer for the above-referenced tax periods. To that

end, please find enclosed Form 12153, Request for a Collection Due Process Hearing along with Form 2848

empowering me to act on behalf of the Taxpayer.

We respectfully request that our Collection Due Process Hearing be held in person with an Appeals Officer

at the Newark, New Jersey, Philadelphia, Pennsylvania or New York City, New York Appeals Office of the

Internal Revenue Service.

Thank you very much for your attention to this matter.

Very truly yours,

E. Martin Davidoff

EMD:rb

encls.

cc: Mr. Bob Turley (via first class mail and e-mail w/encls.)

101


Request for a Collection Due Process or Equivalent Hearing

Use this form to request a Collection Due Process (CDP) or equivalent hearing with the IRS Office of

Appeals if you have been issued one of the following lien or levy notices:






Notice of Federal Tax Lien Filing and Your Right to a Hearing under IRC 6320,

Notice of Intent to Levy and Notice of Your Right to a Hearing,

Notice of Jeopardy Levy and Right of Appeal,

Notice of Levy on Your State Tax Refund,

Notice of Levy and Notice of Your Right to a Hearing.

Complete this form and send it to the address shown on your lien or levy notice. Include a

copy of your lien or levy notice to ensure proper handling of your request.

Call the phone number on the notice or 1-800-829-1040 if you are not sure about the correct address

or if you want to fax your request.

You can find a section explaining the deadline for requesting a Collection Due Process

hearing in this form's instructions. If you've missed the deadline for requesting a CDP

hearing, you must check line 6 (Equivalent Hearing) to request an equivalent hearing.

1. Taxpayer Name: (Taxpayer 1)

Taxpayer Identification Number 123-45-6789

Current Address 123 MAIN STREET

City

3. Taxpayer Name: (Taxpayer 2)

Bob Turley

ANYWHERE State NJ Zip Code 08666

2. Telephone Number and Best Time Home

am. pm.

to Call During Normal Business Work 732-274-1600 6:00 am. x pm.

Hours (Attorney phone)

Cell

am. pm.

Janet Turley

Taxpayer Identification Number

987-65-4321

Current Address

(If Different from

Address Above) City

State

Zip Code

4. Telephone Number and Best Time Home

am. pm.

to Call During Normal Business Work 732-274-1600 6:00 am. x pm.

Hours (Attorney phone)

Cell

am. pm.

5. Tax Information as Shown on the Lien or Levy Notice (If possible, attach a copy of the notice)

Type of Tax (Income,

Employment, Excise,

etc. or Civil Penalty)

Tax Form Number

(1040, 941, 720, etc)

Tax Period or Periods

Income 1040 2005, 2007 and 2008

Employment 941

3/31/05 through 9/30/08

ALL QUARTERS INCLUDED

ISA

Form 12153 (Rev. 3-2011)

102

www.irs.gov

Department of the Treasury - Internal Revenue Service


6.

Request for a Collection Due Process or Equivalent Hearing

Basis for Hearing Request (Both boxes can be checked if you have received both a lien

and levy notice)

Filed Notice of Federal Tax Lien

Proposed Levy or Actual Levy

7. Equivalent Hearing (See the instructions for more information on Equivalent Hearings)

x I would like an Equivalent Hearing - I would like a hearing equivalent to a CDP Hearing if my

request for a CDP hearing does not meet the requirements for a timely CDP Hearing.

8. Check the most appropriate box for the reason you disagree with the filing of the lien or the levy.

See page 4 of this form for examples. You can add more pages if you don't have enough space.

If, during your CDP Hearing, you think you would like to discuss a Collection Alternative to the

action proposed by the Collection function it is recommended you submit a completed Form

433A (Individual) and/or Form 433B (Business), as appropriate, with this form. See www.irs.gov

for copies of the forms.

Collection Alternative x Installment Agreement Offer in Compromise I Cannot Pay Balance9

Lien Subordination Discharge

Withdrawal

Please explain:

x

My Spouse Is Responsible Innocent Spouse Relief (Please attach Form 8857,

Request for Innocent Spouse Relief, to your request.)

Other (For examples, see page 4)

x

Reason (You must provide a reason for the dispute or your request for a CDP hearing will not be honored. Use as

much space as you need to explain the reason for your request. Attach extra pages if necessary.):

See Detailed Explanation Attached.

9. Signatures

SIGN HERE

I understand the CDP hearing and any subsequent judicial review will suspend the statutory

period of limitations for collection action. I also understand my representative or I must sign and

date this request before the IRS Office of Appeals can accept it. If you are signing as an officer

of a company add your title (president, secretary, etc.) behind your signature.

Taxpayer 1's Signature Date

Taxpayer 2's Signature (if a joint request, both must sign) Date

x

I request my CDP hearing be held with my authorized representative (attach a copy of Form

2848)

Authorized Representative's Signature Authorized Representative's Name

Telephone Number

E. Martin Davidoff, CPA, Esq. 732-274-1600

IRS Use Only

IRS Employee (Print) Employee Telephone Number IRS Received Date

Form 12153 (Rev. 3-2011)

103

www.irs.gov

Department of the Treasury - Internal Revenue Service


Form 12153

Request for a Collection Due Process Hearing

Bob & Janet Turley

Mr. & Mrs. Bob Turley (hereinafter the "Taxpayers") has made several attempts to discuss

this case with Mr. Pepitone. Mr. Pepitone has never provided the Taxpayers with a convenient time

for either of them to call Mr. Pepitone.

We believe this case can be easily handled through an installment agreement. Please note

that we are aware that there are unfiled Form 941s for the first three quarters of 20XX. All of these

forms will be filed with Mr. Pepitone on or before October 31, 20XX. At that time, we will make

appropriate arrangements to enter into an installment agreement on behalf of the Taxpayer. Please

also be advised that it is the intent of the Taxpayer to engage the services of a payroll tax service.

Such a tax service would then impound the funds for payroll taxes upon the issuance of each

paycheck.

Please note that the Taxpayers have been using the services of Mr. Tony Kubek for over 20

years. In the middle of 2001, Mr. Kubek retired. Although the Taxpayers have engaged the services

of the successor company to Mr. Kubek, things have not quite been the same. The Taxpayers have

now figured out how to handle all of these problems, with some assistance from our firm.

We respectfully request that our Collection Due Process Hearing be held in person with an

Appeals Officer at the Newark, New Jersey, Philadelphia, Pennsylvania or New York City, New

York Appeals Office of the Internal Revenue Service.

Additional Notes Regarding forms 12153

1. Equivalent Hearings are no longer automatically provided if you do not qualify for a

statutory CDP hearing. This is as a result of regulatory changes in the fall of 2006. If a

CDP request is made more then one year beyond the original due date, then there will be

no CDP hearing or equivalent thereto.

2. On May 25, 2007, President Bush signed The Small Business and Work Opportunity Tax

Act (P.L. 110-28). Under new Section 6330(h) added by that legislation, a CDP hearing

is no longer an entitlement if the particular taxpayer had previously requested a CDP

hearing with respect to unpaid employment taxes arising in the two-year period before

the beginning of the taxable period to which the employment tax levy is served.

104


Information You Need To Know When Requesting A Collection Due Process Hearing

What Is the Deadline for Requesting a Timely Collection Due Process (CDP) Hearing?

• Your request for a CDP hearing about a Federal Tax Lien filing must be postmarked by the date indicated

in the Notice of Federal Tax Lien Filing and Your Right to a Hearing under IRC 6320 (lien notice).

• Your request for a CDP hearing about a levy must be postmarked within 30 days after the date of the

Notice of Intent to Levy and Notice of Your Right to a Hearing (levy notice) or Notice of Your Right to a

Hearing After an Actual Levy.

Your timely request for a CDP hearing will prohibit levy action in most cases. A timely request for CDP hearing will also

suspend the 10-year period we have, by law, to collect your taxes. Both the prohibition on levy and the suspension of the

10-year period will last until the determination the IRS Office of Appeals makes about your disagreement is final. The

amount of time the suspension is in effect will be added to the time remaining in the 10-year period. For example, if the

10-year period is suspended for six months, the time left in the period we have to collect taxes will be extended by six

months.

You can go to court to appeal the CDP determination the IRS Office of Appeals makes about your disagreement.

What Is an Equivalent Hearing?

If you still want a hearing with the IRS Office of Appeals after the deadline for requesting a timely CDP hearing has

passed, you can use this form to request an equivalent hearing. You must check the Equivalent Hearing box on line 6 of

the form to request an equivalent hearing. An equivalent hearing request does not prohibit levy or suspend the

10-year period for collecting your taxes; also, you cannot go to court to appeal the IRS Office of Appeals'

decision about your disagreement. You must request an equivalent hearing within the following timeframe:

• Lien Notice-- one year plus five business days from the filing date of the Notice of Federal Tax Lien.

• Levy Notice-- one year from the date of the levy notice.

• Your request for a CDP levy hearing, whether timely or Equivalent, does not prohibit the Service from filing a

Notice of Federal Tax Lien.

Where Should You File Your CDP or Equivalent Hearing Request?

File your request by mail at the address on your lien notice or levy notice. You may also fax your request. Call the

telephone number on the lien or levy notice to ask for the fax number. Do not send your CDP or equivalent hearing

request directly to the IRS Office of Appeals, it must be sent to the address on the lien or levy notice. If you send

your request directly to Appeals it may result in your request not being considered a timely request. Depending

upon your issue the originating function may contact you in an attempt to resolve the issue(s) raised in your

request prior to forwarding your request to Appeals.

Where Can You Get Help?

You can call the telephone number on the lien or levy notice with your questions about requesting a hearing. The contact

person listed on the notice or other representative can access your tax information and answer your questions.

In addition, you may qualify for representation by a low-income taxpayer clinic for free or nominal charge. Our Publication

4134, Low Income Taxpayer Clinic List, provides information on clinics in your area.

If you are experiencing economic harm, the Taxpayer Advocate Service (TAS) may be able to help you resolve your

problems with the IRS. TAS cannot extend the time you have to request a CDP or equivalent hearing. See Publication

594, The IRS Collection Process, or visit www.irs.gov/advocate/index-html. You also can call 1-877-777-4778 for TAS

assistance.

Note The IRS Office of Appeals will not consider frivolous requests. You can find examples of frivolous reasons for

requesting a hearing or disagreeing with a tax assessment in Publication 2105, Why do I have to Pay Taxes?, or at

www.irs.gov by typing "frivolous" into the search engine.

You can get copies of tax forms, schedules, instructions, publications, and notices at www.irs.gov, at

your local IRS office, or by calling toll-free 1-800-TAX-FORM (829-3676).

Form 12153 (Rev. 3-2011)

Catalog Number 26685D

105

www.irs.gov

Department of the Treasury - Internal Revenue Service


Information You Need To Know When Requesting A Collection Due Process Hearing

What Are Examples of Reasons for Requesting a Hearing?

You will have to explain your reason for requesting a hearinq when you make your request. Below are examples of

reasons for requesting a hearing.

You want a collection alternative-- ''I would like to propose a different way to pay the money I owe.'' Common

collection alternatives include:




Full payment-- you pay your taxes by personal check, cashier's check, money order, or credit card.

Installment Agreement-- you pay your taxes fully or partially by making monthly payments.

Offer in Compromise-- you offer to make a payment or payments to settle your tax liability for less than the

full amount you owe.

"I cannot pay my taxes." Some possible reasons why you cannot pay your taxes are: (1) you have a terminal illness or

excessive medical bills; (2) your only source of income is Social Security payments, welfare payments, or unemployment

benefit payments; (3) you are unemployed with little or no income; (4) you have reasonable expenses exceeding your

income; or (5) you have some other hardship condition. The IRS Office of Appeals may consider freezing collection

action until your circumstances improve. Penalty and interest will continue to accrue on the unpaid balance.

You want action taken about the filing of the tax lien against your property-- You can get a Federal Tax Lien

released if you pay your taxes in full. You also may request a lien subordination, discharge, or withdrawal. See

www.irs.gov for more information.

When you request lien subordination, you are asking the IRS to make a Federal Tax Lien secondary to a non-IRS lien.

For example, you may ask for a subordination of the Federal Tax Lien to get a refinancing mortgage on your house or

other real property you own. You would ask to make the Federal Tax Lien secondary to the mortgage, even though the

mortgage came after the tax lien filing. The IRS Office of Appeals would consider lien subordination, in this example, if

you used the mortgage proceeds to pay your taxes.

When you request a lien discharge, you are asking the IRS to remove a Federal Tax Lien from a specific property. For

example, you may ask for a discharge of the Federal Tax Lien in order to sell your house if you use all of the sale

proceeds to pay your taxes even though the sale proceeds will not fully pay all of the tax you owe.

When you request a lien withdrawal, you are asking the IRS to remove the Notice of Federal Tax Lien (NFTL)

information from public records because you believe the NFTL should not have been filed. For example, you may ask for

a withdrawal of the filing of the NFTL if you believe the IRS filed the NFTL prematurely or did not follow procedures, or you

have entered into an installment agreement and the installment agreement does not provide for the filing of the NFTL. A

withdrawal does not remove the lien from your IRS records.

Your spouse is responsible-- "My spouse (or former spouse) is responsible for all or part of the tax liability." You

may believe that your spouse or former spouse is the only one responsible for all or a part of the tax liability. If this is the

case, you are requesting a hearing so you can receive relief as an innocent spouse. You should complete and attach

Form 8857, Request for Innocent Spouse Relief, to your hearing request.

Other Reasons-- "I am not liable for (I don't owe) all or part of the taxes." You can raise a disagreement about the

amount you owe only if you did not receive a deficiency notice for the liability (a notice explaining why you owe taxes-it

gives you the right to challenge in court, within a specific timeframe, the additional tax the IRS says you owe), or if you

have not had another prior opportunity to disagree with the amount you owe.

"I do not believe I should be responsible for penalties." The IRS Office of Appeals may remove all or part of the

penalties if you have a reasonable cause for not paying or not filing on time. See Notice 746, Information About Your

Notice, Penalty and Interest for what is reasonable cause for removing penalties.

''I have already paid all or part of my taxes.'' You disagree with the amount the IRS says you haven't paid if you think

you have not received credit for payments you have already made.

See Publication 594, The IRS Collection Process, for more information on the following topics:

Installment Agreements and Offers in Compromise; Lien Subordination, Discharge, and Withdrawal;

Innocent Spouse Relief; Temporarily Delay Collection; and belief that tax bill is wrong.

Form 12153 (Rev. 3-2011)

Catalog Number 26685D

106

www.irs.gov

Department of the Treasury - Internal Revenue Service


Collection Appeal Request

1. Taxpayer’s Name 2. Representative: (Form 2848, Power of

Attorney Attached)

JOHN J. and JANE J. DOE

3. SSN/EIN 4. Taxpayer’s Business Phone 5. Taxpayer’s Home Phone 6. Representative’s Phone

7. Taxpayer’s Street Address

E. Martin Davidoff

123-45-6789 & 987-65-4321 732-274-1600 732-274-1600

123 MAIN STREET

xxxxxx

Attorney

8. City 9. State 10. Zip Code

ANYWHERE NJ 08666

11. Type of Tax (Tax Form) 12. Tax Periods Being Appealed 13. Tax Due

Income 2002, 2003, 2004

Collection Action(s) Appealed

14. Please Check the Collection Action(s) You’re Appealing:

x


Federal Tax Lien

Levy or Notice of Levy



Denial of Installment Agreement

Termination of Installment Agreement

Seizure

Explanation

15. Please explain why you disagree with the collection action(s) you checked above and explain how you would resolve your tax problem. Attach additional pages

if needed. Attach copies of any documents that you think will support your position.

See Attached.

Under penalties of perjury, I declare that I have examined this request and the attached documents, and to the best of my knowledge and belief, they are true,

correct and complete. A submission by a representative, other than the taxpayer, is based on all information of which preparer has any knowledge.

16. Taxpayer’s or Authorized Representative’s Signature 17. Date

18. Collection Manager’s Signature 19. Date Received

Form 9423 (Rev. 01-1999) Department of the Treasury - Internal Revenue Service

ISA

(Over)

STF FED7249F.1

107


Collection Appeal Rights

FOR LIENS, LEVIES, SEIZURES, AND DENIAL OR TERMINATION OF INSTALLMENT AGREEMENT

You may appeal a Notice of Federal Tax Lien, levy, seizure, or denial or termination of an installment

agreement under these procedures. However, if you request an appeal after IRS makes a seizure, you must

appeal to the Collection manager within 10 business days after the Notice of Seizure is provided to you or

left at your home or business.

How to Appeal If You Disagree With One of These Actions

1. If you disagree with the decision of the Revenue Officer, and wish to appeal, you must first request a

conference with a Collection manager.

2. If you do not resolve your disagreement with the Collection manager, you may request Appeals consideration

by completing Form 9423, Collection Appeal Request.

3. On the Form 9423, check the Collection action(s) you disagree with and explain why you disagree. You must

also explain your solution to resolve your tax problem. THE COLLECTION OFFICE MUST RECEIVE YOUR

REQUEST FOR AN APPEAL WITHIN 2 DAYS OF YOUR CONFERENCE WITH THE COLLECTION MANAGER

OR WE WILL RESUME COLLECTION ACTION.

What will happen when you appeal your case

Normally, we will stop the collection action(s) you disagree with until your appeal is settled, unless we have

reason to believe that collection of the amount owed is at risk.

You may have a representative

You may represent yourself at your Appeals conference or you may be represented by an attorney, certified

public accountant, or a person enrolled to practice before the IRS. If you want your representative to appear

without you, you must provide a properly completed Form 2848, Power of Attorney and Declaration of

Representative. You can obtain Form 2848 from your local IRS office or by calling 1-800-829-3676.

Decision on the appeal

Once the Appeals Officer makes a decision on your case, that decision is binding on both you and the IRS. This

means that both you and the IRS are required to accept the decision and live up to its terms.

Note: Providing false information, failing to provide all pertinent information, or fraud will void Appeal’s decision.

STF FED7249F.2

108


John J. and Jane Doe

Form 9423 Collection Appeal Request

Soc.Sec.#s: 123-45-6789 & 987-65-4321

Question 15 - Explanation:

Taxpayer has paid all of his taxes and interest for each of the periods above. The only amounts due

are penalties, and interest on penalties. All of the late filing and late payment penalties are subject

to appeal and we believe that the penalties will be abated in full on appeal. The only penalties not

subject to appeal, estimated tax penalties, total $6,945. The Taxpayer can forward a check to

Revenue Officer Smith for that amount plus the interest thereon. Please provide us with the

computations.

Accordingly, the Internal Revenue Service is contemplating placing a lien on a Taxpayer who owes

(or shortly will owe) no money to the Internal Revenue Service. Placing such a lien on the Taxpayer

prior to their opportunity to have a full hearing on the matter with an Appeals Officer appears to be

premature and inappropriate.

Please note that Mr. Doe works in the real estate field. If a lien is placed against Mr. Doe, it will

affect his business and, reduce the amount of tax that he will pay to the Internal Revenue Service in

future years. Accordingly, this is not in the best interest of either the Taxpayers or the Internal

Revenue Service.

We understand that the Federal tax lien has not yet taken place and that we will have our Collection

Appeal Request hearing prior to the filing of that lien.

NOTE FORM 9423 INSTRUCTIONS:

THE COLLECTION OFFICE MUST RECEIVE YOUR REQUEST FOR AN APPEAL

WITHIN 2 DAYS OF YOUR CONFERENCE WITH THE COLLECTION MANAGER

OR WE WILL RESUME COLLECTION ACTION.

109


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E. Martin Davidoff, CPA, Esq. Chapter 4

E. Martin Davidoff, CPA, Esq. is a sole proprietor in Dayton, NJ, with more than 30 years experience practicing as a CPA

and tax attorney. He founded the IRS Tax Liaison Committee of the American Association of Attorney-CPAs, and is a past

president of the AAA-CPA.

IRS Appeals in Collection Matters

The most underutilized arm of the

Internal Revenue Service with

respect to Taxpayer collection

issues is the IRS Office of Appeals

(“Appeals”). This office can be used

to appeal threatened levies and liens,

denials of installment agreements, and

denied offers to compromise one’s tax.

Understanding the processes and tools

available is critical to a practitioner’s

success in this specialty.

Generally, Appeals functions are

divided into two categories: i) assessment

issues and ii) collection issues. Appeals’

officers have become specialized and

most officers deal with either assessment

issues or collection issues, but not both.

Appeals of examination findings, trust

fund assessments, and denials of claims

for refund all fall within the area of

assessment issues. Appeals’ officers

working on collection issues are often

referred to as Settlement Officers.

Other than appeals of Offers in

Compromise (“OICs”), there are two

primary procedures to appeal a Tax

Collection matter:

■■

Collection Due Process

(“CDP”) Appeals (form 12153)

■■The Collection Appeals Program

(“CAP”; form 9423)

CAP is the only methodology that can

be used to head off the filing of a Notice

of Federal Tax Lien (“NFTL”). The

CDP Appeal can only be filed in response

to the filing of the NFTL or when a Levy

is threatened by the IRS. That threat

of levy often comes in the form of the

Letter 1058 which states prominently,

“NOTICE OF INTENT TO LEVY

AND NOTICE OF YOUR RIGHT TO

A HEARING.” Providing advance notice

of levy is required by Internal Revenue

Code (“IRC”) §6330. Such notices are

10 I NOVEMBER/DECEMBER 2011 www.taxcpecourse.com

always sent via Certified Mail. OICs

are appealed through a process clearly

delineated on OIC rejection letters and

will not be discussed in this article.

CDP Hearings

The biggest mistake made by taxpayers

and practitioners alike is not responding

to the IRC §6330 notice within the

30 days required to fully protect the taxpayer’s

rights. In such hearings, Appeals

is empowered to consider ALL collection

alternatives. Responding to the §6330

notice is relatively simple. One need only

complete the form 12153. The most recent

revision (March of 2011) provides

comprehensive guidance. Considerations

when dealing with a §6330 notice and

submitting form 12153 are set forth below,

some of which will be more fully discussed

in the next edition of this column.

1 . Determine whether or not to respond

within 30 days. The IRS has developed

a process to consider untimely-filed

requests for CDP hearings. Such

hearings are administrative, not statutory.

Therefore:

a.) The statute of limitations for

the IRS to collect the tax continues

to run; and

b.) The Taxpayer does not have

the right to pursue the matter in

the U.S. Tax Court.

IRS policies are that such administrative

hearings should be equivalent

to the CDP hearing and, as do

CDP hearings, should consider all

collection alternatives. Accordingly,

such administrative hearings have

been named “Equivalent Hearings,”

which can be requested at item #7 of

110

form 12153 up to 1 year after the taxpayer

is provided the §6330 Notice.

So, if a client is not willing

to take the matter to Tax Court,

would there be any reason to file

within 30 days and suspend the

running of the statute of limitations?

One could argue (correctly,

I believe), that the possibility of a

U.S. Tax Court appeal from the

CDP hearing puts added pressure

on Appeals to resolve the matter.

Often, the 30-day period is

gone before the practitioner gets involved.

So, it is important for a practitioner

to obtain IRS account transcripts

to see when the §6330 notice

was issued so that the time to file an

Equivalent Hearing does not pass

by without consideration of action.

When one is deep into the 10-

year IRS limitations period to collect

the tax, filing for a CDP hearing

may be considered risky as the statute

may expire without the hearing

request. This has become rare, as

the IRS has become more consistent

about issuing notices of intent to

levy early in the collection process.

Be careful about missing deadlines.

Sometimes practitioners will

call the Revenue Officer and/or their

manager upon the receipt of a Letter

1058 or other notice of intent to

levy. While negotiating or playing

telephone tag, the deadline to appeal

could go by and weaken your negotiating

position significantly.

2. Consider requesting a face-to-face/inperson

conference at a local Appeals office.

Generally, our office requests

a face-to-face hearing on all form

12153 filings (also referred to as

“CDP requests”). Why not? Our


experience is that we secure better

results when meeting in person.

Our office is located in central New

Jersey. Accordingly, we find any of

three offices (Newark, New York

City, or Philadelphia) relatively

convenient. I believe our flexibility

regarding location makes it easier

for the IRS to grant our requests.

More information on face-to-face

conferences for CDP hearing requests,

and the IRS reluctance to grant requests

for such hearings, will be found

in the next edition of this column.

3. Seek Penalty Abatements. Whenever

there is money due to the IRS, the

abatement of penalties should be a

consideration. Even if you cannot

elaborate on the detail of reasonable

cause within the form 12153 attachment,

you should request abatement

and provide an overview of the reasonable

causes and state clearly that

you are willing to provide additional

substantiation.

4. Clearly State the Desired Results

You want to make clear what you want

the Appeals Officer to do. Accordingly,

your attachment should state

the desired results. That attachment

should also indicate why you were not

able to resolve the problem (i.e. The

Revenue Officer sent the threat to

levy without ever calling the taxpayer

or his/her representative), provide all

pertinent facts, and identify the potential

issues for consideration.

5. Consider requesting that the hearing be

recorded. To preserve a record for the

Tax Court, you may wish to consider

requesting that the hearing be re

corded. You have the right to do so.

By making this request, you will be assured

that the Appeals manager will be

in attendance. I have not used this tool

personally, but I do know it is being

used regularly by practitioners, particularly

in larger, more complex cases.

6. Other technicalities. Include statements

in your attachment that make

it clear that:

■■

You reserve the right to amend

the request;

■■You reserve the right to supplement

the CDP request

■■There shall be no ex-parte

communications (communication to

influence a decision-making official

off the record) between Appeals and

other IRS employees working on the

case, without your express written

permission

■■Don’t forget to include your

power of attorney for the client,

form 2848

7. Who attends? As with nearly all of my

representation before the IRS, I will

attend alone or with a member of my

staff. In the rare instances that my client

attends an IRS conference/hearing,

I make the decision. I have had

situations wherein my clients insisted

on attending. In such instances, consideration

should be given to whether

or not to retain the client. My purpose

in bringing staff is to either provide

training, have someone along

with me who is more knowledgeable

of the factual nuances and intricacies

of the case, and/or someone whose

personality will assist in the resolution

of the matter.

CAP Appeals

CAP Appeals enable a taxpayer/

practitioner to Appeal a specific

action or proposed action of the IRS.

Some considerations with respect to

CAP Appeals:

1. Only the specific action or proposed action is

evaluated by the Settlement Officer.

The Settlement Officer will not

consider all collection alternatives.

However, some Settlement Officers

will tell you that they are only

doing an “administrative review”

to determine whether the IRS

followed the requisite procedures

in deciding to take or threaten the

action being appealed. Under the

Internal Revenue Manual (“IRM”),

this is simply not true in my opinion.

The Settlement Officer is to put

himself/herself in the position of

the IRS employee and determine

whether the action is the appropriate

action to be taken considering all

facts and circumstances.

111

2. CAP is an expedited procedure in which

the Settlement Officer is required to

have the hearing within five days of

his/her receipt. However, one never

knows when the officer will actually

“receive” the case. The five-day rule

brings on unfair and extraordinary

results, often under the pretense

of doing the Taxpayer a ‘favor’ by

expediting the case. For example, you

could receive a call from a Settlement

Officer, have what you believe is

a preliminary conversation to the

hearing, and then be told that the

Settlement Officer is finding in favor

of the IRS action. Effectively, you

may not have realized that you had

the hearing during that conversation!

Accordingly, you need to clarify from

the beginning in all conversations

whether you are having the hearing

or just trying to set up a mutually

convenient time for one. Also, if you

are planning to be away from the

office for an extended period, you

may want to contact Appeals to make

sure that the hearing is not scheduled

while you are unavailable. The

IRS will consider your unavailability

for more than five days,

effectively, a forfeiture of your

hearing rights.

3. Normally, face-to-face hearings will

be permitted in local IRS offices.

However, it is very rare that a Service

Center CAP will be transferred for a

face-to-face hearing.

4. The CAP Program is used to appeal

rejections of installment agreements

(IRC §7122(e)) and proposed

terminations of installment

agreements (IRC 6159(e)).

The details of IRS procedures

and practices relating to Appeals

change frequently. For that reason,

you should regularly refer to Section

8 of the IRM, which covers the

Appeals function of the IRS and can

be found online at: http://www.irs.

gov/irm/part8/index.html. See also

IRS Publications 594 and 1660.

Contact E. Martin Davidoff, CPA, Esq. at

emd@taxattorneycpa.com and his firm’s Web site

can be found at www.taxattorneycpa.com.

By Tax Practitioners ... For Tax Practitioners NOVEMBER/DECEMBER 2011 I 11


E. MARTIN DAVIDOFF

ATTORNEY AT LAW

353 Georges Road - Suite K

P.O. Box 835

Dayton, NJ 08810-0835

EMD@taxattorneycpa.com

_____________

TEL: 732-274-1600

FAX: 732-274-1666

December 20, 2005

VIA CERTIFIED MAIL #70050390000151327296

Mrs. S. Lopez

Internal Revenue Service

100 Dey Place

Edison, NJ 08817

Re:

Whitey & Joan Ford

SS#s: 123-45-6789 & 987-65-4321

Forms 1040: 1997 through 2003

Dear Mrs. Lopez:

I am in receipt of your letter dated December 6, 2005 rejecting our request for penalty abatement for the

years 1997 through 2003 for the above-nam ed Taxpay ers. Please note that we wish to receive further

consideration by an Appeals Officer. In regard to that, I am providing you the following information:

1. I would like to appeal your findings.

2. The name and address of the Taxpayer(s) is:

Whitey and Joan Ford

123 Main Street

Anywhere, New Jersey 08666

3. The outstanding facts supporting our position are included in our letter to you of October 31, 2005,

a copy of which is attached to this letter.

Under the penalty of perjury, I declare that the facts presented in the accompanying statement are, to the

best of my knowledge and belief, true, correct, and complete.

Thank you very much for your attention to this matter.

Very truly yours,

Encl.

cc: Mr. and Mrs. Whitey Ford (w/out encl.)

E. Martin Davidoff

112


E. MARTIN DAVIDOFF

ATTORNEY AT LAW

353 Georges Road - Suite K

P.O. Box 835

Dayton, NJ 08810-0835

EMD@taxattorneycpa.com

_____________

TEL: 732-274-1600

FAX: 732-274-1666

January 5, 2009

VIA FEDERAL EXPRESS

Internal Revenue Service

Attn: E:3:SF:30

44 S Clinton Avenue

Station Plaza #3

Trenton, New Jersey 08609

[See Publication 3498]

RE:John Doe

Taxpayer ID# 123-45-6789

Form 1040: 2005

To Whom It May Concern:

We hereby protest certain findings of the examining agent set forth in the thirty-day letter dated

December 14, 2008 and the accompanying examination report attached hereto, the response to which has been

extended by James E. O’Hara until February 6, 2009.

1. Statement of Appeal

We wish to appeal such findings to the Office of the Regional Director of Appeals and we request

a conference in that office.

2. Name, Address and Daytime Phone Number

John Doe

123 Main Street

Anywhere, New Jersey 08876

Taxpayer ID# 123-45-6789

Daytime Telephone Number:

Please note that the Taxpayer is represented by me and I may be reached at 732-274-1600. In my

absence, Fanny Mae, my paralegal, is familiar with the case and will be in a position to schedule

specific times for an appeals officer to speak with me.

3. Date and Symbols of Transmittal Letter

The date and symbols of the letter transmitting the proposed adjustments are as follows:

August 14, 2008

Refer Reply to: E:1403:30:SF

Letter 950(Rev 2-2008)

113


Internal Revenue Service

January 5, 2009

Page 2

4. Tax Periods Involved

Taxable year ended December 31, 2005

5. Adjustments with which the Taxpayer Do Not Agree

John Doe (the “Taxpayer”) disputes the adjustments identified in Form 4549-A, which would

increase the Taxpayers’ taxable income by $356,620 for December 31, 2005. The Taxpayer also

disputes the assessment of the Accuracy-IRS 662 penalty and that the proposed assessment of such

penalty is inconsistent with the Taxpayer’s previously agreed assessments.

In our analysis below, we are addressing the issues raised in Revenue Agent Jones’ 30-page

Explanation of Items, Form 886A, set forth as part of the report accompanying the adjustments to the

net income flowing through to the Taxpayer as the sole shareholder of ABC, Inc.

6. Statement of Facts, Law and Supporting Arguments.

A. Overview

[Insert Appropriate Language]

The undersigned hereby submits this protest along with the accompanying documents but does not know

personally that the facts contained herein are true and complete. However, I declare that the facts presented

herein are, to the best of my knowledge and belief, true, correct and complete.

A power of attorney (Form 2848) authorizing the undersigned to represent the Taxpayer in this matter

is enclosed.

Respectfully submitted,

EMD/saf

Encls.

cc: John Doe (via first class mail)

E. Martin Davidoff

114


Department of the Treasury - Internal Revenue Service

Request for Taxpayer Advocate Service Assistance

(And Application for Taxpayer Assistance Order)

OMB No. 1545-1504

Form 911

(Rev. 5-2011)

Section I Taxpayer Information (See Pages 3 and 4 for Form 911 Filing Requirements and Instructions for Completing this Form.)

1a. Your name as shown on tax return 1b. Taxpayer Identifying Number (SSN, ITIN, EIN)

JOHN J. DOE 123-45-6789

2a. Spouse's name as shown on tax return (if applicable) 2b. Spouse's Taxpayer Identifying Number (SSN, ITIN)

JANE J. DOE 987-65-4321

3a. Your current street address (Number, Street, & Apt. Number)

123 MAIN STREET

3b. City 3c. State (or Foreign Country) 3d. ZIP code

ANYWHERE NJ 08666

4. Fax number (if applicable) 5. Email address

of representative

732-274-1666 of representative: EMD@taxattorneycpa.com

6. Tax form(s) 7. Tax period(s)

1040 2006

8. Person to contact 9a. Daytime phone number 9b.

Check here if you consent to

E. Martin Davidoff, CPA, Esq. 732-274-1600

x

have confidential information

10. Best time to call

about your tax issue left on your

Check if Cell Phone

answering machine or voice

11:00 a.m. to 7:00 p.m.

message at this number.

11. Indicate the special communication needs you require (if applicable)

TTY/TDD Line

Interpreter - Specify language other than English (including sign language)

Other (please specify)

12a. Please describe the tax issue you are experiencing and any difficulties it may be creating

(If more space is needed, attach additional sheets.)

SEE ATTACHED ADDENDUM

12b. Please describe the relief/assistance you are requesting (If more space is needed, attach additional sheets.)

1. We request that the IRS allow the release of $4,718 from either levy on July 29, 2006 and continue to do soeach

month until the case in Appeals is heard and completed.

2. We also request that the IRS be responsible for all legal fees incurred as a result of this wrongdoing by Mr. Maris

on behalf of the Internal Revenue Service Collection Division.

I understand that Taxpayer Advocate Service employees may contact third parties in order to respond to this request and I authorize

such contacts to be made. Further, by authorizing the Taxpayer Advocate Service to contact third parties, I understand that I will not

receive notice, pursuant to section 7602(c) of the Internal Revenue Code, of third parties contacted in connection with this request.

13a. Signature of Taxpayer or Corporate Officer, and title, if applicable 13b. Date signed

14a. Signature of spouse 14b. Date signed

Section II Representative Information (Attach Form 2848 if not already on file with the IRS.)

1. Name of authorized representative 2. Centralized Authorization File (CAF) number

E. Martin Davidoff, CPA, Esq. 2000-11-1111R

3. Current mailing address 4. Daytime phone number

E. Martin Davidoff, Attorney at Law

P.O. Box 835

Dayton, NJ 08810

732-274-1600

5. Fax number

732-274-1666

6. Signature of representative 7. Date signed

Check if

Cell Phone

ISA

115

www.irs.gov Form 911 (Rev. 5-2011)


116


117


E. MARTIN DAVIDOFF

ATTORNEY AT LAW

353 Georges Road - Suite K

P.O. Box 835

Dayton, NJ 08810-0835

EM D@ taxattorneycpa.com

_____________

TEL: 732-274-1600

FAX: 732-274-1666

January 5, 2009

VIA CERTIFIED MAIL 70073020000075593190

Ms. Gimme Moore, Revenue Officer

Internal Revenue Service

100 Dey Place

Edison, NJ 08817

Re:

Steinbrenner Enterprises, Inc.

EIN: 12-3456789

Forms 941; 9/30/2006

Dear Ms. Moore:

Please find enclosed check # 1555 in the amount of $500. This check is to be applied to income and

payroll taxes withheld from employees (i.e. trust funds) for the following period:

Quarter Ended

Amount

September 30, 2006 $500.00

Please note that no portion of the above payment should be applied to the employer share of FICA, interest

or penalties with respect to the period above.

Thank you for your attention to this matter.

Very truly yours,

EMD:saf

Encl.

E. Martin Davidoff

cc: Steinbrenner Enterprises, Inc. (w/encl.; via first class mail)

Mr. Yogi Berra (w/encl.; via first class mail)

118


E. MARTIN DAVIDOFF

ATTORNEY AT LAW

353 Georges Road - Suite K

P.O. Box 835

Dayton, NJ 08810-0835

EMD@taxattorneycpa.com

_____________

TEL: 732-274-1600

FAX: 732-274-1666

December 5, 2011

VIA FACSIMILE

Mr. Jeffrey Austin

Internal Revenue Service

Disclosure Scanning Operation - Stop 93A

P.O. Box 621506

Atlanta, GA 30362-3006

Tel: 973-921-4033

Fax: 973-921-4352

RE: ABC Company, Inc.

EIN: 22-1234567

RESPONSE REQUIRED UNDER SECTION 7602(c)(2)

Dear Mr. Austin:

In accordance with section 7602(c)(2) of the Internal Revenue Code, I hereby request on behalf of the

above-named Taxpayer a record of all persons contacted with respect to the determination of any tax liability

against the above-nam ed Taxpayer for any taxable peri od or y ear through this date. As the Taxpayer's

representative, I ask that you transmit the record to my office, with a copy to the Taxpayer.

Please see that we receive a response with seven (7) days of your receipt of this letter.

Please note that we will continue to make these requests under IRC§7602(c)(2) until you have advised

us in writing that there is no longer a need to make third-party contacts with respect to the above-nam ed

Taxpayer.

For y our convenience, please f ind enclosed Form 2848, Power of Attorney and Declaration of

Representative, authorizing me to act on behalf of the above-named Taxpayer.

Very truly yours,

EMD:cr

encl.

cc: ABC Company, Inc. (w/out encl.)

LeMann Squeezer, Revenue Office (w/out encl.)

119

E. Martin Davidoff


E. MARTIN DAVIDOFF

ATTORNEY AT LAW

December 12, 2008

353 Georges Road - Suite K

P.O. Box 835

Dayton, NJ 08810-0835

EMD@taxattorneycpa.com

_____________

TEL: 732-274-1600

FAX: 732-274-1666

VIA FIRST CLASS MAIL

Mr. William Skowron

123 Yankee Way, Unit 1B

New York, NY 10022

Dear Bill:

RE: Installment Agreement

Forms 1040; Year 2002 through 2004

This letter shall confirm that an Installment Agreement has been entered into on your behalf with the

Internal Revenue Service (“IRS”). Attached is the IRS letter of November 30, 2008 confirming the

information below. Please carefully review this letter.

Payment Due Dates and Amounts

First Payment Due: December 27, 2008 Total Amount Due: $14,351.39*

Future payments due: 28 th of each month

Installment Payment Amount: $500.00

* As of 11/30/2008; Note that interest & penalty

shall continue to accrue.

Future Compliance

One of the conditions of the installment agreement is that you are required to remain compliant with the

IRS during the term of this installment agreement. For example, this means that you must file your 2011

income tax return by April 17, 2012 or properly file an extension request by April 17, 2012 and file your

return by October 15, 2012. REMEMBER: Your 2011 tax liability must be paid in full by April 17, 2012,

even if you file an extension request. You may only extend the time to file your return, not to pay the tax.

Again, you must follow this practice consistently throughout the term of your installment agreement.

Your failure to remain compliant during the term of the installment agreement will result in the

termination of the installment agreement and potentially aggressive actions by the IRS.

Refund Offset Program

As you plan on staying current going forward, please keep in mind that any future refunds will be retained

to pay down any debts due to the IRS, including the liability which is the subject of this letter. Such refund

offsets will not be applied to monthly payments under this agreement. Some people find this to be an

advantage as it speeds up their repayment to the IRS. Others prefer to reduce their withholding to eliminate

overpayments so they have more funds to live on month-to-month. You should carefully plan your current

year payments to the IRS whether such payments are made through withholding or estimates.

We suggest you have a conversation with your financial and/or tax advisors regarding the number of

exemptions you are claiming for withholding and/or the level of your estimated income tax payments.

120


Mr. William Skowron

December 12, 2008

Page 2

Electronic Payments

We recommend using the Electronic Federal Tax Payment System (“EFTPS”) to make all payments of the

installment agreement. To ensure that your electronic payment arrives promptly, we suggest that you

submit your payment at least 2 days prior to the due date. If you have not yet registered for EFTPS, your

first payments will have to be sent via mail (see below). You may register for EFTPS by going to their

website (www.eftps.gov).

Non-Electronic Payments (Applicable only if you do not use the EFTPS system described above)

To ensure that your payment arrives promptly, we suggest that you mail your payment 7 to 10 days prior

to the due date. Our recommendation is to send these payments via certified mail to prove that your

payment was mailed timely (the green card is not necessary).

All payments should contain the following information on your check:

Payable to:

Check Notations:

Where:

United States Treasury

On memo portion of the check include your social security number(s), and the

words: “Form 1040: 2002 through 2004"

Until you receive your first statement from the Internal Revenue Service, please

send payments to:

Additional Information

Internal Revenue Service

[enter IRS address from letter]

Atlanta, GA 399901-0025

You will be receiving monthly statements or coupons from the Internal Revenue

Service as a reminder of your payments. Each monthly statement will include the

address for sending in your payments.

Receiving monthly statements. Please do not rely upon receiving statements as a reminder as they are not

guaranteed to arrive every month. Failure to receive a monthly statements is not an acceptable reason for

missing a payment. Any missed payment will result in your defaulting the Installment Agreement and will

automatically put you back in collection status which could result in further levies on your accounts.

Processing fee. There is a $105 processing fee which they will take out of your first ${amount of

payment] installment payment.

Other conditions. Please see the accompanying letter from the IRS outlining the complete terms of your

installment agreement.

Should you have any questions, please do not hesitate to contact me.

Very truly yours,

E. Martin Davidoff

EMD/saf

Encl.

121


Form 9465-FS

(December 2011)

Department of the Treasury

Internal Revenue Service

Installment Agreement Request

If your balance due is greater than $25,000 but not more than $50,000, complete Parts I and II.

If you are filing this form with your tax return, attach it to the front of the return.

See separate instructions.

OMB No. 1545-0074

Caution: Do not file this form if you are currently making payments on an installment agreement or can pay your balance in full within

120 days. Instead, call 1-800-829-1040. If you are in bankruptcy or we have accepted your offer-in-compromise, see Bankruptcy or

offer-in-compromise in the instructions.

Note. If you are filing Form 9465-FS to request an installment agreement for a business tax liability and the business is no longer a

functioning enterprise, complete line 2 in addition to 1a.

This request is for Form(s) (for example, Form 1040 or Form 941) and for tax year(s) (for example, 2010 and 2011)

Part I General Information

1 a Your first name and initial Last name Your social security number

John J. Doe 123-45-6789

If a joint return, spouse’s first name and initial Last name Spouse’s social security number

Jane J. Doe 987-65-4321

Current address (number and street). If you have a P.O. box and no home delivery, enter your box number.

123 Main Stret

Apt. number

City, town or post office, state, and ZIP code. If a foreign address, enter city, province or state, and country. Follow the country’s practice for entering the postal code.

Anywhere, NJ 08666

b If this address is new since you filed your last tax return, check here . . . . . . . . . . . . . . . . .

2 Business name Employer Identification Number

3

732-274-1600 11:00am - 7:00pm

Your phone number

Best time for us to call

5 Name of your bank or other financial institution:

Wells Fargo Bank, NA

Address

200 Main Street

City, state, and ZIP code

Anytown, NJ, 08866

4

Your work phone number Ext. Best time for us to call

6 Your employer’s name:

Address

City, state, and ZIP code

7 Enter the total amount you owe as shown on your tax return(s) (or notice(s)) . . . . . . . . 7

Note. If the amount on line 7 is greater than $25,000 but not more than $50,000, you must

complete line 11 and Part II on page 2. See instructions.

8 Enter the amount of any payment you are making with your tax return(s) (or notice(s)). See instructions 8

9 Enter the amount you can pay each month. Make your payments as large as possible to limit

interest and penalty charges. The charges will continue until you pay in full. If a payment amount

is not listed on line 9, one will be determined for you by dividing the balance due by 72 months . 9

10 Enter the date you want to make your payment each month. Do not enter a date later than the 28th

11 If you want to make your payments by electronic funds withdrawal from your checking account, see the instructions and fill in

lines 11a and 11b. This is the most convenient way to make your payments and it will ensure that they are made on time.

a

Routing number

b Account number

01234567

987654321

ABC Company

123 Main Street

Anytown, NJ 08866

I authorize the U.S. Treasury and its designated Financial Agent to initiate a monthly ACH debit (electronic withdrawal) entry to the financial

institution account indicated for payments of my Federal taxes owed, and the financial institution to debit the entry to this account. This

authorization is to remain in full force and effect until I notify the U.S. Treasury Financial Agent to terminate the authorization. To revoke

payment, I must contact the U.S. Treasury Financial Agent at 1-800-829-1040 no later than 14 business days prior to the payment (settlement)

date. I also authorize the financial institutions involved in the processing of the electronic payments of taxes to receive confidential information

necessary to answer inquiries and resolve issues related to the payments.

Your signature Date Spouse’s signature. If a joint return, both must sign. Date

28th

40,000

0

550

For Privacy Act and Paperwork Reduction Act Notice, see instructions. Form 9465-FS (12-2011)

ISA

122


Form 9465-FS (12-2011) Page 2

Part II Additional information. Complete this part only if your answer on line 7 is greater than $25,000 but not more

than $50,000.

12 In which county is your primary residence? Mercer

13a

b

Marital status:

Single. Skip question 13a and go to question 14.

Married. Go to question 13b.

X

Do you share household expenses with your spouse?

X Yes.

No.

14 How many dependents will you be able to claim on this year's tax return? . . . . 14

15 How many people in your household are 65 or older? . . . . . . . . . . . 15

0

1

16 How often are you paid?

Once a week.

Once every two weeks.

X Once a month.

Twice a month.

17 What is your net income per pay period (take home pay)? . . . . . . . . . . 17 $

2,000

18 How often is your spouse paid?

Once a week.

Once every two weeks.

X Once a month.

Twice a month.

19 What is your spouse's net income per pay period (take home pay)? . . . . . . . 19 $

20 How many vehicles do you own? . . . . . . . . . . . . . . . . . . 20

21 How many car payments do you have each month? . . . . . . . . . . . . 21

5,300

3

1

22a

b

Do you have health insurance?

X Yes. Go to question 22b.

No. Skip question 22b and go to question 23a.

Are your premiums deducted from your paycheck?

Yes. Skip question 22c and go to question 23a.

No. Go to question 22c.

X

c How much are your monthly premiums? . . . . . . . . . . . . . . . . 22c $

300

23a

b

Do you make court-ordered payments?

Yes. Go to question 23b.

No. Go to question 24.

X

Are your court-ordered payments deducted from your paycheck?

Yes. Go to question 24.

No. Go to question 23c.

c How much are your court-ordered payments each month? . . . . . . . . . . 23c $

24 Not including any court-ordered payments for child and dependent support,

how much do you pay for child or dependent care each month? . . . . . . . . 24 $

123

0

Form 9465-FS (12-2011)


Form 433-D

(Rev. January 2012)

Name and address of taxpayer(s)

Department of the Treasury — Internal Revenue Service

Installment Agreement

(See Instructions on the back of this page)

Social security or employer identification number

(Taxpayer)

(Spouse)

Your telephone numbers (including area code)

(Home)

(Work, cell or business)

Submit a new Form W-4 to your employer to increase your

withholding.

For assistance, call: 1-800-829-0115 (Business), or

1-800-829-8374 (Individual Self-Employed/Business Owners), or

1-800-829-0922 (Individuals Wage Earners)

Or write:

(City, State, and ZIP Code)

Employer (Name, address, and telephone number)

Financial Institution (Name and address)

Kinds of taxes (Form numbers) Tax periods Amount owed as of

$

I / We agree to pay the federal taxes shown above, PLUS PENALTIES AND INTEREST PROVIDED BY LAW, as follows:

$ on and $ on the of each month thereafter

I / We also agree to increase or decrease the above installment payment as follows:

Date of increase (or decrease) Amount of increase (or decrease) New installment payment amount

The terms of this agreement are provided on the back of this page. Please review them thoroughly.

Please initial this box after you’ve reviewed all terms and any additional conditions.

Additional Conditions / Terms (To be completed by IRS)

Note: Internal Revenue Service employees

may contact third parties in order to process

and maintain this agreement.

DIRECT DEBIT—Attach a voided check or complete this part only if you choose to make payments by direct debit. Read the instructions on the

back of this page.

a. Routing number:

b. Account number:

I authorize the U.S. Treasury and its designated Financial Agent to initiate a monthly ACH debit (electronic withdrawal) entry to the financial

institution account indicated for payments of my Federal taxes owed, and the financial institution to debit the entry to this account. This

authorization is to remain in full force and effect until I notify the U.S. Treasury Financial Agent to terminate the authorization. To revoke

payment, I must contact the U.S. Treasury Financial Agent at the applicable toll free number listed above no later than 14 business days prior to

the payment (settlement) date. I also authorize the financial institutions involved in the processing of the electronic payments of taxes to receive

confidential information necessary to answer inquiries and resolve issues related to the payments.

Your signature Title (if Corporate Officer or Partner) Date

Spouse’s signature (if a joint liability)

Date

Agreement examined or approved by (Signature, title, function)

Date

FOR IRS USE ONLY

AGREEMENT LOCATOR NUMBER:

Check the appropriate boxes:

A NOTICE OF FEDERAL TAX LIEN (Check one box below.)

RSI “1” no further review AI “0” Not a PPIA HAS ALREADY BEEN FILED

RSI “5” PPIA IMF 2 year review AI “1” Field Asset PPIA WILL BE FILED IMMEDIATELY

RSI “6” PPIA BMF 2 year review AI “2” All other PPIAs WILL BE FILED WHEN TAX IS ASSESSED

Agreement Review Cycle: Earliest CSED: MAY BE FILED IF THIS AGREEMENT DEFAULTS

Check box if pre-assessed modules included

Originator’s ID #:

Originator Code:

Name:

Title:

Part 1— IRS Copy Catalog No. 16644M www.irs.gov

Form 433-D (Rev. 1-2012)

124


INSTRUCTIONS TO TAXPAYER

If not already completed by an IRS employee, please fill in the information in the spaces provided on the front of this form for:

• Your name (include spouse’s name if a joint return) and current address;

• Your social security number and/or employer identification number (whichever applies to your tax liability);

• Your home and work, cell or business telephone numbers;

• The complete name, address and phone number of your employer and your financial institution;

• The amount you can pay now as a partial payment;

• The amount you can pay each month (or the amount determined by IRS personnel); and

• The date you prefer to make this payment (This must be the same day for each month, from the 1st to the 28th). We

must receive your payment by this date. If you elect the direct debit option, this is the day you want your payment

electronically withdrawn from your financial institution account.

Review the terms of this agreement.

When you’ve completed this agreement form, please sign and date it. Then, return Part 1 to IRS at the address on the letter

that came with it or the address shown in the “For assistance” box on the front of the form.

Terms of this agreement

By completing and submitting this agreement, you (the taxpayer) agree to the following terms:

• This agreement will remain in effect until your liabilities (including penalties and interest) are paid in full, the statutory period for collection

has expired, or the agreement is terminated.

• You will make each payment so that we (IRS) receive it by the monthly due date stated on the front of this form. If you cannot make a

scheduled payment, contact us immediately.

• This agreement is based on your current financial condition. We may modify or terminate the agreement if our information shows

that your ability to pay has significantly changed. You must provide updated financial information when requested.

• While this agreement is in effect, you must file all federal tax returns and pay any (federal) taxes you owe on time.

• We will apply your federal tax refunds or overpayments (if any) to the amount you owe until it is fully paid or the statutory period for

collection has expired.

• You must pay a $105 user fee, which we have authority to deduct from your first payment(s) ($52 for Direct Debit).

• If you default on your installment agreement, you must pay a $45 reinstatement fee if we reinstate the agreement. We have the

authority to deduct this fee from your first payment(s) after the agreement is reinstated.

• We will apply all payments on this agreement in the best interests of the United States.

• We can terminate your installment agreement if:

• You do not make monthly installment payments as agreed.

• You do not pay any other federal tax debt when due.

• You do not provide financial information when requested.

• If we terminate your agreement, we may collect the entire amount you owe by levy on your income, bank accounts or other assets,

or by seizing your property.

• We may terminate this agreement at any time if we find that collection of the tax is in jeopardy.

• This agreement may require managerial approval. We’ll notify you when we approve or don’t approve the agreement.

• We may file a Federal Tax lien if one has not been filed previously.

HOW TO PAY BY DIRECT DEBIT

Instead of sending us a check, you can pay by direct debit (electronic withdrawal) from your checking account at a financial

institution (such as a bank, mutual fund, brokerage firm, or credit union). To do so, fill in Lines a and b. Contact your financial

institution to make sure that a direct debit is allowed and to get the correct routing and account numbers.

Line a. The first two digits of the routing number must be 01 through 12 or 21 through 32. Don’t use a deposit slip to verify the

number because it may contain internal routing numbers that are not part of the actual routing number.

Line b. The account number can be up to 17 characters. Include hyphens but omit spaces and special symbols. Enter the

number from left to right and leave any unused boxes blank.

CHECKLIST FOR MAKING INSTALLMENT PAYMENTS:

1. Write your social security or employer identification number on each payment.

2. Make your check or money order payable to “United States Treasury.”

3. Make each payment in an amount at least equal to the amount specified in this agreement.

4. Don’t double one payment and skip the next without contacting us first.

5. Enclose a copy of the reminder notice, if you received one, with each payment using the envelope provided.

6. If you didn’t receive an envelope, call the number below.

This agreement will not affect your liability (if any) for backup withholding under Public Law 98-67, the Interest and Dividend

Compliance Act of 1983.

QUESTIONS? — If you have any questions about the direct debit process or completing this form, please call the applicable

telephone number below for assistance.

1-800-829-0115 (Business)

1-800-829-8374 (Individuals Self-Employed / Business Owners)

1-800-829-0922 (Individuals Wage Earners)

Catalog No. 16644M 125

Form 433-D (Rev. 1-2012)


E. MARTIN DAVIDOFF

ATTORNEY AT LAW

Septermber 19, 2011

353 Georges Road - Suite K

P.O. Box 835

Dayton, NJ 08810-0835

EMD@taxattorneycpa.com

_____________

TEL: 732-274-1600

FAX: 732-274-1666

VIA REGULAR MAIL & PORTAL

Mr. Yogi Berra

456 Main Street

Anywhere, NJ 08876

Dear Yogi:

Congratulations on the acceptance of your Offer in Compromise! We have received the Acceptance

Letter dated July 20, 2011, a copy of which is enclosed. This Offer of $18,500 will resolve all outstanding

liabilities in connection with your Form 1040 for 2006, and Civil Penalties resulting from Cape Lumber

Company, Inc. for payroll tax liabilities for the following quarters:

6/30/06, 9/30/06, all quarters of 2007, 3/31/08, 6/30/08, 12/31/08, 6/30/09, 9/30/09 and 12/31/09

As a result of this acceptance, you are saving over $523,548 in taxes, interest, and penalties. (The total

amount due as of August 12, 2011 in the amount of $542,048 consisted of approximately $13,353 due on

your personal liability for 2006, and Civil Penalties resulting from Bat Buster Company, Inc. (Forms 941)

of approximately $528,695).

Payment

To ensure that your payment arrives promptly, we suggest that you mail your payment at least 10 days prior

to the due date. We recommend that you send the payment via certified mail, return receipt

requested, and secure a receipt from the post office evidencing the date of mailing. I cannot

emphasize enough how important it is that you make this payment in a timely manner. Failure to do

so may eliminate the forgiveness of unpaid taxes.

Payment Instructions:

Payable to:

Check Notations:

Send payment to:

United States Treasury

On the memo portion of the check include the following “Offer #1000861873; SS#:

123-45-6789; Civil penalties 2006-2009; Form 1040; 2006"

Internal Revenue Service

P.O. Box 24015

Fresno, CA 93779

(Cont’d page 2)

126


Mr. Yogi Berry

September 19, 2011

Page 2

Some other things you should know:

• The IRS will keep any refunds or credits, including interest, due to you because of overpayment of any

tax or other liability in connection with 2011 or earlier tax years. This includes refunds you may be

entitled to receive in 2012 for any overpayments you made in 2011. Thus, you should be very careful

that your withholding is adjusted appropriately now so that you do not overpay your taxes for 2011.

• As a condition to retain the benefits of the Offer in Compromise, you are required to remain compliant

with all Internal Revenue Service laws for the next 5 years. For example, this means that you must

either file your 2011 tax return by April 15, 2012 or properly file an extension request by April 15,

2012 and then file your tax return by the extension date. REMEMBER: Your 2011 tax liability must

be paid in full by April 15, 2012, even if you file an extension request. You may only extend the time

to file your tax return, not to pay the tax. Again, you must follow this practice for the next five years.

These and other requirements which you must follow to maintain this forgiveness are listed on the 3rd

and 4th pages of the Form 656. I urge you to read each of the items carefully and make certain that you do

not violate any of the conditions of the IRS acceptance.

This might seem like a lot to remember and abide by at first ....but please remember you have now earned

a fresh start and can finally proceed with a clean slate. Again, I congratulate you on this accomplishment.

Please do not hesitate to contact me if I can be of any further assistance.

Very truly yours,

EMD:am

Encl.

E. Martin Davidoff

127


E. MARTIN DAVIDOFF

ATTORNEY AT LAW

353 Georges Road - Suite K

P.O. Box 835

Dayton, NJ 08810-0835

EMD@taxattorneycpa.com

_____________

TEL: 732-274-1600

FAX: 732-274-1666

VIA CERTIFIED MAIL #7008 2810 0001 1969 1111

January 5, 2011

Mr. Jeffrey Austin

Internal Revenue Service

Disclosure Scanning Operation - Stop 93A

P.O. Box 621506

Atlanta, GA 30362-3006

Dear Mr. Austin:

RE: Cletis (Clete) Leroy Boyer

SSN# 123-45-6789

Form 1040: 2007 and 2008

We represent Cletis Leroy Boyer (the “Taxpayer”; see attached, IRS Form 2848). Pursuant to the Privacy

Act of 1974, 5 U.S.C. Section 552a (the “Privacy Act”), Section 6103 & 7602(c) of the Internal Revenue

Code (“IRC”) and the Freedom of Information Act, 5 U.S.C. Section 552, as amended, (“FOIA”), we wish

to obtain access to and copies of the following records maintained by the Internal Revenue Service (“IRS”):

1. The History Transcript or similar Time Records by the IRS for the Taxpayer and periods/years

set forth above for the specific time period of January 1, 2007 through the date of this request.

2. All entries entered into the IRS computer systems by those conducting the recent examination

of the Taxpayer’s 2008 Form 1040.

3. A list of all third party contacts that IRS representatives have been in communication with about

the above-referenced Taxpayer for the specific time period of January 1, 2007 through the date

of this request.

4. The entire administrative file for 2007 and 2008

5. Please refer to the attached copy of the 2007 IRS account transcript showing a removed payment

of $25,000 near the last few lines. There is also a denial of either a claim made of Form 843 or

penalty abatement request referenced as well. We will be discussing the missing $25,000

payment with an Appeals Officer when our case is assigned and we need to find out what

happened to it in the IRS records. Please pursue research pertinent to that missing payment

throughout any tax year from 2007 through 2012 and forward me any information from notes,

conversations, telephone calls or written correspondences regarding that item. Any

Correspondence records, Telephone logs, or other kind of Documentary files would be very

helpful.

This case file was most recently assigned to the Technical Services - SBSE group in Springfield, New

Jersey with James Jones (ID# 9909900, Phone: 123-456-9999).

If possible, we would appreciate if you could forward materials become available.

128


Mr. Jeffrey Austin

January 5, 2011

Page 2 of 2

SECTION 601.702(B)(3) STATEMENT

In accordance with IRS Statement of Procedural Rules, Reg. Section 601.702(b)(3), we agree to pay

reasonable charges incurred in locating and copying the requested documents, to an upper limit not to exceed

$200. If the disclosed information exceeds 500 pages, we request that the data be saved to a CD in lieu of

receiving paper copies.

If you decide that any portion of the requested information is exempt from disclosure under the Act, I

request that you send me the remaining non-exempt portion of that record. In addition, to the extent that

access is denied to inspect any part of the requested administrative files and documents, please send me an

index and a detailed description of the deleted material and a statement of the statutory basis for withholding

each such document.

In accordance with the provisions of IRC §§ 6103, 6203 and 7602(c), 5 U.S.C. Section 552, as amended,

and 5 U.S.C. § 552A, we anticipate receiving a reply within twenty working days.

Kindly acknowledge receipt of this request by countersigning the enclosed copy of this letter and

returning the same in the enclosed self-addressed stamped envelope. Please keep me advised as to the status

of the above-referenced request.

Very truly yours,

EMD:rb

cc: Mr. Cletis LeRoy Boyer(w/o encl.)

Encl.

RECEIPT ACKNOWLEDGED:

INTERNAL REVENUE SERVICE

BY:____________________________

TITLE:_________________________

DATED:________________________

E. Martin Davidoff

EMD COMMENT: If the case needs urgent expediting, please see the

following pages for additional wording to use & sample.

129


Reasons for Expedited FOIA Processing

11.3.13.8 (10-26-2007)

Response and Closing

1. The response to the requester and the closing of the case are the final actions in completing

a FOIA request.

2. The response letter must contain specific items of information and explain the exemptions

applied for records denied in full or in part, if any. The date the request was received

must also be stated.

3. When the response includes records that have been edited in any fashion, the letter must

cite the reason and the associated exemptions applied. The edited records must generally

reflect the exemption applied at the point of extraction.

If the IRS accepts the reasons, the IRM states that they must process the request in 10 calendar

days after receipt of the request.

For more detail, see the remainder of IRM 11.3.13.8.4, which can be found

http://www.irs.gov/irm/part11/irm_11-003-013-cont01.html#d0e3366 as of 4/27/2012.

Sample Language for Expedited Processing

#1

URGENT NOTE - EXPEDITED PROCESSING REQUIRED!

Failure to obtain these records promptly (within the 10 days as provided by IRM 11.3.13.8.4) will cause a

loss of substantial due process rights. In light of the fact that the IRS continues to levy on our accounts,

time is urgent. In addition, we are being required to provide financial disclosures on or before May 31,

2011. These disclosures will be not be required if it is found that the IRS does not the executed forms

900.

#2

URGENT NOTE - EXPEDITED PROCESSING REQUIRED!

Failure to obtain these records on or before May 31, 2011 will cause a loss of substantial due process

rights. We currently have a hearing scheduled in the Office of Appeals on June 15 th . We require

the information requested herein to prepare for our hearing. Failure to have the information by

May 31st places us in a position that we cannot appropriately prepare for the hearing.

W:\A Numbers Folder\61\FOIA Requests\FOIAExpedite.wpd

130


131


IRS Disclosure Offices

FOIA requestors may have questions or want to know the status of their request. Initial inquiries should be

directed to the FOIA Requestor Service Center where the request was submitted.Following response from the

Center staff, FOIA requestors who require more information or assistance may contact the IRS Disclosure

Manager, who serves as the FOIA Public Liaison for that Center.The Public Liaison can assist with reducing

delays, explaining the status of the request, and resolving disputes. The Service Center and Public Liaison may be

reached at the contact number provided for each Disclosure Office.

If you live in:

Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont

Delaware, New Jersey, New York, Pennsylvania

Public Liaison: Tom Batch

Ph: 617-316-2408

Public Liaison: Jeffrey Austin

Ph: 215-861-1919

Illinois, Indiana, Maryland, Wisconsin, Outside the U.S. (International and U.S.

Territories

District of Columbia, Kentucky, Michigan, Ohio, West Virginia

Florida, North Carolina, South Carolina, Virginia

Alabama, Arkansas, Georgia, Mississippi, Tennessee

Public Liaison: Lynda Dyer

Ph: 312-566-3522

Public Liaison: Ava Littlejohn

Ph: 513-263-3900

Public Liaison: Paula Curren

Ph: 904-665-1175

Public Liaison: Diana Church

Ph: 615-250-5004

Mail your request to:

Internal Revenue Service

Disclosure Scanning

Operation - Stop 93A

Post Office Box 621506

Atlanta GA 30362-3006

Internal Revenue Service

Disclosure Scanning

Operation - Stop 93A

Post Office Box 621506

Atlanta GA 30362-3006

Internal Revenue Service

Disclosure Scanning

Operation - Stop 93A

Post Office Box 621506

Atlanta GA 30362-3006

Internal Revenue Service

Disclosure Scanning

Operation - Stop 93A

Post Office Box 621506

Atlanta GA 30362-3006

Internal Revenue Service

Disclosure Scanning

Operation - Stop 93A

Post Office Box 621506

Atlanta GA 30362-3006

Internal Revenue Service

Disclosure Scanning

Operation - Stop 93A

Post Office Box 621506

Atlanta GA 30362-3006

132


Texas

Iowa, Kansas, Louisiana, Missouri, Oklahoma

Public Liaison: Stephanie Young

Ph: 512-460-4433

Public Liaison: Melba Tyson

Ph: 314-612-4390

Arizona, Colorado, Minnesota, Montana, Nebraska, New Mexico, North Dakota,

South Dakota, Wyoming

Public Liaison: Jonathan K. Davis

Ph: 303-603-3809

Internal Revenue Service

Disclosure Scanning

Operation - Stop 93A

Post Office Box 621506

Atlanta GA 30362-3006

Internal Revenue Service

Disclosure Scanning

Operation - Stop 93A

Post Office Box 621506

Atlanta GA 30362-3006

Internal Revenue Service

Disclosure Scanning

Operation - Stop 93A

Post Office Box 621506

Atlanta GA 30362-3006

Alaska, Idaho, Oregon, Utah, Washington

Southern California, Hawaii, Nevada

Northern and Central California

Public Liaison: Theresa Gates

Ph: 206-220-5678

Public Liaison: Nesbit Parker

Ph: 504-558-3241

Public Liaison: Celeste Neal

Ph: 510-637-2312

Internal Revenue Service

Disclosure Scanning

Operation - Stop 93A

Post Office Box 621506

Atlanta GA 30362-3006

Internal Revenue Service

Disclosure Scanning

Operation - Stop 93A

Post Office Box 621506

Atlanta GA 30362-3006

Internal Revenue Service

Disclosure Scanning

Operation - Stop 93A

Post Office Box 621506

Atlanta GA 30362-3006

If you are requesting IRS Headquarters Office records not available on the

electronic Reading Room site, mail your request to:

Public Liaison: Marie Twarog

Ph:770-234-4374

IRS FOIA Request

HQ FOIA

Stop 211

2385 Chamblee Tucker

Road

Chamblee, GA 30341

133

Page Last Reviewed or Updated: April 05, 2012


E. MARTIN DAVIDOFF

ATTORNEY AT LAW

353 Georges Road - Suite K

P.O. Box 835

Dayton, NJ 08810-0835

emd@ taxattorneycpa.com

_____________

TEL: 732-274-1600

FAX: 732-274-1666

January 5, 2009

VIA CERTIFIED MAIL#70050390000451287639

Internal Revenue Service

Holtsville, New York 00501

To Whom It May Concern:

Re: Elston Howard

SS#: 123-45-6789

Deposit in the Nature of a Cash Bond pursuant

to Section 6603

2001 Form 1040

Please find enclosed check # 864 in the amount of $50,000 payable to the United States

Treasury. This payment is hereby designated as a deposit pursuant to Section 6603(a) of the

Internal Revenue Code. Pursuant to Rev. Proc. 2005-18, the following information is required.

1. Type of Tax

Income Tax

2. Tax Year

2001

3. Identification and Description of Disputable Tax

The amount of the disputable tax is set forth in the 30-day letter provided by the Internal

Revenue Service on August 30, 2006 setting forth a balance due $248,339. A copy of the 30-

day letter is enclosed herein.

134


4. Filing of Tax Court Petition

In the event that a Tax Court petition is filed in connection with the above-referenced tax for

the above- referenced period, the enclosed payment shall continue to be treated as a deposit

during the applicable Tax Court proceeding.

Please return the duplicate copy of the check enclosed with your acknowledgment that it has

been received and applied as a deposit in the nature of a cash bond pursuant to section 6603 of

the Internal Revenue Code. For your convenience, I have enclosed a self-addressed, stamped

envelope.

Thank you very much for your attention to this matter.

Very truly yours,

E. Martin Davidoff

EMD:ed

Encls.

cc: Mr. Elston Howard

(w/out Encls. & via First Class Mail)

Note, this procedure has been added by Code Section 6603 added by the American Jobs

Creation Act of 2004. Section 6603 supercedes Revenue Procedure 84-58. Section 6603 also

provides for interest for refunds of deposits paid with respect to a “disputable tax”.

Further clarification and procedures are outlined in Revenue Procedure 2005-18, I.R.B.

2005-13 (3/28/05). This Revenue Procedure sets forth some very important rules, some of

which are counter-intuitive.

135


L\EMD\DOELiab.123 11/12/2004

JOHN DOE

YEARLY SUMMARY OF FORM 1040 TAX LIABILITY

PENALTIES OVERPYMT

FEES & LATE LATE ESTIMATED TOTAL PAYMENTS & CREDIT BALANCE DATE OF

YEAR TAX INTEREST COLLECTION FILING PAYMENT TAX ASSESSMENTS CREDITS TRANS OUT DUE "1040" TRANSCRIPT

1991 54,056.00 102,817.39 13,514.00 13,514.00 183,901.39 183,901.39 07/23/2004

1992 105,339.00 176,033.26 26,335.00 26,334.75 334,042.01 334,042.01 07/23/2004

1993 57,286.00 68,332.01 52.00 14,321.50 14,315.49 2,400.25 156,707.25 (61,284.75) 95,422.50 09/13/2004

1994 126,939.00 130,383.40 70.00 31,734.75 31,734.75 320,861.90 320,861.90 09/13/2004

1995 131,126.00 111,359.90 32,781.50 32,781.50 308,048.90 308,048.90 09/13/2004

1996 198,387.00 137,665.23 49,596.75 49,596.75 435,245.73 435,245.73 09/13/2004

1997 71,195.00 39,070.53 17,798.75 17,798.75 145,863.03 145,863.03 09/13/2004

1998 94,743.00 41,047.19 23,685.75 23,685.75 183,161.69 183,161.69 09/13/2004

1999 107,016.00 34,493.18 26,754.00 26,754.00 195,017.18 195,017.18 09/13/2004

2000 141,777.00 29,659.32 35,444.25 31,186.10 238,066.67 (22.00) 238,044.67 09/13/2004

2001 86,825.00 13,372.66 20.00 21,706.25 13,023.75 134,947.66 134,947.66 07/23/2004

2002 93,454.00 7,108.98 23,363.50 8,410.86 132,337.34 132,337.34 07/23/2004

2003 63,276.00 0.54 0.00 0.00 1,444.16 64,720.70 (64,728.00) 7.30 0.00 07/23/2004

TOTALS $1,331,419.00 $891,343.59 $142.00 $317,036.00 $289,136.45 $3,844.41 $2,832,921.45 ($126,034.75) $7.30 $2,706,894.00

136


137


138


139


Comment by Appeals Officer: Taxpayer has not been compliant since 2001.

In reality, with only a handful of exceptions, the taxpayer has been fully compliant. The taxpayer has

actually overpaid approximately $8,000.

Quarter Ended Filing Payments

03/31/02 Timely Filed Payments were made all on time. However, two payments are

missing from transcript. Client double-paid ...see original cancelled

checks. Client overpaid $8,369.41.

06/30/02 Timely Filed Checks for last three payments of quarter were written timely, but

deposited five to six weeks late. The payments were all made on or

before the due date of the return. Client paid penalty of $1,278.82.

09/30/02 Timely Filed Timely Paid

12/31/02 Timely Filed There was an oversight as to one week’s payment (October 11,

2002). The check was written (#5079) on time but not turned in for

deposit. Client believed that the payment had been made and filed

his form 941 accordingly. Upon receipt of notice from IRS, client

paid promptly. See form 941.

03/31/03 Timely Filed Timely Paid

06/30/03 Timely Filed 13 Weekly payments of payroll taxes were paid. A penalty of

$1,761.06 was assessed and paid. We have no idea why.

09/30/03 Timely Filed Taxpayer did fall behind slightly during the first 2 months of the

quarter. All was caught up by October 1. A penalty of $2,905.79

was imposed by the IRS and paid.

12/31/03 Timely Filed Timely Paid

03/31/04 Timely Filed Timely Paid. Note, a federal tax deposit penalty was assessed and

abated. A review of the payroll tax return and transcript shows that

all payments were timely made.

06/30/04 Timely Filed 13 Weekly payments of payroll taxes were paid. A penalty of

$606.14 was assessed and paid. We have no idea why.

09/30/04 Timely Filed Timely Paid

12/31/04 Timely Filed Timely Paid

03/31/05 Timely Filed Timely Paid

06/30/05 Timely Filed Timely Paid

09/30/05 Timely Filed One of the 13 weekly payments was paid 2 months late (7/29

payroll paid on 9/29/05). All others were paid timely. Client was

assessed a penalty of $948.62 which was paid in full by the client.

140


Yogi Berra

Estimated 2011 - 2012 Cash Flow Projection


















End of Year

Balances













150 300 450 600 750 900 50 14,200 350 9,500 21,150 1,800

141


Representing Clients

Before the IRS

Part 1: Getting Started

T

This is the first of a series of articles on Representing Clients

Before the IRS. In this segment, Mr. Davidoff covers the first

three steps of a tax controversy engagement. Future segments

will cover the remaining steps and talk about the tools available

to practitioners, along with some practical rules of engagement.

Representing clients before the IRS is a learned art. At the

start, practitioners must understand that they are subject to

the highest ethical standards. Accordingly, representatives will

often find themselves turning away potential clients in order to

preserve those standards. Representatives must be committed

to adhering to those high standards, even though it may appear

that their adversary, the IRS, is not playing fair. And, even

when it plays by the rules, the “rules” grant the IRS awesome

powers in its ability to place liens on taxpayers, levy wages and

seize property, all of which places us at a distinct disadvantage

as practitioners. To win, we must enhance our skills in communications

with clients, foster relationships with IRS personnel

and understand the tools available to combat an often unreasonable,

unsympathetic behemoth we refer to as the IRS.

The Frantic Call & the Office Environment

For those who specialize in representation, most tax controversies

are not with your own 1040 or business clients. Rather, the

issues involve those who have gotten into trouble on their

own or in spite of the assistance they received from their CPA.

Accordingly, how your firm handles the initial call from this

person will often dictate whether you get the opportunity to

represent the client.

One of the best-selling tools available is a person, not an

answering machine. Having a live person answering the telephone

dramatically increases your odds of getting the client.

Clients like to know that they can get in touch with their

representative, or at least a live person at his/her office. In my

firm, if I am not available to speak to a prospective client, our

office policy is to forward the call to a paraprofessional who

knows the process and can “sell” the firm to the potential client

by noting our expertise. In most cases, I return all calls the

same day or the next day; if I can’t return the call promptly,

we will set up a specific date and time for a conference call or

meeting.

Whenever a prospective client calls, the notes are alphabetically

placed in a folder set up for the year. I often have prospects

calling me a year or two later who are amazed that I have all of

my notes from our previous conversation. As my office becomes

paperless (a couple of years away for me), I envision my access to

142

Our goals are to fully


understand the client’s

problems, engage the client,

and set up a Plan of Action.


IRS

Representation

Advisor

E. Martin Davidoff, CPA, Esq.

this information will only become that much faster when that

“folder” for the year will be at my fingertips.

You can dramatically expand the number of cases handled

through the use of paraprofessionals. In my office, these are former

executive or legal secretaries who have honed their project

management skills and understanding of IRS operations, but

they also are individuals with great people skills. Such skills

are often the difference between getting the deal you want!. In

most cases, my paraprofessionals put in more than 75 percent

of the chargeable hours, enabling me to focus on the more difficult

questions and issues of each case, thus minimizing the

overall charges to our clients.

Initial Client Meeting

The initial client meeting sets the tone for the entire relationship.

In some cases it is the only in-person meeting that I have with

the client. Our goals at this meeting are to fully understand

the client’s problems, engage the client (financially), and set up

a “Plan of Action.”

I have the paraprofessional who will be working the case join

the meeting at no charge to the client. Typically, I charge $50

for the first half hour and then my normal hourly rate. If the

client was referred to me by an existing client or a regular referral

source, I do not charge for the first half hour and emphasize

that I am doing this as a courtesy to the referral source. The

referral source appreciates this and the potential client feels

good that the person who referred him or her is held in such

high esteem.

Throughout our discussions we are realistic. We promise only

what we know we can accomplish because we want to establish

trust with our clients and referral sources, and establish reasonable

expectations in the minds of our clients. Because much of

Davidoff, continued on page 15

10 For Practitioners … By Practitioners November 2006


BY HAND IN OUR OFFICE

Mr. and Mrs. John J. Doe

123 Main Street

Anywhere, New Jersey 08666

Dear John and Jane:

Sample Engagement Letter

E. MARTIN DAVIDOFF

353 Georges Road - Suite K

P.O. Box 835

Dayton, NJ 08810-0835

EMD@taxattorneycpa.com

TEL: 732-274-1600

FAX: 732-274-1666

I am writing this letter to confirm and specify the financial arrangements regarding the services, which I will be providing to

XYZ Corporation and you.

I will be representing XYZ Corporation in connection with the assessment and collection of Payroll taxes for the years 2001

through 2003. I will be representing you, personally, before the Internal Revenue Service in connection with the assessment and

collection of income taxes for the years 2002 through 2004, for trust fund recovery penalties proposed by the IRS, and for other

years and matters in the event that the Internal Revenue Service expands the scope of its investigation. I may also provide other

services, which you request. Please note that it is hereby acknowledged that you have given us permission to discuss your case and

provide copies of documents to Tony Kubek, CPA.

My fees are based upon the amount of time required to review and analyze information provided to me, perform necessary

research, carry out additional services in representing you, and complete additional services which you request. My current hourly

rate is $330. The hourly rates for my staff range from $75 to $225. In addition, you will be charged for out-of-pocket expenses

(photocopying, federal express, postage, etc). All rates will increase from time to time consistent with the rates charged generally

to the firm’s clients.

I will require an initial retainer of $3,500 prior to commencing work. The $3,500 will be held in my business account and will

be applied towards the final bill. During the course of our engagement, you will receive invoices periodically. My invoices are

due and payable immediately upon receipt. There will be a late charge equal to 1.5 percent per month on any unpaid balances.

Please note that, at our option, the work on your account will cease 20 days following our issuance of an invoice if full payment

of such invoice is not received, unless other mutually satisfactory arrangements have been made in writing. We have also agreed

to provide you with additional flexibility with respect to the payment of fees due to this firm. So long as you make monthly payments

of $350 on the first of each month, commencing with October 1, 2006, we will continue to work on your account and we

will waive any late charges through October 1, 2009. Any balance due and payable as of October 1, 2009 shall become due and

payable immediately.

Although you may find it convenient and appropriate that I invoice XYZ Corporation for some or all of my services, each of

you will be personally responsible for the payment of any of my invoices issued to the corporation and/or you.

In the unlikely event that it becomes necessary for me to seek legal recourse to receive payment of my fees through litigation

or arbitration, you hereby agree to reimburse me for all out-of-pocket expenses, as well as any of the time expended by my staff

and/or me at the hourly rates then in effect, to secure such payment. For purposes of our agreement, the term “out-of-pocket

expenses” also includes any legal fees and all other expenses in connection with any attempt (including litigation) to collect my

fees. By signing below, you hereby consent that I may use any information which you provide me to collect any fees due to this

firm. Such information includes income tax returns which we prepare for you or which you provide us.

If the terms outlined in this letter are in agreement with your understanding of our engagement, each of you should sign the

enclosed copy of this letter and return it to me as soon as possible with the $3,500 retainer. By signing below you are each also

agreeing to be jointly and individually responsible for the entire amount of my fees. Should you have any questions concerning

this letter or the fees to be charged, please do not hesitate to contact me.

To facilitate our representation, please find enclosed, in triplicate, Forms 2848, Power of Attorney, which will enable us to

represent you before the Internal Revenue Service. Also enclosed is Form 8821, Tax Information Authorization, which will enable

other members of my staff to discuss your case with the Internal Revenue Service. Please sign two copies of each form and return

them to us. You may retain the third copy for your files.

Very truly yours,

E. Martin Davidoff

EMD:ac

encls.

Agreed to by:

John J. Joe, Individually and as President of XYZ Corporation

Date

Jane J. Joe

143

Date

11


Davidoff, continued from page 10

our success depends upon our advocacy skills in working with

individual decision-makers at the IRS, we are often able to

deliver more than our clients anticipate.

I usually leave my schedule fairly flexible so that I can spend

two to three hours with the client, if necessary. During this

time, multiple tasks may be taking place at one time. I may

have one staff member copying documents, while another prepares

an engagement letter and a third prepares powers of attorney

forms. While they are doing this, I am putting together

a list of additional documents or information required of the

client, doing a budget with the client and/or putting together

the Plan of Action.

The Engagement Letter

This is the contract between your client and you. After the

initial consultation, I perform no work until the client executes

the engagement letter and provides the agreed-to retainer.

As you develop your standard engagement letter, keep the

following points in mind:

•I will state, usually in general terms, that I will be representing

the taxpayer before the tax agency for certain years with

respect to particular taxes. If I anticipate submitting an offer in

compromise to resolve a collection matter, I will include that

information. (It should be noted that most of my collection

engagements do not result in submissions of offers in compromise.)

I also add the following wording: “I may also provide

other services which you request.” This ensures I am covered if

the scope of the engagement expands.

•If the Taxpayer is married, I insist that the spouse sign the

engagement letter and be fully responsible for my fees.

•I ask for a retainer in advance. The client will receive

interim billings. The funds held as a retainer are applied to the

last invoice.

•Since my rates increase annually, I include the following

Torres, continued from page 14

Form 5304-SIMPLE is used if the employee chooses the

financial institution and Form 5305-SIMPLE if the employer

chooses. Either of these forms establishes the SIMPLE, and is

not filed with the IRS.

language: “All rates will increase from time to time consistent

with rates charged generally to the firm’s clients.”

•I provide that work will cease, at my option, if invoices are

not paid within a set timeframe, usually 20 days. In addition, I

will often issue stop-work letters if the deadline is not met. This

is a tremendous tool in getting clients to pay. It really works!

•If I am providing services for a corporation, my letter

includes provisions that will make the owner individually liable

for any invoices issued to the corporation or the individual.

•The engagement letter provides that the costs of collecting

my fees from the taxpayer are his or her responsibility, including

my time. While I have not usually collected this, it does

bring us to more satisfying resolution on the few times I have

had a financial dispute with a client.

•We occasionally include a provision that clients may pay me

on a monthly basis, ranging from $300 to $750 per month.

By doing so, a portion of the payment will often be included

by the IRS in determining the client’s necessary expenditures.

However, it is important to provide an end date to such an

arrangement. I use three years, at which point any remaining

balance becomes due.

In spite of all the provisions that our firm includes, our

engagement letters for tax representation work are never longer

than two pages. When presenting the engagement letter to the

client, I take time to clearly explain its provisions. I pay particular

attention to the retainer, which many clients think will

be applied to the initial invoice, not the last.

With an office staff attuned to landing the prospect and serving

the client, you can develop a profitable tax representation

practice, providing cost-effective services to those in need.

E. Martin Davidoff, CPA, Esq. is a sole proprietor with more

than 25 years experience practicing as a CPA and tax attorney in

Dayton, N.J. Davidoff is founder and current chairman of the IRS

Tax Liaison Committee of the American Association of Attorney-

CPAs and currently serves as its vice president. A frequent

instructor having most recently appeared at the IRS Nationwide

Tax Forums. Davidoff’s upcoming speaking engagements can be

found by emailing lisa@copeseminars.com.

Summary

The chief concerns that stop a small business client from

establishing a retirement plan are being required to contribute

annually and the administrative burdens. SEP and SIMPLE

plans can overcome these concerns. These plans do away with

the complex fiduciary and reporting requirements associated

with managing a standard deferred compensation plan; topheavy

rules and eligibility criteria are built into the structure

of the plans. These plans offer flexibility as to how much an

employer must contribute in the year. They can be presented

to clients with the assurance that they will adequately address

their employee’s retirement concerns.

Rosann Torres, J.D., is a Federal Tax analyst with LexisNexis. Formerly

with PricewaterhouseCoopers, contact her at rosann.torres@lexisnexis.

com. Brian J. McBreen, J.D., LL.M., LexisNexis Federal Tax analyst,

is the co-author. Contact him at brian.j.mcbreen@lexisnexis.com.

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November 2006 For Practitioners … By Practitioners 15


Representing Clients Before

the IRS Part 2: Being Authorized

to Represent Your Client

T

This is the second of a series of articles on Representing Clients

Before the IRS in which the fourth step of a tax controversy

engagement is covered. Part 1 dealt with Getting Started,

covering the frantic call, initial meeting and engagement letter.

Future segments will cover the remaining steps and talk about

the tools available to practitioners, along with some practical

rules of engagement.

Tax practitioners use Forms 2848 and 8821 to represent their

clients before the IRS. Most states, if not all, require their own

forms. At the inception of the engagement, these forms should

be signed by the taxpayer(s) providing immediate authorization

with respect to all matters and periods of representation

and potential representation. If you have not recently read the

instructions to these forms, you should; they provide helpful

guidance for special situations, such as how to present civil

penalties and where each form should be filed. My practice is to

prepare the forms in triplicate. I have the client sign two copies

and provide the third copy to the client for his or her records.

Tips on Completing Form 2848

The completion of the form is basic. Be sure to use the current

version of the form, currently the March 2004 revision. Here

are nine tips to keep in mind:

1. Include all years with which you may require access. Since

current and future compliance are items for discussion in

nearly all collection matters, I always include the current

and following year on Form 2848, and the instructions make

it clear that you may include up to three years beyond the

current year. I also include years as far back as I can imagine

needing, even though they may not be directly relevant to

the matter at hand.

2. In the column “Year(s) or Period(s),” there often is not

enough room to easily fit multiple years. It is simpler to show

a range of years. We use the wording “2002 through 2007”

and “ALL YEARS INCLUDED.”

3. The Internal Revenue Manual (IRM) makes it clear that the

use of the phrases “Current Year” or “All Years” is unacceptable.

Instead, the manual suggests using “through” or “thru”

or a hyphen (“ - “) to show a range of years.

4. Line 5 of Form 2848 “Acts authorized” allows the taxpayer

to expand or reduce the effect of the power of attorney.

At one point, our office used to add the power to delegate.

However, as a result of E-Services, we no longer do so.

Why?

One of the services available under E-Services is to download

145

Since current and future

compliance “ are in nearly all

collection matters, I always

include the current and following

year on Form 2848; you

may include up to three years

beyond the current year.


IRS

Representation

Advisor

E. Martin Davidoff, CPA, Esq.

IRS records on your taxpayer, such as transcripts and matching

information. However, any entry on line 5 will disable your

access to E-Services for the client because an entry on line 5

may limit your powers. As a result, since the IRS has not yet

programmed its computers appropriately to determine how line

5 entries impact the authorization to represent clients, it limits

access to online E-Services if there is any entry on line 5.

5. Always include a PIN number on page 2 to enable input of

the power on E-Services. Your firm should come up with a

standard method for determining PIN numbers.

6. In my experience, there has always been some question on

when signatures should be dated. If the client’s signature is

before or after the CPA’s, is that a problem? To avoid any

problems with respect to signature dating, we try to have the

signatures dated on the same day. Where that is not possible,

we always have the client sign first, hence the client date will

be earlier. The IRM, at 21.3.7.7.1 (10-01-2005) at paragraph

2 states that signatures for domestic taxpayers should be

within 45 days of each other with a 60-day standard for

taxpayers residing abroad. The IRM states: “The sequencing

of dated signatures is not critical although the taxpayer

generally signs first ....”

7. Determine whether you need to retain any existing power of

attorney authorizations. If so, you need to check the box on

line 8 on page two of Form 2848 and attach a copy of Form

2848 for the power being retained. If the box is not checked,

all prior Power of Attorney authorizations are considered

revoked with respect to that taxpayer for the matters and

years covered. I have seen the failure to address this provision

cause practitioners to inadvertently revoke powers of

attorney by other members of their own firm!

8. We never accept the power to receive refund checks as

Davidoff, continued on page 19

10 For Practitioners … By Practitioners December/March 2007


Davidoff, continued from page 10

provided on Line 6 of Form 2848. Frankly, I think it is a

significant conflict of interest. If you have a situation where

this is important to your representation, tread carefully.

9. To prepare forms expeditiously, we use a simple tax forms

service. In our case, we use the CFS Fill-N-Print product

(www.taxtools.com) for federal and state power of attorney/

authorization forms. We set up a template so that the names

of the representatives, Central Authorization File (CAF)

numbers, telephone numbers and address of our firm do not

have to be re-entered with each new client. The software also

enables you to prepare other forms commonly used in representation,

including Forms 433A (Collection Information

Statement for Individuals), 433B (Collection Information

Statement for Businesses), 656 (Offer in Compromise), 9423

(Collection Appeal Request, 12153 (Request for a Collection

Due Process Hearing), and 911 (Application for Taxpayer

Assistance Order). The forms service is designed to allow you

to input the client’s information once and use it on multiple

forms.

Form 8821, Tax Information Authorization

Form 8821 is not normally used by practitioners and others

authorized to practice before the IRS. However, it is a critical tool

because it enables our non-CPA staff, such as paraprofessionals,

secretaries and non-certified staff accountants to take a greater

role in the firm’s representation of clients. As a result, we are in

a position to handle more cases overall and focus on the more

difficult aspects of such representation.

In our office, we use the Form 8821 to enable paralegals to

secure IRS records. The paralegals become, essentially, project

managers for their cases, making sure that I meet all deadlines

Tax Developers, continued from page 14

designed to help firms grow their business: talent, training,

technology and teamwork.

“Staff want to work for the best and the brightest organizations,

be challenged and increase their sense of accomplishment,”

Sabbatis told attendees.“ Look at how technology can

help fill gaps in your workflow, look for tools that are flexible

and portable, and that can be integrated around everyday applications

and platforms,” advised Sabbatis.

Thomson Tax and Accounting

At the Thomson Tax and Accounting (TTA) annual user

conference Jon Baron, CEO, delivered the keynote and

spoke about changing from a task orientation to a workflow

orientation. “Technology can be fun,” he said. He described

what he called, “the most significant Microsoft changes in

history. Vista may cause hardware changes and is farther along

than Office 2007. Also, Internet Explorer 7.0 will be arriving

for a more robust internet access experience.

The Most Productive Tax Tip of All

From all the visits, the most productive tax tip of all from

any conference or software company is the increased staff

productivity of having dual monitors on all tax preparer’s desks,

especially with document imaging.

146

and commitments to the IRS and my clients. They have valuable

experience, and their relationships with IRS employees help

us facilitate cases to achieve more successful results overall.

With changing personnel, the key is to take advantage of an

IRS rule that enables any employee to have the access offered

by Form 8821. We have a separate CAF number for “The Firm

of E. Martin Davidoff, Attorney-at-law” in addition to a CAF

number for me, personally. The key wording is “The Firm of,”

which conveys to the IRS that it is not an authorization to

me alone. Those magic words extend the authorization to any

employee of the firm.

The Central Authorization File

The IRS maintains a CAF for all Forms 8821 and 2848. Form

2848 may be entered through E-Services or by sending it to

one of the three locations listed in the form’s instructions. In

most cases, we find it more effective to simply fax the forms to

the appropriate CAF unit (Ogden, Utah; Memphis, Tenn.; or

Philadelphia, Pa.). In some cases, the CAF unit inputs these

items within 48 hours! We file authorizations with E-Services

or the appropriate CAF unit promptly upon being engaged by

the client, even if IRS contact is not imminent.

Once your authorizations (whether Form 2848 or 8821) are

in the CAF, there should be no need to ever give an IRS representative

a copy of the authorizations. However, most revenue

officers, revenue agents and appeals officers will want a copy in

their files. Normally, such employees will then send a copy to

the CAF unit for processing. If we have already sent the authorizations

in, as a courtesy, we advise the employees that we have

already done so.

E. Martin Davidoff, CPA, Esq. is a sole proprietor with more

than 25 years experience practicing as a CPA and tax attorney in

Dayton, N.J. Davidoff is founder and current chairman of the IRS

Tax Liaison Committee of the American Association of Attorney-

CPAs and currently serves as its vice president. A frequent

instructor having most recently appeared at the IRS Nationwide

Tax Forums. Davidoff’s upcoming speaking engagements can be

found by emailing lisa@copeseminars.com.

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December/March 2007 For Practitioners … By Practitioners 19


Rules of Engagement

in Dealing With the IRS Part I

In practicing before the IRS regarding collection matters, penalty

abatements and examinations, I have found certain "rules of engagement"

helpful.

1. Never volunteer information, unless it is part of a strategy.

The IRS often asks us a lot of questions. To appear cooperative and

move the case along, it is in our best interest to answer all questions

directly, succinctly and narrowly. Answer the question and offer

nothing more. On occasion, you may wish to strategically provide

additional information to the auditor. For instance, sometimes volunteering

information in one area may move the IRS away from asking

questions in other, more difficult, areas. In other situations you

are trying to provide the IRS employee a human perspective on the

client (i.e. Taxpayer's mom died last December after fighting lung

cancer for five years. Taxpayer would visit her every day!).

2. Never provide materials/documents to the IRS that you have not reviewed

carefully — bank statements, paycheck stubs, credit card statements,

etc.

The documents may contain information that is not helpful to your

client. For example, in the context of determining the amount of an

installment agreement, the IRS requests three months of recent bank

statements to support your disclosures in form 433. In such cases, I

will secure six months of recent bank statements from my client and

I will choose which three months of statements to provide the IRS.

In doing so, I will total up the deposits and make sure they are consistent

with my client's representations of income. In following this

process, you should investigate all significant discrepancies. Familiarize

yourself as to whom the checks have been written to, for what

purposes, and in what amounts. In choosing which three months of

statements you are providing the IRS, you are still meeting their requirements,

but you are doing so on your terms and in good defense

of your client.

3. Assert yourself as appropriate.

One way of doing so is to learn how to say phrases such as:

n "Please give me your manager's name and phone number."

n "What is your authority for that position?"

n "Who is your territory manager?"

n "Are you refusing to provide that information to me?"

From first line staffers at the IRS 800 numbers all the way up

to Appeal Officers, I have found that these phrases enable me to

secure a clear chain of command and a true understanding of the

positions the IRS is taking. On several occasions, the IRS has cited

authority — a case or IRM section — for their position that actually

supported my contention. In such situations the IRS representative

had not carefully read the authority or was simply bluffing, figuring

that I would not take the time to read the cited authority. In one

10 I J U N E /J U LY 2 0 1 0 www.cpamagazine.com

147

When calling the IRS be sure

"

to get the ID number of each

and every IRS employee you

speak with ... at the beginning

of each conversation. "

IRS

Representation

Advisor

E. Martin Davidoff, CPA, Esq.

Appeal involving tens of thousands of dollars, the Appeals Officer

told me that there was a case on point supporting the IRS position. I

presumed he was correct and politely asked him to send me the case

before issuing his report. I followed up after the conference with several

phone calls and faxes. After about a month, the Appeals Officer

simply told me he was finding in my favor, never providing the case

on point nor admitting that there was no such case supporting his

position to begin with!

In the rare case that a Revenue Officer refuses to provide me the

name and telephone number of his/her manager, I will say "Let me

make this very clear. I have asked for the name and phone number

of your manager and you are refusing to provide that information

to me. Do I have that right?" Four out of five times such an assertive

technique when making reasonable requests will secure the information

you are seeking. (Those who work on the "800" numbers

are not allowed to provide their managers phone numbers, but still

should provide the name of their manager when asked. They should

offer to provide a manager callback within 48 hours.)

4. Always ask for the full name and employee ID number.

When calling the IRS be sure to get the ID number of each and every

IRS employee you speak with, as well as the correct spellings of their

names. This should be done at the beginning of each conversation,

before the possibility of the call becoming contentious. By doing so,

you will able to backtrack to that individual if you find that behavior

inappropriate or exemplary. Reporting both kinds of behavior to

IRS management will likely make your feedback more effective and

provide you with a reputation as a practitioner who is both fair and

tenacious in representing your clients.

E. Martin Davidoff, CPA, Esq., is a practicing CPA and tax attorney

in Dayton, NJ. He founded the IRS Tax Liaison Committee of the

American Association of Attorney-CPAs and is the immediate past

president of the AAA-CPA. Contact him at emd@taxattorneycpa.com.


Rules of Engagement

in Dealing With the IRS Part II

In practicing before the IRS regarding collection matters, penalty

abatements, and examinations, I have found certain rules of engagement

helpful. For the first four rules of engagement, see the June/July

edition of this magazine.

Assert yourself as appropriate — postscript

Although this was discussed last month, I had an excellent example

today of how important it is to assert yourself on behalf of your clients.

Several weeks ago, the CFO of a company contacted me. His

company owed more than $200,000 in payroll taxes. This is a company

that has $6 million in annual sales and is likely to be paying

the payroll taxes in full. The IRS revenue officer, Ms. Thomson, had

been eager to interview the company's president, Mr. Mays, regarding

the possible assessment of the trust fund recovery penalty (IRC

§6672). During the preliminary call with the CFO, it was agreed

that I would represent Mr. Mays.

Ms. Thomson had set a deadline of May 24 to have this interview,

and Mr. Mays called me on May 21 to engage me. At this

point, Ms. Thomson knew that Mr. Mays was in the process of securing

representation but insisted that the appointment be kept. It

took until May 25 for me to receive the engagement letter, including

a guarantor signature, the retainer and powers of attorney. The CFO

called Ms. Thomson to tell her that the attorney would be engaged

on May 25. She said that the interview must take place between 9

a.m. and 1 p.m. on May 25, and this would be the taxpayer's final

chance. The implication was clear that she would be taking some sort

of enforcement action, but against whom? The company was making

regular payments, and Mr. Mays had not yet been assessed. This

was nothing but a scare tactic, a threat.

On the morning of May 25, we faxed our power of attorney

to Ms. Thomson and left a message on her office phone. It wasn't

until the afternoon that we learned we were supposed to call her cell

phone. By close of business on May 25, we had not heard from her.

What now? (Even if we had reached her, we were merely going

to request more time.) As of close of business, we had not received a

return call. In my mind, Ms. Thomson was a possible loose cannon,

one who did not take seriously one's right to representation.

So, on May 26, my paralegal, Sarah, called the area director to

get the name of Ms. Thomson's manager. She explained the circumstances

and secured the name of the manager. She then left a message

with the manager stating that a threat had been made and that we

could not contact the revenue officer. By the end of the day, we had

heard back from the area director's staff, the territory manager and

Ms. Thomson. The managers who called us were sympathetic and

made it clear that we did the right thing. I believe that we will get the

additional time we require to determine what questions Ms. Thomson

will be posing to my client (probably those on form 4180) and

what my client's answers to those questions will be.

8 I A U G U S T/ S E P T E M B E R 2 0 1 0 www.cpamagazine.com

Explain to the IRS your

"

justification for the extension

of time or change of payment

amount and that you are

interested in working together to

find a successful resolution ... "

IRS

Representation

Advisor

E. Martin Davidoff, CPA, Esq.

The next day, Ms. Thomson insisted on assessing the Trust

Fund Recovery Penalty without an interview. I spoke with the territory

manager, who agreed that the interview will be conducted on

or before June 18. In the meantime, no assessment would be made

against Mr. Mays. I attribute the reasonable extension of time to my

office's proactive approach in contacting the higher-ups at the IRS.

5. Never lie. Period.

This seems simple. You should never make representations to the

IRS that are misleading or untrue. Better to refuse to answer a question

than to lie. In the long run, the IRS learns which practitioners

are reliable and which are not. Once you fall in the latter category,

your cases will become uphill battles.

At the beginning of most tax examinations, the auditor will ask

if there is any income that was not reported on the tax return. If the

answer is yes, I have limited choices. I can provide the information or

I can say, "that is for you to determine"— thus evading the answer

but making no misrepresentation.

6. Do not accept unreasonable timelines.

If the IRS asks for a form 433-A in 14 days, do not agree to do so if

you know you need 30 days. If the IRS asks your client to pay $1,500

by next Friday, do not agree to do so if you believe the client is unable

to do so. Explain to the IRS your justification for the extension

of time or change of payment amount and that you are interested

in working together to find a successful resolution for all. You have

options in nearly all circumstances. You can speak to a manager or

bring the case to Appeals.

More rules of engagement to come next issue.

E. Martin Davidoff, CPA, Esq., is a practicing CPA and tax attorney

in Dayton, NJ. He founded the IRS Tax Liaison Committee of the

American Association of Attorney-CPAs and is a recent past president

of the AAA-CPA. Contact him at emd@taxattorneycpa.com.

148


Rules of Engagement:

Dealing With IRS Installment Plans

IIn practicing before the IRS concerning collection matters, penalty

abatements and examinations, I have found certain rules of engagement

helpful. For previous rules of engagement, see the August/September

edition of this magazine.

7. Do not agree to terms your client cannot meet.

If you believe your client only can pay $500 per month, and the IRS

insists that your client pay $1,000 per month, you should not agree

to the higher amount. By doing so, you are setting up your client for

failure. Rather, you should appeal the decision to a manager or other

administrative level within the IRS.

Usually, the unpalatable terms of an installment agreement deal

with the amount of monthly payments, but occasionally they might

deal with the timing of payments. For example, I have had clients

who have owed substantial amounts to the IRS who received bonuses

at the end of each year. In one case, an attorney could repay

the IRS $60,000 per year. But, a $5,000 per month payment plan

would not work because the attorney received much of her income

in December, January and February of each year through bonuses.

Thus, we negotiated with the IRS to have the payments due

for each December, January and February at a rate of $20,000. Although

the IRS had to manually monitor this particular installment

agreement, they agreed to do so because they understood the logic of

structuring the payments in this manner. Usually, you will not get

a first-level employee to depart from the prescribed monthly installment

formula that is normally used by the IRS. Higher-ups, however,

often will exercise their judgment to bring about a resolution.

8. Current taxes get paid first.

While meeting with clients about IRS collection matters, they are

likely to tell you their tales of woe about how they got into these

predicaments. Hopefully, you will give them excellent advice on how

to resolve their past issues. Maybe the issues can be resolved with

installment agreements or offers in compromise. Perhaps, the clients

will take out equity loans on their homes to pay off the IRS. Regardless

of the resolution, they will not be successful in resolving their IRS

disputes if they are not meeting their current tax obligations.

Quickly, the conversation needs to move to the current tax year

because no long-term resolution will be possible if the client is not

current. Is the client paying his or her personal estimated taxes? Is

the withholding level correct? It is important that you as the advisor

know where the taxpayer stands on the current year. Your goal

is to pay in nearly all of the tax by year-end and no more. Why no

more? Typically, the IRS will seize the excess and apply it “in the best

interests of the government,” which is usually not in your client’s

best interests.

6 I O C T O B E R 2 0 1 0 www.cpamagazine.com

149

Your goal is to pay in nearly

"

all of the tax by year-end

and no more. "

IRS

Representation

Advisor

E. Martin Davidoff, CPA, Esq.

If you are dealing with a client who is also an employer, make

sure that all payroll tax filings have been completed and that the payroll

taxes are being paid timely. I usually will have the client sign up

with a major payroll tax service and opt into their tax-pay service.

Such a service takes out the proper withholding tax with each payroll.

I educate the client that the net payroll should not be paid unless

you have the funds to be sure to pay-in the related payroll taxes.

Many IRS employees understand that current taxes should be

the first concern. Yet, some IRS employees will pressure clients to

pay delinquent taxes first because those are the cases on the IRS employees’

desks. It often takes an aggressive representative to keep the

proper focus.

Often, clients just refuse to stay current on their taxes, claiming

they are unable to do so. They explain that they cannot afford to pay

the mortgage, the auto payments, college, etc., and pay their taxes. In

many instances, these are self-employed individuals. Your approach

with such individuals has to be clear and firm. People often have

to realize that they must change their lifestyles to live within their

current budgets and that current taxes are non-discretionary parts

of those budgets. So, if a client comes in today, I realize he or she

might not be able to pay even the first half of the current year’s taxes.

But, from this day forward, the client must keep current. I encourage

high-income individuals to pay their estimated taxes monthly or

weekly through www.eftps.gov to avoid facing those huge quarterly

estimated tax payments.

More rules of engagement to come next issue.

E. Martin Davidoff, CPA, Esq., is a sole proprietor in Dayton, N.J., with

more than 30 years experience practicing as a CPA and tax attorney. He

founded the IRS Tax Liaison Committee of the American Association of

Attorney-CPAs and is a past president of the AAA-CPA. Contact him at

emd@taxattorneycpa.com.


IRS Rules of Engagement No. 10:

Never Let Deadlines Pass

IIn practicing before the IRS regarding collection matters, penalty

abatements, and examinations, I have found certain rules of engagement

helpful. For previous rules of engagement, see the June/July,

August/September and October editions of this magazine.

9. Meet all commitments made to the IRS … or at least call.

A corollary to the rule of not accepting unreasonable time lines from

the IRS is for the CPA to meet all commitments made to the IRS. If

you insist on reasonable time lines, you should be able to meet such

time lines. In the rare instances that you are unable to meet such

time lines, you must be sure to communicate with the IRS before the

commitment date passes.

Most revenue officers (RO) and agents will work with you as

long as you communicate and make a significant effort to move the

case forward. You may need to speak to a manager before securing a

reasonable time frame, as the IRS appears to provide little discretion

to its front-line telephone collection employees.

In setting time lines or requesting additional time there are techniques

you can use along with your own personal style. Let’s say you

have a client who owes $75,000 and should be able to full-pay the account

in due course. The negotiation with the IRS ultimately comes

to whether the client can liquidate assets through sale or loans and/or

the amount of monthly installment payments.

One of the first requirements of the IRS is to secure financial

information about the taxpayer. For me, the most difficult aspect

for most high-income taxpayers is determining and presenting their

budget to the IRS. Thus, one of the compromises I will make with

a RO will be to provide form 433-A, presenting all but the budget.

This is helpful to the RO because it provides a road map to assets

and employment. In exchange, I will get the time needed to put

together the client’s budget. (See a detailed budget in the April/May

2009 edition.)

How do I convince the IRS to provide more time? Often, I

bring it to a personal level. I recognize that we both are professionals

and need to be reasonable about the demands we place upon ourselves.

To eliminate resistance, I may communicate with the IRS

representative along the following lines:

“As one who has been in practice for many years, I am in the

business of avoiding stress for my clients and myself. When left to

our own resources, we will make your job easier and provide you

with a quality, comprehensive package. I know the demands on my

time and my client’s time and am in the best position to set my own

schedule. I cannot meet the deadline you are asking of me while

exercising my due diligence. I am sure if I provide you the requested

materials in the time line I have laid out, you are not going to be running

out of work. Accordingly, I would appreciate you treating me

6 I N O V E M B E R 2 0 1 0 www.cpamagazine.com

150

Most revenue officers (RO) and


agents will work with you as long

as you communicate and make a

significant effort to move the case

forward. ”

IRS

Representation

Advisor

E. Martin Davidoff, CPA, Esq.

professionally as you would like to be treated.”

In the most absurd cases, I have had the IRS require eight to ten

years of tax returns to be filed in 30 days. The IRS has been waiting

for these returns for eight to ten years, and now it is suddenly urgent

that they get them in 30 days? I will negotiate a schedule to provide

the returns over a period of time that is reasonable for the complexity,

or lack thereof, of the client’s tax returns. My rule of thumb has

been to provide the first two years’ returns within 45 days and then

two more years every 30 days.

10. Do not let appeals deadlines pass without considering action.

Most commitments with the IRS are artificial deadlines set by the

IRS (and, hopefully, the practitioner) to keep the case moving along.

However, some deadlines are critical. You should never just let those

deadlines pass. Examples of such deadlines are the 30-day deadline

to appeal a Revenue Agent Report in an examination context, the

90-day deadline to file a Tax Court Petition, the 30-day deadline to

request a Collection Due Process hearing or the one-year deadline to

request a Collection Due Process Equivalency hearing. Each of these

deadlines requires a written response.

There are also deadlines to appeal the imposition of a penalty

or the denial of a request for abatement. Never allow a deadline to

go by as a result of your indecision or inability to act. Each deadline

requires careful consideration and documentation of the actions you

decide to take or not take.

More rules of engagement to come next issue.

E. Martin Davidoff, CPA, Esq., is a sole proprietor in Dayton, N.J., with

more than 30 years experience practicing as a CPA and tax attorney. He

founded the IRS Tax Liaison Committee of the American Association of

Attorney-CPAs and is a past president of the AAA-CPA. Contact him at

emd@taxattorneycpa.com.


IRS Rules of Engagement:

Under Promise and Over Perform

IIn practicing before the IRS regarding collection matters, penalty

abatements and examinations, I have found certain rules of engagement

helpful. This is the fifth in the series on such rules of engagement,

with the previous four editions appearing in this magazine.

11. Carefully read and fully understand all IRS communications.

The title of this “rule” seems to say it all. However, I am astounded

by the number of taxpayers and practitioners who misread IRS communications.

The first thing to look for in any IRS communications

is whether there is a deadline to take action (i.e. appeal the denial of

a request for penalty abatement). Even if I do not have time to carefully

read the entire communication at first, I quickly peruse it to be

certain that no deadlines will be missed. From time-to-time, the IRS

will request documentation within a short period of time and failure

to do so will create havoc for the client. For example, offer in compromise

specialists will often request additional information within

10 to 14 days. If you don’t provide the requested information by the

due date, the IRS will return the case to you without a decision. This

is worse than a rejection in some respects, because you cannot appeal

the decision to return the case. If you realize at the outset that there

is a short time line, you can then take action to meet the deadline or

speak to someone, including a manager, to request additional time

to gather the information.

It is also key to know how to respond. For example, if the proper

response is an appeal, to what address do I send the appeal? Most

of the time, the communication will provide that information. If it

does not, you should call the telephone number on the notice (or

the practitioner hot line, 866-860-4259) to determine the proper

address (usually, the inside address within the communication). We

will often fax our appeal as well as mail it via Certified Mail, to ensure

timely receipt.

Many IRS letters can be confusing. For example, some letters

state that the IRS has made a decision, but if you provide additional

information within 30 days, they will reconsider. Yet, I have often

seen that same letter include language advising the taxpayer that he/

she had 30 days to appeal the decision (most often in offers in compromise).

A taxpayer may send in the additional information, but

not ask for an appeal. Thus, if the information does not change the

mind of the IRS, the taxpayer has lost the right to go to Appeals!

Many of you are familiar with IRS letter 1058, wherein the IRS

advises the taxpayer of a potential levy and his/her right to a Collection

Due Process Hearing. After a case has remained dormant for

awhile, the IRS may file what is often referred to as a “refresher letter,”

letter 3174. Essentially, this again advises the client of the potential

for levies as well as other enforcement action if full payment is not

timely made. However, there is no formal Appeals mechanism. In

my opinion, a response is necessary to ensure that levy or lien action

is not imminent. The appropriate response is to follow the process

which would lead to a CAP Appeal (form 9423), the first step of

which is to communicate with the source who sent the letter 3174.

6 I TA X S E A S O N 2 0 11 www.cpamagazine.com

151

Such tools are E-Services or the


Practitioner Hot Line to secure

account transcripts or Freedom

of Information requests to secure

other documents (i.e. SFR, AUR

or examination assessments). ”

IRS

Representation

Advisor

E. Martin Davidoff, CPA, Esq.

IRS communications often provide explanations on changes in

tax, interest and/or penalties. Yet, such communications are often

not complete. So, in order for you to “fully understand” a communication,

you may need to use a variety of tools to request such

documentation to enable you to fully understand the notice. Such

tools are E-Services or the Practitioner Hot Line to secure account

transcripts or Freedom of Information requests to secure other documents

(i.e. SFR, AUR or examination assessments).

The bottom line is to read the IRS communication from cover

to cover, making sure that you fully understand how the document

impacts the taxpayer and, if you disagree with that impact, how and

when to reply to the communication.

12. Know your case’s status! Set ticklers and follow-up.

When dealing with IRS controversy matters, you, the practitioner,

should take control and fully understand the procedural context of

the case. Is the case in Appeals? Has the tax been assessed? Can an innocent

spouse claim be timely filed? Can the taxpayer take advantage

of a Collection Due Process Hearing or the equivalency hearing? Is

your case nearing the expiration of the Statute of Limitations on IRS

collections? Once you understand the procedural context, then set

forth a plan of action and execute that plan.

Never just wait for the IRS to contact you. You should set ticklers

and time lines for anticipated contacts. Depending upon your

situation and your strategy, you may wish to push the case to a conclusion

aggressively. If your hope is that the IRS will be quiet and go

away, that should be a strategic decision, not as a result of indecision.

At our office, after we have made contact with the IRS, we “tickler”

a follow-up to check the status of the case. When the “tickler” pops

up, we then decide whether contact with the IRS is appropriate and,

if so, we decide upon the best manner of contacting the IRS.

For example, at the time we submit an offer in compromise

package on behalf of a client to the IRS, we also set a tickler of 30

days to make certain that the case has been received and assigned. If

we have heard nothing in that time frame, we call the OIC unit to

Continued on page 13


Save Thousands of Dollars By Running

Examination Results Through Tax Software

Continued from page 6

which the case was sent (usually Holtsville, NY for us). After the call,

we evaluate the discussion and set a new tickler.

Another example, would be securing an installment agreement.

We monitor the case to ensure that the IRS is not placing levies or

liens on the case while the request for an installment agreement is

pending. Also, many clients wish to have some finality to their situation

as quickly as possible. So, we will set ticklers and make contacts

to keep the case moving along. After each conversation with the IRS

we inquire on the best time to make contact again and use that information

as one point of reference in setting the next tickler.

13. Confirm all examination computations through tax software.

In the past year, I have saved two clients thousands of dollars by

merely running the tax examination results through our tax software.

I had a ‘hunch’ on each matter that there were some errors in the initial

return preparation or in the computations by the IRS. So, I ran

the original return and the adjustments (as a 1040-X) through my

tax software. I found that there were computational errors as a result

of passive loss computations, the AMT, depreciation and net operating

loss carryovers. (It should be noted that the original returns were

not prepared by our firm.) The results were so significant that I have

made it a rule to check the computations on all examinations. We

also check the more complicated interest and penalty computations

using a program by TValue entitled TaxInterest.

The first step is to make certain that we ensure that there were

no errors in the original return. Through that process, you can discover

and evaluate errors in the return, the correction of which will

benefit your client. The complexity of the passive loss rules, the AMT

and the combination of the two provide a significant opportunity for

tax savings. Then we add the agreed-to changes in income to arrive

at a revised tax liability.

The IRS will usually not have a problem correcting errors such

as those described above. The settlements we reach with them are

usually related to under-reported income or disallowed deductions.

The ultimate tax is merely a computation. The IRS software for examinations

does not have the sophistication of the IRS tax processing

computers or our software. Accordingly, it is not unusual for the IRS

to fail to pick-up a passive loss carryover, for example, which gets

freed up with the disallowance of current year deductions on rental

real estate.

More rules of engagement to come next issue.

E. Martin Davidoff, CPA, Esq., is a sole proprietor in Dayton, N.J., with

more than 30 years experience practicing as a CPA and tax attorney. He is a

past president of the AAA-CPA. Contact him at emd@taxattorneycpa.com.

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By Practicing CPAs ... For Practicing CPAs TA X S E A S O N 2 0 11 I 13


Dealing with the IRS Regarding

Collections, Penalty Abatements

and Examinations

In practicing before the IRS regarding collection matters,

Ipenalty abatements and examinations, I have found certain rules

Iof engagement helpful. This is the sixth and final in the series of

Iarticles in this magazine on such rules of engagement.

14. Be Realistic With Your Client.

Promise only what you know you can deliver, which will

frequently result in your delivering more than anticipated.

Throughout our communications with our client, we

promise only what we know we can accomplish. Our goal is

to establish trust with our clients and referral sources, while

establishing reasonable expectations in the minds of our clients.

Since much of our success depends upon our advocacy skills in

working with a variety of individual decision-makers at the IRS,

we are often able to deliver more than our clients anticipate.

15. Confirm all Oral Agreements with the IRS field employees in writing

and request that they sign off.

In collection matters, the IRS often wants information more

quickly than you can provide it with reasonable accuracy.

Accordingly, you often enter into a negotiation with the Revenue

Officer (RO) and establish mutually-agreeable deadlines. For

example, when will back tax returns be filed? When will the form

433-A be completed? How will interim payments, estimated

taxes, and payroll tax deposits be handled? ROs are instructed

to secure form 433-A information (client financial information)

immediately. The assets/liabilities sections of the form 433-A

are often straight-forward and can be completed in a relatively

short timeframe. However, the budget section may take more

time and finesse to present a complete and accurate picture of

the taxpayer’s finances and monthly budget. Accordingly, you

may agree on varying timelines for portions of the form 433-

A in order to satisfy the RO’s need for securing at least some

information quickly. In exchange for meeting the agreed-to

timelines, you should negotiate with the RO to hold off in taking

any collection actions and/or issuing notices that will accelerate

the collection process.

To avoid any possible misunderstandings, you should set

forth the understandings with the RO in writing. You could do

a memorandum to your client’s file. However, if you are dealing

with a RO in the field, why not turn that memorandum into a

letter and ask the RO to sign off on its contents? The worst that

could happen is that the RO will not sign the letter. If the RO

receives the letter and fails to object to its contents, I believe

that such inaction would be considered a tacit agreement to the

letter’s terms. If I am dealing with a RO whom I trust, I often

6 I AUGUST/SEPTEMBER 2011 www.cpamagazine.com

153

In exchange for meeting

"

the agreed-to timelines, you

should negotiate with the RO

to hold off in taking any

collection actions. "

IRS

REPRESENTATION

E. Martin Davidoff, CPA, Esq.

send the confirming letter and ask the RO to call me if any of

the contents are inaccurate. If I do not trust the RO or have no

long-term relationship with the RO, I will often insist that the

RO sign off on the letter or issue their own letter of confirmation

back to me. On occasion, I will go to the manager to secure a

written confirmation from the RO.

In drafting the letter, I take great care to write the

agreement precisely as discussed. I would not want to be accused

of attempting to renegotiate the agreement by using wording

more favorable to my client than our discussion had provided.

Sometimes, in drafting the letter, I will think of something

that had not been discussed that should be included in our

agreement. In such circumstances, I make it very clear that we

had not discussed that aspect and invite the RO to call me if he/

she does not agree with my proposed resolution of the issue.

When dealing with IRS collections through the centralized

telephone sites, securing written confirmation of oral agreements

is nearly impossible. In such cases, I write detailed internal

memoranda. If nothing else, each memorandum should clearly

communicate to your client what has transpired. In lieu of a

memorandum, I will often send a letter to my client summarizing

the case’s status. Both the memorandum and the client letter

serve the purpose of documenting what has transpired and

communicating the status of the matter to your client.

16. When you win, say “thank you” and “good-bye.”

■ The Appeals Officer agrees to waive your client’s penalty;

■ The Criminal Investigation Division decides not to

prosecute your client;

■ The IRS telephone assister agrees to accept a favorable

installment agreement; or

■ The IRS finally agrees to that Offer in Compromise.


All of the above are favorable outcomes for your client.

Some practitioners might ask “what swayed you to see it our

way?” or “how did you come up with that number?” When

the IRS says “you win,” you should simply say “thank you”

and “good-bye.” (Then, of course, do the memorandum to

your file.) For example, I recently received a verbal approval

of a highly favorable installment agreement. I then gave the

IRS manager in this case, the only information he needed,

“I would like the payments to come due on the 28th of each

month, starting next month.” That is all he needed to input

the installment agreement and, at that point, I quickly ended

the call.

17. Pull transcripts and summarize them.

To fully understand a client’s options, it is helpful to prepare a

federal tax summary. A sample of such a summary can be found

below. To prepare such a summary, you must secure Account

Transcripts from the IRS. For practitioners, this can be done

through E-Services or by calling the tax practitioner hotline

(1-866-860-4259). Preparing a federal tax summary using a

spreadsheet program allows you to summarize dozens of pages

from IRS Account Transcripts on one page so you can readily

see the amounts of tax, interest, late filing penalties, late payment

penalties, estimated tax penalties and offsetting payments and

credits for multiple years.

18. Be fully prepared for all meetings…anticipate the unexpected.

I recently represented a client at a tax examination. In

preparing for my meeting with the auditor, I came in

prepared with multiple sets of files. We carefully segregated

the information so that we could answer anticipated questions

narrowly to prevent raising additional issues inadvertently.

The bottom line is that we anticipated virtually all of the

auditor’s potential questions. Our thorough preparation

enabled us to achieve a more favorable and faster result for

our client and minimize her stress. Such preparation is helpful

in the collection area too. Comprehensive form 433 packages

enable us to secure better results. Anticipating weaknesses in

our client’s arguments for penalty abatement hearings enables

us to more effectively address those weaknesses with the

Appeals Officer.

19. Know the tools available to you and your clients’ rights.

Some examples include:

■ Your client has a right to appeal the rejection of his/her

request for an installment agreement;

■ You have the right to discuss your case with a manager,

territory manager, or anyone else up the chain of command;

■ You have the right to go to the Office of Appeals for

Collection Due Process hearings, CAP Appeals, penalty

abatement appeals, and to appeal examination findings;

■ To assist you, you have programs available such as the

Office of Taxpayer Advocate and Fast Track Mediation;

■ You may designate payments as Trust Funds or Deposits

in the Nature of a Cash Bond;

■ You have the right to see, generally, what is in IRS files

through the Freedom of Information Act. You also may see

IRS records of third-party contacts.

Learn all you can about your clients’ rights and what

tools are available within the IRS so you can utilize them most

effectively to benefit your clients.

E. Martin Davidoff, CPA, Esq., is a sole proprietor in Dayton, N.J., with

more than 30 years experience practicing as a CPA and tax attorney. He

founded the IRS Tax Liaison Committee of the American Association of

Attorney-CPAs and is a past president of the AAA-CPA. Contact him at

emd@taxattorneycpa.com.

(IRS Representation Federal Tax Summary)

L\EMD\DOELiab.123 11/12/2004

JOHN DOE

YEARLY SUMMARY OF FORM 1040 TAX LIABILITY

PENALTIES

OVERPYMT

FEES & LATE LATE ESTIMATED TOTAL PAYMENTS & CREDIT BALANCE DATE OF

YEAR TAX INTEREST COLLECTION FILING PAYMENT TAX ASSESSMENTS CREDITS TRANS OUT DUE "1040" TRANSCRIPT

1991 54,056.00 102,817.39 13,514.00 13,514.00 183,901.39 183,901.39 07/23/2004

1992 105,339.00 176,033.26 26,335.00 26,334.75 334,042.01 334,042.01 07/23/2004

1993 57,286.00 68,332.01 52.00 14,321.50 14,315.49 2,400.25 156,707.25 (61,284.75) 95,422.50 09/13/2004

1994 126,939.00 130,383.40 70.00 31,734.75 31,734.75 320,861.90 320,861.90 09/13/2004

1995 131,126.00 111,359.90 32,781.50 32,781.50 308,048.90 308,048.90 09/13/2004

1996 198,387.00 137,665.23 49,596.75 49,596.75 435,245.73 435,245.73 09/13/2004

1997 71,195.00 39,070.53 17,798.75 17,798.75 145,863.03 145,863.03 09/13/2004

1998 94,743.00 41,047.19 23,685.75 23,685.75 183,161.69 183,161.69 09/13/2004

1999 107,016.00 34,493.18 26,754.00 26,754.00 195,017.18 195,017.18 09/13/2004

2000 141,777.00 29,659.32 35,444.25 31,186.10 238,066.67 (22.00) 238,044.67 09/13/2004

2001 86,825.00 13,372.66 20.00 21,706.25 13,023.75 134,947.66 134,947.66 07/23/2004

2002 93,454.00 7,108.98 23,363.50 8,410.86 132,337.34 132,337.34 07/23/2004

2003 63,276.00 0.54 0.00 0.00 1,444.16 64,720.70 (64,728.00) 7.30 0.00 07/23/2004

TOTALS $1,331,419.00 $891,343.59 $142.00 $317,036.00 $289,136.45 $3,844.41 $2,832,921.45 ($126,034.75) $7.30 $2,706,894.00

154 By Tax Practitioners ... For Tax Practitioners AUGUST/SEPTEMBER 2011 I 7


IRS Announces New Effort to Help Struggling Taxpayers

Get a Fresh Start; Major Changes Made to Lien Process

IR-2011-20, Feb. 24, 2011

WASHINGTON — In its latest effort to help struggling taxpayers, the Internal Revenue

Service today announced a series of new steps to help people get a fresh start with their tax

liabilities.

The goal is to help individuals and small businesses meet their tax obligations, without adding

unnecessary burden to taxpayers. Specifically, the IRS is announcing new policies and

programs to help taxpayers pay back taxes and avoid tax liens.

“We are making fundamental changes to our lien system and other collection tools that will

help taxpayers and give them a fresh start,” IRS Commissioner Doug Shulman said. “These

steps are good for people facing tough times, and they reflect a responsible approach for the tax

system.”

Today’s announcement centers on the IRS making important changes to its lien filing practices

that will lessen the negative impact on taxpayers. The changes include:






Significantly increasing the dollar threshold when liens are generally issued, resulting in

fewer tax liens.

Making it easier for taxpayers to obtain lien withdrawals after paying a tax bill.

Withdrawing liens in most cases where a taxpayer enters into a Direct Debit Installment

Agreement.

Creating easier access to Installment Agreements for more struggling small businesses.

Expanding a streamlined Offer in Compromise program to cover more taxpayers.

“These steps are in the best interest of both taxpayers and the tax system,” Shulman said.

“People will have a better chance to stay current on their taxes and keep their financial house in

order. We all benefit if that happens.”

This is another in a series of steps to help struggling taxpayers. In 2008, the IRS announced lien

relief for people trying to refinance or sell a home. In 2009, the IRS added new flexibility for

taxpayers facing payment or collection problems. And last year, the IRS held about 1,000

special open houses to help small businesses and individuals resolve tax issues with the

Agency.

……..FOR FURTHER INFORMATION SEE IRS WEBSITE:

http://www.irs.gov/newsroom/article/0,,id=236540,00.html

155


New IRS Procedures Claim to

Provide ‘Fresh Start’ for Taxpayers

OOver the past several weeks, the IRS has made some significant

changes in collection policies and procedures, which I am covering

in this issue. The series “Rules of Engagement in Dealing with the

IRS” will continue in a future issue.

IR News Release 2011-20 (02/24/2011)

IR News Release 2011-20 (“IR-2011-20”) appears long on claiming

to provide taxpayers a “fresh start” and short on specifics. But, there

are several important concepts and details that were provided.

A. Incentives for Direct Debit Installment Agreements (“DDIA”)

The IRS is using the avoidance of a lien as the carrot to provide

incentives for people to enter into installment agreements with the

IRS that allow the IRS to directly debit a taxpayer’s bank account for

monthly payments. If the unpaid assessments of a taxpayer amount

to $25,000 or less, then the IRS will consider withdrawing a lien:

n For taxpayers entering into a DDIA;

n For taxpayers converting their existing “regular” installment

agreement into a DDIA; and

n For taxpayers with an existing DDIA who request a lien withdrawal

from the IRS.

However, the lien will be withdrawn only after a probationary

period (the length of which was not covered in the IRS Release)

“demonstrating that direct debit payments will be honored.” My

guess is that the probationary period will run from 45-90 days from

the time that the taxpayer moves into or creates a DDIA with respect

to their debt.

Although not mentioned in the IRS release, it appears that

taxpayers for whom no IRS liens have yet to be filed, and owing

less than $25,000, will be able to avoid a lien upon entering into a

DDIA. It should be noted, however, that current policy is to not file

a lien for all installment agreements under $25,000.

B. Small Business Installment Agreements

Small businesses owing payroll taxes to the IRS will now have an expanded

opportunity to avail themselves of a streamlined installment

agreement process only if they enter into a DDIA. Prior to IR-2011-

20, such streamlined agreements were only available on payroll tax

liabilities if the liability did not exceed $10,000. Under the new rules,

small businesses may enter into a streamlined installment agreement

(SIA) with balances of up to $25,000 in payroll taxes as long as they

agree to a DDIA. However, even though the dollar threshold is

higher, the 24-month period remains for small businesses to pay off

their SIAs. Accordingly, few are likely to take advantage of this new

opportunity as it is currently offered.

6 I APRIL/MAY 2011 www.cpamagazine.com

156

It should be noted that the


IRS will not allow the transfer

of a case from a Service Center

Appeals office unless such

financial disclosure forms are

provided in advance. ”

IRS

Representation

Advisor

E. Martin Davidoff, CPA, Esq.

Prior to IR-2011-20, small businesses were already allowed to

enter into SIAs for income taxes and were allowed up to 60 months

to repay such liabilities. One of the many unanswered questions presented

by IR-2011-20 is whether the small businesses who only owe

income taxes will now be required to enter into a DDIA in order to

secure an SIA? If so, the new rules would actually create an added

restriction upon taxpayers when compared to the previous rules of

IRM §5.14.5.2 (08/05/2010).

C. Fewer Liens

The principal message of IR-2011-20 was that the IRS is taking steps

to “help people get a fresh start with their tax liabilities” and announces

that it is “making important changes to its lien filing practices.”

Let’s look at these five changes.

1. “Significantly increasing the dollar threshold when liens are

generally issued, resulting in fewer tax liens.”

The obvious question is what is the change in the threshold? In

spite of the question being presented to the IRS at several levels, it

remains unanswered. The pre-IR-2011-20 rules set forth in Internal

Revenue Manual (“IRM”) §5.12.2.4.1 provide that a lien may be

considered when the unpaid balance of an assessment against the

taxpayer is more than $5,000. And, a lien can be considered even if

the balance due is less than $5,000 if “the lien will promote payment

compliance.” Is the $5,000 threshold being increased? If so, to what

level?

The larger focus of IR-2011-20 was that one may avoid liens if

entering into an SIA which is also a DDIA. IRM §5.14.5.2(4) has

provided that “A lien determination is not required for a streamlined

installment agreement but may be made at the discretion of the revenue

officer and liens may be filed.” SIAs have generally been made

available to those owing less than $25,000 to the IRS.


Under New Rules, the IRS Will Now Remove the Lien

So, has the IRS truly taken action to

reduce lien filings in IR-2011-20? Probably

not, because existing policy generally would

not have the IRS placing liens on taxpayers

entering into streamlined installment agreements.

Actually, for this group of taxpayers

(those owing less than $25,000 and entering

into a streamlined agreement), the requirements

to avoid a lien may have been

increased by the requirement for a DDIA.

Will the IRS now routinely assert liens for

those owing less than $25,000 who enter

into an SIA if a DDIA is not elected? The

answer is currently unknown to the public.

Who gets the biggest benefit from the

new rules? In my mind, it is those who were

not getting into a streamlined installment

agreement and being unresponsive to the

IRS. Such unresponsiveness would have led

to the IRS placement of the lien upon the

taxpayer. Under the new rules, the IRS will

now remove the lien when the taxpayer enters

into an SIA/DIA and gets through the

probationary period. Previously, the removal

of the lien prior to full payment was virtually

impossible.

2. “Making it easier for taxpayers to

obtain lien withdrawals after paying a tax

bill.”

No specifics were mentioned here.

Currently, it is not particularly difficult to

secure a lien withdrawal after payment. Such

can be done at walk-in centers if timing is

pressing or through a centralized lien hotline.

Will the IRS really make it easier? That

remains to be seen.

3. “Withdrawing liens in most cases

where a taxpayer enters into a Direct Debit

Installment Agreement.”

See the discussion in sections A and B

above. And, even if this is true, the IRS is

getting a bigger benefit through the increase

in the rate of compliance of those entering

into DDIAs as compared to those who enter

into an agreement to, hopefully, mail in the

check each month.

4. “Creating easier access to Installment

Agreement for more struggling small

businesses.”

See discussion in section B above.

5. “Expanding a streamlined Offer in

Compromise program to cover more taxpayers.”

IR-2011-20 goes further, stating

that the IRS is expanding the availability

of streamlined offer in compromises

(OIC) to taxpayers with annual income

of up to $100,000 and those owing up to

$50,000 (doubled from the previous limit

of $25,000). There is just one catch here.

I haven’t found anyone who understands

how a “streamlined” OIC program is different

from the normal Offer in Compromise

system. When one searches “streamlined

Offer in Compromise” on the IRS Web site,

the only entry that comes up is IR-2011-20!

Also, the concept of a streamlined OIC is

not mentioned in the OIC regulations under

§7122.

Revised: Form 12153, Request for a Collection

Due Process or Equivalent Hearing

For the first time since 2006, the IRS has

revised form 12153, Request for a Collection

Due Process or Equivalent Hearing.

The form, now available on www.irs.gov, requests

more information from the Taxpayer

and provides much better guidance on the

use of the form. Kudos to the IRS on providing

very helpful information as to when

and where to file the form. Also, very specific

information is provided to assist taxpayers

on what takes place in a Collection Due

Process (CDP) hearing and what issues can

be addressed in such hearings. The following

changes have been made to the form itself:

n Separate contact information is requested

for the taxpayer and spouse.

n The form now has language encouraging

the submission of financial disclosure

information (forms 433A and 433B) if a

taxpayer wants to discuss collection alternatives.

It should be noted that the IRS will

not allow the transfer of a case from a Service

Center Appeals office unless such financial

disclosure forms are provided in advance.

n The form makes it clear that you

must provide a reason for your dispute and

that failure to do so will result in your request

for a CDP hearing not being honored.

The instructions provide an entire page of

examples of reasons.

n A new box has been added to designate

that the CDP hearing will be held with

one’s representative.

n The instructions make it very clear

that liens may be filed during the pendency

of a CDP regarding a proposed levy action.

157

As a side note, at press-time, the IRS

had nine sections on the form, numbered 1

through 8 (two items marked #5).

E. Martin Davidoff, CPA, Esq., is a sole proprietor

in Dayton, N.J., with more than 30 years

experience practicing as a CPA and tax attorney.

He founded the IRS Tax Liaison Committee of

the American Association of Attorney-CPAs and

is a past president of the AAA-CPA. Contact him

at emd@taxattorneycpa.com.

REVIEW QUESTION

True or False? Form 12153 has

CPA TAX

UNIVERSITY

been revised to include language

that encourages including forms

433A and 433B if a taxpayer wants to discuss

collection alternatives.

Answer: True

The form now has language encouraging the submission

of financial disclosure information (forms 433A and 433B)

if a taxpayer wants to discuss collection alternatives. It

should be noted that the IRS will not allow the transfer

of a case from a Service Center Appeals office unless such

financial disclosure forms are provided in advance.

By Practicing CPAs ... For Practicing CPAs APRIL/MAY 2011 I 7


Adjustments to IRS Lien Policies

Page 1 of 2

Adjustments to IRS Lien Policies

Increase in the lien filing threshold

The Fresh Start changes increase the IRS lien filing threshold from $5,000 to $10,000. Liens may still be filed on

amounts less than $10,000 when circumstances warrant. The IRS will not retroactively apply the new $10,000 lien

filing threshold and automatically withdraw a previously filed lien.

Requesting a lien withdrawal after the lien has been released

The IRS may now issue a withdrawal of a filed Notice of Federal Tax Lien after the lien has been released. If you wish

to have the Notice of Federal Tax Lien withdrawn, you must request the withdrawal in writing. Please use Form 12277,

Application for Withdrawal, (PDF). In item 8, Reason for requesting withdrawal, check box d, the best interest

provision.

Generally, eligibility requirements are:

• Your tax liability has been satisfied and your lien has been released

• You are in compliance for the past three years in filing:

◦ All individual and business returns

◦ All information returns

• You are current on your estimated tax payments and federal tax deposits, as applicable.

Lien withdrawal after entering into a Direct Debit installment agreement

If you are a qualifying taxpayer and meet the eligibility requirements, you may have your lien withdrawn after entering

into a Direct Debit installment agreement. Your request for lien withdrawal must be in writing. Please use Form 12277,

Application for Withdrawal (PDF). In item 8, “Reason for requesting withdrawal,” check box b, the “entered into an

installment agreement” provision.

Qualifying taxpayers are:

• Individuals (Form 1040 tax)

• Businesses with income tax liability only

• Out of business entities with any type of tax debt

Eligibility Requirements are:

• The current amount you owe must be $25,000 or less

• If you owe more than $25,000, you may pay down the balance to $25,000 prior to requesting the lien

withdrawal to be eligible

• Your Direct Debit Installment Agreement must full pay the amount you owe within 60 months or before the

Collection Statute expires, whichever is earlier

• You must be in full compliance with other filing and payment requirements

• You must have made three consecutive direct debit payments

• You cannot have previously received a lien withdrawal for the same taxes unless the withdrawal was for an

improper filing of the lien

• You cannot have defaulted on your current, or any previous, direct debit installment agreement

If you are currently on a regular installment agreement, you may convert to a Direct Debit Installment Agreement. To

convert a regular installment agreement to a Direct Debit Installment Agreement:

• Individuals may use the Online Payment Agreement (OPA) application, call the toll free line listed below, or visit

your local IRS office

• Businesses may call the toll free line listed below or visit your local IRS office

If you have questions or need assistance with the direct debit process, please call the applicable telephone number

below.

158

http://www.irs.gov/businesses/small/article/0,,id=239095,00.html

12/2/2011


Adjustments to IRS Lien Policies

159

http://www.irs.gov/businesses/small/article/0,,id=239095,00.html

Page 2 of 2

12/2/2011

Individuals (Wage & Salary Earners) 1-800-829-0922

Individuals (Self-Employed) 1-800-829-8374

Businesses 1-800-829-0115

If you default on your Direct Debit installment agreement after the lien is withdrawn, a new notice of lien may be filed

and collection efforts may resume.

References/Related Topics

• Struggling with Paying Your Taxes? Let IRS Help You Get a Fresh Start

Page Last Reviewed or Updated: December 01, 2011


LIEN HAS BEEN RELEASED

Eligibility Requirements:

1. Tax liability has been fully paid.

2. Taxpayer is in compliance for the past three years in filing:

a. All individual and business returns

b. All information returns

3. Taxpayer is current on estimated tax payments and federal tax deposits (as applicable)

4. Has to be a determination that it is in the best interest of Taxpayer and the

government.

Completion of Form 12277 “Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien”:

A. Check the last box in Section 11 “the best interest provision”

B. In Section 12 write: "My liability is fully paid and the lien has been released, and I am seeking a

withdrawal under the Fresh Start program."

Submit Package:

(See Publication 4235 "Advisory Group Addresses" to determine which is office should receive your Form 12277)

1. Transmittal Letter

2. Copy of Form 668(Z) "Certificate of Release of Federal Tax Lien"

3. Copy of Form 2848 "Power of Attorney and Declaration of Representative"

160


DIRECT DEBIT INSTALLMENT AGREEMENT

Eligibility Requirements to request Lien Withdrawal:

1. The current amount owed must be $25,000 or less

2. Balance may be paid down to $25,000 or less prior to requesting the lien withdrawal to become eligible.

3. DDIA must pay the full amount owed within 60 months OR before the Collection Statute expires,

whichever is earlier.

4. Taxpayer must be in full compliance with other filing and payment requirements

5. Taxpayer must have made three consecutive direct debit payments

6. Taxpayer cannot have previously received a lien withdrawal for the same taxes (unless the withdrawal

was for an improper filing of the lien).

7. You cannot have defaulted on your CURRENT, or any PREVIOUS, direct debit installment agreement.

Who is NOT Eligible

1. Taxpayers who owe more than $25,000

2. Small Business who owe Payroll Trust Fund Taxes

3. Taxpayer has defaulted on their CURRENT, or any PREVIOUS, direct debit installment agreement.

Completion of Form 12277 “Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien”:

A. Check the third box in Section 11 “The taxpayer is under a Direct Debit Installment Agreement”

B. In Section 12 write: "I have a Direct Debit Installment Agreement, the balance is less than $25,000

and I have made three payments. I am seeking a withdrawal under the Fresh

Start program."

Submit Package:

(See Publication 4235 "Advisory Group Addresses" to determine which is office should receive your Form 12277)

1. Transmittal Letter

2. Copy of the IRS Direct Debit Installment Agreement Acceptance Letter.

3. Copy of Form 2848 "Power of Attorney and Declaration of Representative"

161


E. MARTIN DAVIDOFF

ATTORNEY AT LAW

353 Georges Road - Suite K

P.O. Box 835

Dayton, NJ 08810-0835

EMD@taxattorneycpa.com

_____________

TEL: 732-274-1600

FAX: 732-274-1666

December 2, 2011

VIA CERTIFIED MAIL

Attn: Advisory Group Manager

IRS Advisory Group

4 Paragon Way, Suite 2

Freehold, NJ 07728

RE: Withdrawal of Notice of Federal Tax Lien

Bobby Swisher

SS#: 123-45-6789

Dear Sir or Madam:

On behalf of the above-referenced Taxpayer, we are requesting a Withdrawal of Notice of Federal Tax

Lien. As such please find enclosed:

1. Form 12277 "Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien;

2. Copy of the "Certificate of Release of Federal Tax Lien;" and,

3. Copy of Form 2848, "Power of Attorney and Declaration of Representative."

Once the paperwork has been com pleted, please forward a copy of Form 10916(c) "W ithdrawal of

Federal Tax Lien" to the Middlesex County Clerk's office for recording. In addition, please provide a copy

of Form 10916(c) to my office for the Taxpayer's records.

Should you have any questions, please do not hesitate to contact me. Thank you in advance for your

assistance with this matter.

Very truly yours,

EMD:rb

encls.

E. Martin Davidoff

162


LIEN HAS BEEN RELEASED

163


General Instructions

Page 2 of 2

1. Complete the application. If the information you supply is

not complete, it may be necessary for the IRS to obtain

additional information before making a determination on the

application.

Sections 1 and 2: Enter the taxpayer's name and

Social Security Number (SSN) or Employer

Identification Number (EIN) as shown on the Notice of

Federal Tax Lien (NFTL).

Section 3: Enter the name of the person completing

the application if it differs from the taxpayer's name in

section 1 (for example, taxpayer representative). For

business taxpayers, enter the name and title of person

making the application. Otherwise, leave blank.

Sections 4 through 8: Enter current contact information

of taxpayer or representative.

Section 9: Attach a copy of the NFTL to be withdrawn,

if available. If you don't have a copy of the NFTL but

have other information about the NFTL, enter that

information to assist the IRS in processing your

request.

Section 10: Check the box that indicates the current

status of the lien.

"Open" means there is still a balance owed with

respect to the tax liabilities listed on the NFTL.

"Released" means the lien has been satisfied or is no

longer enforceable.

"Unknown" means you do not know the current status

of the lien.

Section 11: Check the box(es) that best describe the

reason(s) for the withdrawal request. NOTE: If you are

requesting a withdrawal of a released NFTL, you

generally should check the last box regarding the best

interest provision.

Section 12: Provide a detailed explanation of the

events or the situation to support your reason(s) for the

withdrawal request. Attach additional sheets and

supporting documentation, as needed.

Affirmation: Sign and date the application. If you are

completing the application for a business taxpayer,

enter your title in the business.

2. Mail your application to the IRS office assigned your

account. If the account is not assigned or you are

uncertain where it is assigned, mail your application to IRS,

ATTN: Advisory Group Manager, in the area where you live

or is the taxpayer's principal place of business. Use

Publication 4235, Advisory Group Addresses, to determine

the appropriate office.

3. Your application will be reviewed and, if needed, you may

be asked to provide additional information. You will be

contacted regarding a determination on your application.

a. If a determination is made to withdraw the NFTL, we

will file a Form 10916(c), Withdrawal of Filed Notice of

Federal Tax Lien, in the recording office where the

original NFTL was filed and provide you a copy of the

document for your records.

b. If the determination is made to not withdraw the

NFTL, we will notify you and provide information

regarding your rights to appeal the decision.

4. At your request, we will notify other interested parties

of the withdrawal notice. Your request must be in

writing and provide the names and addresses of the

credit reporting agencies, financial institutions, and/or

creditors that you want notified.

NOTE: Your request serves as our authority to release the

notice of withdrawal information to the agencies, financial

institutions, or creditors you have identified.

5. If, at a later date, additional copies of the withdrawal notice

are needed, you must provide a written request to the

Advisory Group Manager. The request must provide:

a. The taxpayer's name, current address, and taxpayer

identification number with a brief statement

authorizing the additional notifications;.

b. A copy of the notice of withdrawal, if available; and

c. A supplemental list of the names and addresses of

any credit reporting agencies, financial institutions, or

creditors to notify of the withdrawal of the filed Form

668(Y).

. Privacy Act Notice

We ask for the information on this form to carry out the

Internal Revenue laws of the United States. The primary

purpose of this form is to apply for withdrawal of a notice of

federal tax lien. The information requested on this form is

needed to process your application and to determine

whether the notice of federal tax lien can be withdrawn.

You are not required to apply for a withdrawal; however, if

you want the notice of federal tax lien to be withdrawn, you

are required to provide the information requested on this

form. Sections 6001, 6011, and 6323 of the Internal

Revenue Code authorize us to collect this information.

Section 6109 requires you to provide the requested

identification numbers. Failure to provide this information

may delay or prevent processing your application; providing

false or fraudulent information may subject you to penalties.

Routine uses of this information include giving it to the

Department of Justice for civil and criminal litigation, and to

cities, states, the District of Columbia, and U.S.

commonwealths and possessions for use in administering

their tax laws. We may also disclose this information to

other countries under a tax treaty, to federal and state

agencies to enforce federal nontax criminal laws, or to

federal law enforcement and intelligence agencies to

combat terrorism.

Catalog Number 27939C www.irs.gov Form 12277 (Rev. 10-2011)

164


165


(Publication 487, Catalog No. 46553K)





(Publication 785, Catalog No. 47474W)





(Publication 783, Catalog No. 46755I. You

lication

at

)

-


(Publication 784, Catalog No. 46756T. You can


at )






(Publication 786, Catalog No. 46757E)

-


(Publication 1024, Catalog No. 46878I)



12277, Catalog No. 27939C)

Publication 4235 37262G

166


617-316-2608 617-316-2606
















518-427-4178 518-427-4214

212-436-1314 212-436-1203

718-488-2826 718-488-2738

716-961-5381 716-961-5067

412-395-5200 412-395-5291

215-861-1328 215-861-1119

973-921-4283 732-761-3342

513-263-3197 513-263-4426

313-234-2398 313-234-2261




804-916-8039 804-916-8060








3





Plantation, FL 33324

410-962-7298 410-962-9955

336-378-2414 336-378-2071

904-665-0832 904-665-1848

954-423-7043 954-423-7809

Illinois 312-566-2915 312-566-2999




317-685-7581 317-685-7580


Wisconsin


414-231-2121 414-231-2123



314-612-4081 314-612-4079


314-612-4081 651-312-8050


402-233-7391 402-233-7480


404-338-8262 404-338-8247




504-558-3465 504-558-3490


615-250-5797 615-250-6008



405-297-4462 405-297-4370



214-413-5349 214-413-5654

Dallas, TX 75242




512-499-5241 512-499-5993






Houston, TX 77002

Western
















713-209-4515 713-209-3802

303-603-4570 303-382-6327

206-220-4868

602-636-9358

206-220-5531

602-636-9377

949-389-4122 949-389-5004

213-576-4463 213-576-4401

510-637-4660 510-637-2500



954-423-7456 954-423-7809

Plantation, FL 33324

Publication 4235 37262G

167


DIRECT DEBIT INSTALLMENT AGREEMENT

Eligibility Requirements to request Lien Withdrawal: