All too often, we see hard-working people who unexpectedly run into a financial hardship that is out of their control. This hardship then ends up with them owing money to the IRS or State due to unpaid taxes. Here are two examples of tax liability cases from this month where we got our clients out of tax trouble, into a peaceful state of mind, and set them back on track for financial success.
Case #1: A loss of income can be devastating when you owe taxes to the IRS or State, especially when medical problems are also involved. Our clients were a married couple, with one being a doctor who made good money- but who to stop working as much due to slowly declining health. This led to a loss of income for them.
In the past, they had always gotten their taxes filed and paid on time, but the accountant that they hired to prepare their 2 years of tax returns had cancer and took a very long time to get them filed. Once they finally got the returns filed, they discovered that amount that they owed for the prior 2 years was much more than they could afford. They were so scared that they resorted to draining their retirement accounts to try and pay back the IRS and State what they owed. The doctor’s health problems worsened, and he had to stop working entirely while the wife lost her nursing license due to the unpaid taxes. Social security became their only source of income, and the IRS even threatened to garnish that. The couple couldn’t afford the payment on their home any longer, so they had to sell their house and move into a mobile home.
When they decided to get help from tax professionals and came to our firm, we were able to negotiate with the IRS to work out a financial proposal based on their current income. We were able to secure them in a Partial Pay Installment Agreement, which ended up saving them approximately $259,350!
Case #2: The most common reason that people do not pay their taxes is simply because they cannot afford it. Many people who become our clients recently had something occur in their lives that caused a financial setback- whether it’s medical problems, job loss, divorce, or any other unexpected financial problem. They have a great track record for filing and paying their past taxes, but whatever setback they are facing is what led them to not paying the taxes they owed.
This client had gotten a divorce from his wife, and was court ordered to pay her alimony for an extended period of time. After finally getting the alimony paid, he decided that he wanted to retire. He had always filed his returns, but he was not able to pay the taxes owed due to the court ordered alimony he was paying to his ex-wife. He had also been battling injury and disability for a while, and at one point had no health insurance when injured, which set him back a great deal as well. After he quit working, his only income source was disability and he had virtually no assets. This was when he decided to hire our office for help so he could get his tax problems behind him and actually enjoy his retirement.
After our team researched his IRS account and began negotiating with the IRS, we found out that he actually had some old business liabilities that were being held against him personally, in addition to the personal liabilities. His business had not been open for years, and he had no means of getting the information or documents that the IRS needed. We were able to negotiate a $25 Offer in Compromise with the IRS which included the business balances assessed to the client, and ended up saving him over $43,500!