IRS Innocent Spouse Relief – A $1,200,000 Tax Settlement Success Story

Posted on November 17, 2011 by Kursti Nakagawa

Mrs. M. was referred to us by a local attorney. Her husband had recently passed away and, shortly after his death, she became aware of an outstanding IRS tax liability in the amount of an astonishing $1,200,000.

Mrs. M. had had no knowledge of this tax debt before her husband’s death. A few months later in our initial meeting with her, we learned that her personal tragedy was even worse than the death of her husband and realization of this massive IRS debt. She informed us that she had hired a very large tax settlement firm to resolve the issue and had already paid them a whopping $25,000. She came to us after six months, when she had no indication that the tax settlement company she had employed was making progress towards resolving the issue. Now skeptical that a firm might really be able to help, she did her research and read all of our credentials and reviews before arranging our initial meeting.

We immediately started working on her case and during our initial conversation with the IRS Revenue Officer assigned to Mrs. M’s file, we were brought up to date on the details of the case. Unfortunately due to the inaction of the previous tax settlement company, the IRS had already levied the client’s insurance and financial accounts. Even more alarming was the fact that the IRS was also in the process pursuing other aggressive collection techniques to the extent that Mrs. M actually risked the immediate seizure of her additional assets to settle the outstanding liability. After assuring the revenue officer that we were working towards a resolution, we were granted a 90 day hold. This time interval gave us the opportunity to resolve the case in manor that was acceptable to the IRS and still allowed Mrs. M to keep her assets.

After reviewing all of the relevant information and consulting with our client, we felt that she qualified for Innocent Spouse Relief. Innocent Spouse Relief is an IRS tax settlement option available to taxpayers who owe the IRS for tax amounts incurred by their spouse. While it is an excellent tax settlement alternative for a spouse who meets the qualifying criteria, it is definitely not a blanket solution for anyone with a marital tax debt. The acceptance criteria for Innocent Spouse Relief are very explicit and must be well documented. After careful analysis, we determined that Mrs. M’s situation met these criteria and felt that her application would be accepted by the IRS

After gathering all of the relevant information and documentation, we were able to prepare and file the application for Innocent Spouse Relief. Although there was a wait of several months after the request was submitted, the IRS granted the Innocent Spouse Relief for our client’s half of the $1,200,000 tax liability.

This was excellent news. However because the husband was deceased, this is not the end of the story. While this was the best result that anyone could have hoped for, the IRS did not relieve the husband’s estate for its share of the outstanding tax debt. Therefore to complete the resolution process, we continued our efforts. We were able to negotiate a settlement contract for the estate with the IRS. The terms were that Mrs. M. would sell one of her residences and whatever the sale of the home produced as an asset, the IRS would accept 50% of the net equity from this sale as a final settlement of the debt.

This is truly a remarkable success story and Mrs. M. is finally able to move on and heal after a tumultuous year.

Here is a Recap:

Total Deceased Husband/Wife Total IRS liability $1,200,000
Wife’s portion of this liability $600,000
Wife’s liability after Innocent Spouse Relief Ruling $0 a 100% Reduction!
Husband’s Estate IRS Liability $600,000
Tax Settlement (50% of Net Equity from Home Sale) $300,000 a 50% Reduction!

This example is an excellent illustration of how Innocent Spouse Relief can be used to settle large IRS tax debt. In Mrs. M’s case the joint $1,200,000 tax debt was settled for just $300,000! The wife’s personal liability was reduced by 100% and the total estate settled for just 25% of the original liability!

If you have an unresolved tax debt, visit us today at www.professionaltaxresolution.com for more information about our customized tax settlement assistance. The CPAs and tax professionals at Professional Tax Resolution use their extensive knowledge of the tax code to provide taxpayers with the best settlement option available. Contact us by phone at (877) 889-6527 or by email at info@protaxres.com to learn more about our services and to receive a free, no obligation consultation

Policy Change for Tax Settlements Involving Innocent Spouse Relief

Posted on July 26, 2011 by Kursti Nakagawa

The Internal Revenue Service has changed their policy regarding those tax settlements dealing with a request for Innocent Spouse Relief. Originally there was a two year limit on the innocent spouse relief, but effective Monday, July 25, 2011, that has been eliminated.

The IRS initiated a review of the equitable relief provisions of the innocent spouse program earlier this year, and decided to make changes in both the policy and the program. Those changes will become fully operational this fall and additional guidance will be issued, according to the IRS. The IRS said it would no longer apply the two-year limit to new equitable relief requests or requests currently being considered by the agency, as of Monday, July 25, with respect to expanding the availability of equitable relief.

If the collection statute of limitations for the tax years involved has not expired, a taxpayer whose equitable relief request was previously denied solely due to the two-year limit may reapply using IRS Form 8857, Request for Innocent Spouse Relief.

The new rule will automatically be applied to taxpayers with cases currently in suspense and should not reapply. The two-year limit in any pending litigation involving equitable relief will not be applied, according to the IRS. The IRS said it would suspend its collection action under certain circumstances where the litigation is final.

If you need help with tax debt, talk to one of our licensed experts today!

Amazing Tax Settlement – $1,600,000 Tax Debt Reduced to Zero!

Posted on July 14, 2011 by Kursti Nakagawa

Karen M. was recently divorced and owed the IRS over $1,600,000 for a joint IRS liability she had incurred with her ex-husband. The debt had accumulated over many years and, as is usually the case, included a significant dollar amount of assessed penalties and interest. The taxpayer was newly single, lived on a modest income and had no possibility of settling the debt owed to the IRS. After looking at the taxpayer’s situation and all of the available tax settlement alternatives, we determined that filing for Innocent Spouse Relief gave the taxpayer the most realistic chance of one day being free of the tax debt.

Innocent Spouse Relief provides a taxpayer relief from tax debt if their spouse or former spouse failed to report income, reported income improperly or claimed improper deductions or credits. While the benefits from obtaining this tax settlement option can be significant, it is usually difficult to obtain. Generally, a taxpayer requesting Innocent Spouse Relief must claim and document that he or she had no knowledge of the unreported income and did not receive the benefits of that income.

In the case of Karen M., we were able to provide documentation demonstrating that our client had no knowledge of the unreported income and had limited involvement in the financial matters of the family. We were also able to prove that she did not receive the benefits of the income that was never reported and that the non-innocent spouse had a history of hiding income from both her and the IRS.

Professional Tax Resolution and the taxpayer were thrilled when a letter was received from the IRS indicating that the Innocent Spouse filing was accepted and that the $1,600,000 tax debt was reduced to zero. This is another good example of why CPAs, Enrolled Agents, and Attorneys are often so passionate about what they do. In most cases there are tax settlement options available even in the most complicated situations.

Is Your Tax Refund Held Up Because of Your Spouse’s Tax Debt? You May Be Eligible for Innocent Spouse Relief.

Posted on March 21, 2011 by admin

If you are filing a joint Federal income tax return and either have had, or expect to have, your refund withheld to offset a tax debt owed by your spouse but not you, you might be eligible to submit a claim for Injured Spouse Relief. This claim can be attached to your tax return if you have received advance notification that your refund will be withheld to pay your spouse’s tax debt. If no advance notification has been received, the claim for Injured Spouse Relief can be filed once you know your refund has been intercepted.

In general, you are not responsible for a tax debt incurred by your spouse before marriage. After the marriage, if your refund is intercepted to cover such a tax debt, you are probably eligible to file a claim for Injured Spouse Relief. You may also meet the eligibility requirements for this claim if your refund was withheld to cover a defaulted or foreclosed student loan debt acquired by your spouse before the marriage or to cover his or her back child support payments for children from a previous marriage. An Injured Spouse Relief claim does not apply to any tax due from a return that was submitted as “married filing jointly.” Any such tax debt is owed by both parties so neither spouse can claim injury if a refund is later withheld to cover it.

The following three conditions must be met to qualify with the IRS for Injured Spouse Relief:

Some or all of the income reported on the joint return from which the refund was withheld must have been earned by the injured spouse. This income can also include income from investments owned by the injured spouse.
The tax payments made by the injured spouse including tax credits, income tax withheld from wages and estimated tax payments must have been reported on the joint return from which the refund was withheld.
The debt in question must be one for which only the spouse is liable. This usually represents a state or federal income tax debt incurred before the marriage but can also include delinquent child support payments owed to a former spouse or a debt due to a defaulted or foreclosed student loan.

If a claim for Injured Spouse Relief is accepted, the IRS will use a formula to calculate the percentage of the refund owed to the spouse submitting the claim. This calculation will include any tax withheld from income earned by the injured spouse plus pro-rated portions of any estimated tax payments or income tax credits.
If your income tax refund has been witheld to cover an outstanding tax debt incurred by your spouse before marriage, we can help you determine whether you qualify for Injured Spouse Relief or one of the other forms of spousal tax relief offered by the IRS. These other programs include Innocent Spouse Relief, Separation of Liability Relief and Equitable Relief. The eligibility criteria for all IRS tax relief options are very specific so selecting the appropriate one may require the assistance of a knowledgeable tax professional. Following the determination of which form of spousal tax relief best fits your specific situation, we can help you get all forms and documentation submitted according to established IRS guidelines.

For more information about our tax relief services, visit us at www.professionaltaxresolution.com. Contact us today at (949)-596-4143 or info@protaxres.com to receive a free, no obligation consultation.