From: Miami, Florida
Dear TaxMama,
I basically have two questions.
A long term abusive relationship left me owing $55,000 in back taxes (not
married - owe them personally).
I want to submit an Offer in Compromise (OIC).
First, my mortgage, electric, phone total about $800 more than the local
standards.
However, living in Miami the $1,200 a month local standard allowed would
mean my two teenage boys would have to share a room, we would have to move
into a bad neighborhood, I would have to get rid of my kids' two dogs, and
my son would have to change schools.
I have been collecting real estate ads to show this.
How much lienency is given on using my figures instead of the local standards?
Second, does showing proof of the abuse as an explanation of how the situation
came to be help or hurt my OIC?
Thanks,
Diana
Hi Diana,
Well, let's see how we can help.
First of all the local standards for Miami for a family of 3 turn out to
be $1457.00
- about $250 more than you mention.
Plus, I don't know how much your income is, but don't forget to add in the total
national standards for living expenses for a family of three:
You'll find other
standards here.
Now, here is an interesting addition that might help you. It is a 'necessary
standard'.
See what it says:
Necessary Expenses are the allowable payments you make to support you and
your family's health and welfare and/or the production of income.
Use that feature when you submit your offer in compromise. Let's face it,
if you were in an abusive relationship, so were your children. Their emotional
well-being is at stake here, too.
Get a letter from a therapist confirming how damaging it would be
to move them from their present home at this time.
As to whether mentioning the abuse would help your case or hurt it - it
will help. Tell the truth.
If you got into tax trouble because of abuse, even if you don't get an offer
in compromise on financial grounds, ask for an abatement of penalties
due to extenuating circumstances. (abatement is IRS's word for cancelation.)
Here's what I would do, Diana. Before even filing for the OIC, I would file Form
843 - Claim for Refund and Request for Abatement
(See instructions
here)
Ask them to reduce or cancel your penalties. Describe what happened and
why you filed late or couldn't pay. Tell the truth. If you can provide objective
proof (police reports, doctor's reports etc.) include copies with your request.
If IRS reduces or waives the penalties, the interest on those penalties
goes away. Often, this alone, can cut the taxes in half.
Once you've done that, depending on your income, you can either get an installment
agreement, payable over 5 years. Or you can then apply for an Offer in Compromise
to reduce some of the rest due to hardship.
But if getting rid of the penalties will make the balance due manageable,
try that first. It takes much less time than the OIC. Meanwhile. ask IRS to
put collections actions on hold for 90 days while waiting for an answer.
They'll help you.
Take care of each other, and try to stay in your home as long as possible.
You all need the stability.
Best Wishes,
Eva Rosenberg, MBA, EA
