future income collateral agreement

[Catherine]

Client has one of these with an accepted OIC. There is a Form 3439 (from 1991!!) that is required to be sent in annually. I need some advice in figuring out how to fill out a couple of the lines on the form

The form itself asks for "Total income (adjusted gross income)" which itself includes adjustments, but the letter instructions talk about taxable income. Well, those are two different numbers -- one is before deductions and exemptions, the other is after. I talked to the IRS twice yesterday about this. First time I got a very nice man who must be quota hire for the developmentally disabled -- he tried real hard but could not complete a coherent sentence. Second lady did not understand what I was asking so after several attempts I thanked her and hung up. Yes I called the number on the letter -- that was one. Practitioner Priority Service was the other attempt.

Has anyone here done one of these and can help me figure which income figure (AGI or taxable) I am supposed to use? Difference to the client is substantial and of course if he over-pays the IRS will take the $$ and run.

TIA,

Catherine

[jainen]

>>those are two different numbers<<

One might expect a basic term like "taxable income" would have a specific meaning on the tax return, but in fact it depends on the context. For example, the IRS has a whole book called Publication 525 Taxable and Nontaxable Income. That's not a reference to Form 1040 Line 43. It means that all income is subject to tax unless exempted by law.

So I think what Form 3439 needs is indeed Adjusted Gross Income. Of course that is not defined consistently either. Muni bond interest is nontaxable but counts for whether Social Security is taxable. Capital gain is taxable even when the tax rate is zero, but nontaxable when a capital loss is carried forward from a prior year. While business income is still taxable when a loss is carried forward, but nontaxable when the loss occurs in the same year. Then there's those odd "adjustments" that reduce AGI. Some taxpayers can deduct insurance premiums there, and others can't. Good luck!

[Catherine]

bump -- still need help please!

[Lion EA]

I haven't done one of these, but this'll help it stay up high! If the IRS form states "Total income (adjusted gross income)" I would think from the way the IRS usually explains things on paper that the (adjusted gross income) is what they are pointing you to. But, I'd be looking for leads just like you are due to the letter using the term Taxable Income.

[Catherine]

Think I'm stuck with AGI. Seems more than slightly unfair, to base tax due NOT on taxable income but rather AGI. Of course, no one (in their right mind) ever accused the IRS or tax law of being fair. Thanks.

Repeal the 16th!!

[joanmcq]

I can see where it's AGI, in the sense that itemized deductions don't necessarily correspond with ability to pay, and the standard deduction certainly doesn't. The 433 allows certain living expenses, and charitable contributions and car taxes aren't one of them.