Compliance questions

[Sabrina Santos]

I had a potential client approach me about a $17k debt she had been ignoring from 2018. On her self-prepared 2018 return, she claimed she had made a $15k payment that she had not made, and also failed to report her 1095A, incurring another $2k in assessed fees. I had given her a consultation rate, which she called 3 different times to discuss and question. Ultimately, I had thought she would require a little work to get into an installment agreement, as she never pays her quarterly estimates and owes a pretty substantial underpayment penalty every year. Such was the case for 2019: she was not in “compliance”, as she has not made any quarterlies and will owe her normal approx $20k in taxes and fines like she does every year. However, today she got on the IRS website and set up her own installment agreement. Is my understanding of the compliance requirement inaccurate? I thought they had to be current on their withholdings/payments in order to set up an installment agreement? Does not seem to be the case for her, so I want to confirm my understanding before making the process sound complicated to future potential IA clients.

[Eric Green]

Sabrina, if you owe less than $100,000 and can full-pay over 84 months you can set up a streamlined agreement. If you do so over the computer there is no human being checking on compliance. Her agreement will default the moment she files 2019 with a balance, or if she already filed 2019 and rolled it in, she will default the moment 2020 gets filed with a balance.

That is the issue with taxpayers with small balances. Its the same process as those with large balances but they dont want to pay.

Its annoying. Next time one phone call and they need to make an appointment and pay. Otherwise you wish them the best of luck.

[Sabrina Santos]

Thanks Eric. Glad I wasnt totally misunderstanding the compliance piece. Am I under any obligation to tell her this information? I am the one filing her 2019 taxes (hence, the reason I know she will owe, and the reason this debt was being discussed). Her 2019 taxes will be filed later probably by the end of the month. For my own information; how does the notice of default get issued?

Thank you also for the “1 phone call” policy reminder. She was definitely a learning lesson for me. She kept “remembering” new facts and wanting to “just run them by me really quick”. I was trying to be helpful, but will henceforth be pulling your hardline stance, as it only created more confusion and annoyance to be on the phone having to say “I cant answer that without an engagement agreement”. Lol.

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