IRS question

go2guy · Oct 31, 2008

I have a friend who is being audited by the IRS from a deduction he took from 2005? He deducted school items like a computer and books while he was in grad school (I personally don't know how that shit works). The IRS wants all kind of ridiculous shit like internet cable bills from 2005 to prove that he was conducting research online and etc. and he has since chunked out shit like old bills and other stuff from '05. He just wants to settle the debt and be done with it but doesn't want to pay the full 5K plus back interest. Does he have any chance of trying to partially settle this figure and be through with this episode or does the government want all their loot since he won't be able to produce everything they want? He has a tax lawyer but he sounds pretty worthless. I told him I've heard of an Offer In Compromise but don't know how it works. I've read post where people have been through this shit, care to share what you know?

BTW, no I'm not the friend Thank god (knock on wood) Never been audited and hope to keep it that way, sounds like a pain in the ass to me.

zeeman · Oct 31, 2008

With an Offer in Compromise you need to fill out the proper forms. Form 656 needs to be filed and it has a filing fee of $150. IRS may accept if there is doubt of collectibility or doubt of liability. There is a 3rd reason but I don't think your friend will fall under this category. Doubt of collectibilty will require your friend to complete personal financial statements. These statements will list your assets, liabilities, monthly income and expenses. Based on the information the IRS with decide to accept of decline your offer. They may ask you to increase the offer.

go2guy · Oct 31, 2008

zeeman said:
With an Offer in Compromise you need to fill out the proper forms. Form 656 needs to be filed and it has a filing fee of $150. IRS may accept if there is doubt of collectibility or doubt of liability. There is a 3rd reason but I don't think your friend will fall under this category. Doubt of collectibilty will require your friend to complete personal financial statements. These statements will list your assets, liabilities, monthly income and expenses. Based on the information the IRS with decide to accept of decline your offer. They may ask you to increase the offer.

Yeah he makes 6 figures and lives a pretty nice lifestyle. The more I read it, the more it seems like he's stuck. I'm gonna tell him that it sucks that they got you on some BS with asking for bills from 3+ years ago (unless he cheated on his taxes) but he may have to man up and pay a months salary to move on. He also said that they could continue to audit him every year after this too, is that true? LOL I thought the IRS got friendlier?!

go2guy · Oct 31, 2008

zeeman said:
With an Offer in Compromise you need to fill out the proper forms. Form 656 needs to be filed and it has a filing fee of $150. IRS may accept if there is doubt of collectibility or doubt of liability. There is a 3rd reason but I don't think your friend will fall under this category. Doubt of collectibilty will require your friend to complete personal financial statements. These statements will list your assets, liabilities, monthly income and expenses. Based on the information the IRS with decide to accept of decline your offer. They may ask you to increase the offer.

Know anything about admitting no fault and settling for less or is an offer of compromise the only "settlement" option?

Gaz · Oct 31, 2008

He makes 6 figures already only a couple years after graduating?

D2bets · Oct 31, 2008

Hard to see how deducting some computer and books expenses would have reduced his taxes by 5K while he was in grad school. He spent 20K+ on computer and book expenses? No wonder why he was audited.

zeeman · Oct 31, 2008

D2bets said:
Hard to see how deducting some computer and books expenses would have reduced his taxes by 5K while he was in grad school. He spent 20K+ on computer and book expenses? No wonder why he was audited.

D2,

You bring up some good points. There must be some pretty steep penalties & Interest, who knows a tax liability from '05 can grow pretty quickly.

Whoson1st · Oct 31, 2008

Gaz said:
He makes 6 figures already only a couple years after graduating?

This is THE GENERATION GAP, that we face.
I'm a divorced dad that paid my child support and wow. I can't even go on here. Way too stupid.
Basically 20+ years puts us all in differnt modes of thinking.

go2guy · Oct 31, 2008

Gaz said:
He makes 6 figures already only a couple years after graduating?

After completing grad school. Hell if you get in the right occupation it's damn near possible to make near that after undergrad. My cousin came out of undergrad making 70k+ a year working at IBM after damn near flunking out of school. Some people get all the breaks.

go2guy · Oct 31, 2008

D2bets said:
Hard to see how deducting some computer and books expenses would have reduced his taxes by 5K while he was in grad school. He spent 20K+ on computer and book expenses? No wonder why he was audited.

Yeah I was wondering myself like shit, what kind of books and computer did you buy but I can see spending 5k on a new computer and new books in one year if you get high end stuff but you're saying for him to get a 5k writeoff, he would've had to spend 20k? If so, I can see why he was audited too and looks like he didn't tell me the complete story.

HiPockets · Oct 31, 2008

I have had dealings with the IRS over years and recommend paying any reasonable price to separate yourself from their bizarre world. If their estimate of your tax and penalties are anyway close to a minor bad beat, then pay and get them alway from your mailbox and out of your life. Logic and records and rationality carry no currency in this nightmare world. Never fight the IRS over principle or righteous honesty. Always take the beat and scramble out with shreds of a shirt on your back.

Pogodog · Oct 31, 2008

If the potential liability is $5000, he would have had to have claimed a write off much higher than that $5000.

He is not going to be eligble for and offer and compromise on this relatively small amount of money if he is making decent income. The IRS knows it will get it's money, one way or the other.

Cusipz · Oct 31, 2008

HiPockets said:
I have had dealings with the IRS over years and recommend paying any reasonable price to separate yourself from their bizarre world. If their estimate of your tax and penalties are anyway close to a minor bad beat, then pay and get them alway from your mailbox and out of your life. Logic and records and rationality carry no currency in this nightmare world. Never fight the IRS over principle or righteous honesty. Always take the beat and scramble out with shreds of a shirt on your back.

This.....is so true. Good post.

LLXC13 · Nov 2, 2008

Guess I never claimed the little stuff - computers, internet, books, etc...I bet those throw up red flags. Typically people (maybe stupid like me?) usually use the default deduction allowed.

PatPatriot · Nov 2, 2008

Get ready for more audits.The era of big goverment is back and going to explode to about ten times its size.

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