Husband passed away. $22,000 tax debt. OIC?

Home Forums Offers-in-Compromise Husband passed away. $22,000 tax debt. OIC?

Viewing 5 posts - 1 through 5 (of 5 total)
  • Author
    Posts
  • #44500
    Brian Barto
    Participant

    Husband was in hospital most of 2020 and passed away in Aug. The couple has $22,000 in IRS Debt. Her only income now is $663/mo SSA (death benefit), $150/mo from a network marketing company, and $1200/mo in unemployment. I assume the IRS would use her future income potential. (We don’t need to consider the unemployment, right? Her 2019 W2 income was $30,000 ($2500/mo).
    Note: She called IRS back in Aug, just before husband passed and they put the account in CNC. (Lots of time still on CSED)
    1. Less than $1000 in the bank.
    2. She owes the hospital about $5500.
    3. No house, no other assets.
    4. Question about the deceased husband’s truck. Based on circumstances, the bank wrote off the loan (Cancellation of debt) – Before he passed, he asked his wife to give the truck to the son which she has done. The title is still in her name. I told her to transfer it right away. She has another car valued at about $2000. The truck was worth about $10,000. Any problem here with dissipated asset?
    5. She owes $2700 to Virginia and has an installment agreement for $75/mo
    Possible candidate for OIC? If we do not need to count the truck?
    6. Taxpayer plans to move to New Hampshire in April, 2021. I think she is moving to live with family. If I go with OIC, would I use housing and vehicle operating expense for NH, assuming that by the time IRS processes the OIC she will be in NH. Could be a problem if she moves in with family rent free? No housing expense?

    #44504
    Marvin Mann
    Participant

    Hello

    1. I disagree re dissipated asset, I believe there is a 3yr look back, and IRS would include the value of the truck minus exemption or $6,500 approx
    2. The one thing I am not sure about is if you transfer the truck out of TP name, and IRS claims dissipated asset, would they allow the $3450 exemption if truck not in TP name.

    Marvin

    #44520
    Brian Barto
    Participant

    Do you agree that the IRS will likely use average of prior 3 years of income? As of now, she has only SSA income from deceased spouse and her unemployment.

    #44521
    Brian Barto
    Participant

    Taxpayer lives with her son and son’s girlfriend. The lease is in the taxpayer’s name. Rent is $1200/month. Son and girlfriend pay $800. How is best to list this on the 433? Use $1200 as the rental expense and list $800 as rental income?

    #44522
    Marvin Mann
    Participant

    Hello

    I will take a swing.

    1. I am not sure why IRS will look at income for past 3 years, 433 doesn’t ask anything about income for past 3 years. 433 OIC does say if employed in business you can use a 6-12 month average. Eric has mentioned submitting information for the past 3 months. So, list her present income, submitting 3 months of bank statements. I would want to submit her present low income so she could stay in CNC.

    2. I don’t think I would want her to have any more income than necessary, keeping her in CNC. Eric has mentioned income expense allocation if sharing a living space with non liable tax person. Of course you would have to run the figures both ways, rent from co tenant vs allocation of income.

    3. I think my end game would be to keep her in CNC as long as possible, to see if 3 years from when tax return was due (assuming no late filing). If IRS comes after before 3 years are up because of change of her circumstance, then OIC is in the bullpen. IF more than 3 years has expired, then you have 2 options, OIC or bankruptcy.

    Marvin

Viewing 5 posts - 1 through 5 (of 5 total)
  • You must be logged in to reply to this topic.