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Hello all,
I have a client who is going for an OIC. They have high living expenses, most of which surpass the allowable living expenses national standards. So long as they can prove that they were paid, is that something that can still be taken or will it still be capped?
Also, they had received about 90,000 from an estate and used that to pay NYS taxes. Is that considered a dissipated asset if the payment was applied to balances older than the IRS balances being put into OIC? If it is a dissipated asset, does that blow the deal until the 3 year look-back period is over or is it something that just has to be added back in?
The taxpayer owes about 700k and is in the real estate industry in NYC and has very little hope that her business will come back. Currently bringing in no income at all and is not sure when/if income will be what it was. Don’t know how much that will wiegh in on RCP.
Any info that someone could provide would be very helpful and much appreciated. Thank you.
Jarett,
The payment to NY should not be dissipated because the NY liability was older.
As far as the RCP the expenses for the calculation will be capped. The RCP is the formula that the IRS uses to calculate what it is willing to accept. Though if they have had little income for a while now than future income should not be an issue, even with the allowable standards.
As it turns out, the taxpayer’s IRS debts were from 2016-2018 and NYS for 2017-2018 so the NYS is not older.
Will this blow up the OIC or will we just have to add the money the taxpayer spent on NYS tax back into the equation?
Jarett, the IRS can fight about it but they do have an obligation to pay current state taxes (it is factored into the 433-A current taxes line) so I would take the position this is not dissipated. Also, given that it wont show on a 1040 (like a sale of stock or business asset) it may never become an issue. I would try and avoid filing the offer that would need to include those bank statements, so as long as it did not occur in the last three months and wont be seen flushing through the bank statements there is a good shot it never comes up as an issue. If it does I would argue its not dissipated because current state taxes are an allowable expense.
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