But they cashed the check! If you owe a lot of tax, it’s understandable that you would try to get the IRS to settle for partial payment. Unfortunately, the IRS has a say in the matter.
S corporation owners are supposed to pick up the corporate taxable income on their 1040s. A Florida couple owning two S corporations apparently didn’t do so for 2011 and 2012. The IRS noticed and assessed them about $2.9 million in additional tax and another $697,000 in penalties. They had other tax issues too, going back to 2006.
The couple tried to settle, sending the IRS a proposed offer in compromise on Form 656-L — but with a twist. Tax Court Judge Paris explains:
Petitioners substantially modified the terms and conditions of the Form 656-L by crossing out sentences in subsections (b) and (d) and crossing out entirely subsections (k), (l), and (m). Along with their OIC, petitioners tendered a $3 million check as satisfaction of their 2006 through 2012 tax liabilities.
The IRS cashed the check, but a few weeks later told the taxpayers that they were returning the cash and rejecting the offer because of the modifications to the form. The couple argued that it was too late — the check had been cashed, so the thing was settled.
It doesn’t work that way. Judge Paris:
Petitioners further argue that by cashing their check, the IRS accepted their OIC. This argument is incorrect. The IRS cashing a check does not necessarily mean that the IRS has accepted the offer.
So the couple tried another argument (citations omitted):
Alternatively, petitioners argue that their OIC was deemed accepted under the UCC because their offer was not rejected within 90 days. The facts surrounding this OIC and the IRS’ response — set forth in petitioners’ response to respondent’s motion for partial summary judgment, see supra note 5 — clearly show the IRS’ timely rejection of their OIC and return of their $3 million deposit. More importantly, the U.S. Government, as the sovereign, is not bound by State statutes such as the UCC.
Nice try, but the decision on this issue went to the IRS.
The Moral? Getting an offer in compromise through the IRS is not easy, despite what you might hear on late night radio shows. It’s a lot easier to get the IRS to cash a check, but it’s not the same thing.
Cite: Whitesell, T.C. Memo. 2017-84
Related: Lew Taishoff, THE LAW OF RETURN. “Go With The Flow, and The Check’s Not the Thing”
Iowa Congressman David Young has introduced the “Freedom from the ACA Tax Penalty Act” in reaction to the likely unavailability of ACA exchange policies in Iowa starting in 2018. From his press release: “His legislation would waive this tax penalty and requirement under Obamacare for Iowans, and any American, who has no access to health coverage because of the failing health care law.”
O. Kay Henderson, The Branstad record on business, property and gas taxes (Radio Iowa). “Terry Branstad’s tenure as governor appears to be nearing its end and his impact on state tax policy is assessed differently by his supporters and critics.”
Peter Reilly, Motion To Stop IRS From Examining Marijuana Dispensary Up In Smoke. “My own view is that activists and advocates use the Constitution like a drunk uses a lamppost – More for support than illumination – but that’s just me.”
Kay Bell, 3 big tax breaks for Americans who go into home debt
TaxGrrrl, My Mother’s Maiden Name Is Cumberbatch (And Other Lies I Tell For The Sake Of Security). “When information gleaned from social media sites can be matched to other data – say, from a recent hack or breach – it’s incredibly valuable. It can be used not only to access your existing financial accounts but also to open new accounts in your name.”
Leslie Book, 9th Circuit Reverses District Court in Case Involving Exceptions to SOL For Failing to Disclose a Listed Transaction (Procedurally Taxing). “In an opinion that surprised me, in May v US, (an unpublished opinion) the 9th Circuit reversed and held that the taxpayer’s failure to file the form resulted in the application of an extended SOL on assessment even when the IRS admitted that it had knowledge of the information that the form itself would have contained.”
Jim Maule, No Tax Benefit for Being Nice. “One hopes that people would be nice for reasons other than a tax incentive to do so.” To listen to some people, nothing good happens without a tax credit.
Lew Taishoff, THE RIGHT PAPER. “But once again, the power of attorney is useless if it fails to empower the agent to do what is needful.”
Morgan Scarboro, Which Places Pay the Most in Property Taxes? (Tax Policy Blog). The post includes this interactive map:
The above map, prepared by the Tax Foundation, is interactive — hover the mouse over a given county to see the median about of property tax residents there pay. Click here to see a larger version.
TaxProf, Tax Policy In The Trump Administration . A roundup of news on Trump and Congressional tax news.
Mercatus Center, “Fixing” the tax code: Key principles for successful, sustainable reform. “Successful reform should lower current individual and corporate tax rates.”
Meg Wiehe, State Rundown 5/18: Tax Debate Heat Wave Hitting States (Tax Justice Blog). “Late-session discovered revenue shortfalls, for example, are creating friction in Delaware, New Jersey, and Oklahoma, while special sessions featuring tax debates continue in Louisiana, New Mexico, and West Virginia.”
News from the Profession. Your Technology Disorder Has a Name (Megan Lewczyk, Going Concern)
