Indianapolis Man's IRA Distribution Deals Hefty Taxes


A tax payer located near Indianapolis, Indiana was contacted by the IRS with a Proposed Assessment letter stating he owed $10,000.00 made up of Original Taxes, Penalties and Interest. The amount owed was based on the tax payer taking a distribution on his IRA to take care of a family member with health problems. He was unable to repay the distribution causing the tax liability.

The tax payer contacted the IRS where he completed a Customer Information Statement know as a (433A CIS ) over the phone with an agent. The 433A is used to determine the tax payer's ability to pay based on assets and liabilities established in guidelines determined by the IRS. For example, credit card debt is not considered a liability. Upon completion the IRS agent informed the tax payer he was required to pay $400.00 per month until the tax debt was paid. Backing the tax payer into a corner he became very emotional "since he grossed $1600.00 a month" and took it out on the agent. At this point the tax payer lost his credibility and put the agent on the defense eliminating any chance to negotiate a different installment plan.

Tax Matters Solutions (TMS) was contacted by the tax payer who explained the case as he understood it and what he could handle financially, "$150.00 per month." Although this may be the tax payer's interpretation we find that this is not always the case in the eyes of the IRS. Through our setup process we learn what the IRS sees as the truth. Understanding this and what the tax payer can handle financially we formulate a plan to ultimately resolute the situation for both parties.

One of TMS' representatives contacted the IRS and reviewed the CIS prepared earlier. This process uncovered expenses, for example "auto expenses", that were not accounted for during the interview process inflating the monthly installment that the tax payer would have to pay. TMS simply asked for the national standard for the expenses that were not accounted for, which the IRS granted. TMS then negotiated a monthly payment plan of $150.00 per month until paid. The solution was presented to the tax payer which he agreed to, resolving the case. • 


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