Build Back America Plan Proposes $80 Billion Increase to IRS Budget Allowing Hiring of 87,000 New Employees
Taxpayers in the News
IRS cases against actors Charlie Sheen and Chris Tucker made recent news headlines. As the 2021 tax filing season is quickly approaching, the IRS is using this form of publicity to warn taxpayers to fulfill their tax obligations.
It has been reported that the IRS alleges that Chris Tucker (the Rush Hour actor) owes it $9.6 million in back taxes, interest and penalties for tax years 2002, 2006, 2008 and 2010 when he reported and paid significantly less than he actually owed. Court docs state that Tucker attempted to pay off his debt three times through monthly installation agreements, but they ultimately fell through for various reasons.
Actor Charlie Sheen is best known for his TV role in Two and a Half Men. He owes the IRS millions, is tired of its collection efforts, and has been trying to negotiate a deal with the agency. Mr. Sheen has unsuccessfully attempted to settle his IRS debt via an installment agreement and via an offer in compromise (OIC).
It has been reported that Sheen owes for tax years 2015, 2017 and 2018. His 2015 tax liability was $5.7 million. He supposedly offered the IRS $1,240,000 as a compromise, but later revised it to $3.1 million to cover all three years. When he made his revised offer, he paid the IRS $626,000 as the required 20% down payment. When an OIC is rejected, the down payment is not returned to the taxpayer, but is applied against the balance due. Mr. Sheen is now suing the IRS claiming it abused its discretion when rejecting his offer, citing his tortured history dealing with the IRS, and that the Los Angeles area director did not give him a fair shake.
Tax Tip #1
You need to understand that installment agreements are easier to get since the IRS isn’t reducing the amount the taxpayer owes, it is merely agreeing to get paid the entire balance due it (in most cases) over time. OICs are much harder to attain because the IRS is agreeing to accept less than the full amount owed. If the IRS’s financial analysis (Form 433A) shows that it can collect the entire balance due before the statute of limitations expires, it will generally not accept the OIC.
Tax Tip #2
There is likely more to Mr. Sheen’s story than is being reported or alleged by him. If the Form 433-A(OIC) financial analysis shows that the taxpayer qualifies for an OIC, the taxpayer’s offer will generally be accepted by the IRS. If Mr. Sheen merely made an arbitrary monetary offer that he thought was a fair offer to the IRS to settle his debt, and the financial analysis did not support that offer amount, the IRS would reject his offer.
When OICs are made, the taxpayer makes an offer for all tax years owed to the IRS and the taxpayer needs to be in compliance (fully paid) for all other tax years. From the facts of Sheen’s case that were reported, that doesn’t seem to be the case which is likely why the IRS would have rejected his offer.
Tax Tip #3
The IRS has announced that if (and when) it gets an increased budget, it plans to hire more agents to audit more taxpayers. If you are not currently in compliance, this may be the time to reevaluate that strategy. The longer a taxpayer is non-compliant, the greater the penalty and interest assessments. These can very significantly add to the total tax debt.
If you would like to discuss your business or personal tax planning, tax preparation and other financial concerns with an experienced tax professional, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your situation. You can also schedule a consultation at Click Here.
Copyright © 2021 Keystone Financial Solutions, Inc. All rights reserved.
BE SURE TO READ THE DISCLAIMER PAGE: Tax laws, IRS rules and regulations change frequently. Although we hope you’ll find this information helpful, this blog is for educational purposes only and should not be considered as the rendering of tax, legal or investment advice. The publisher shall not assume liability for any losses, injuries, or damages from the display or use of this information.
About F. Bryan Haarlander, EA, CTRS:
Bryan Haarlander is an IRS licensed Enrolled Agent and who owns and operates a specialized tax services firm serving clients in the western suburbs of Philadelphia, PA, which includes the cities of Chester Springs, Coatesville, Collegeville, Devon, Downingtown, Exton, Frazer, King of Prussia, Paoli, Philadelphia, Phoenixville, Pottstown, Radnor, Reading, Wayne, West Chester in Berks, Chester, Delaware, Montgomery and Philadelphia Counties, as well as clients in Delaware, New Jersey, New York and throughout the continental USA.
A Certified Tax Resolution Specialist, Bryan is well-known for his IRS tax resolution expertise and his book How to Resolve Your IRS Tax Debt Problems.