Tax Levy Question

[T and T Accounting]

I have a client who received a notice from the IRS that he owed more than $35,000 taxes. Once I did some research I discovered he did not file his 2002 tax return, so I went ahead and filed it . We have now received a notice that the balance owed is $19,000.00, which is correct. My client can not afford to pay this amount and normally I would file an offer in compromise but the tax levy is outside the 10 year window. What do I?

[MDEA]

The 10 years did not start to run till you filed the return. I would try first to obtain a partial pay installment agreement.

[Jack from Ohio]

The 10 years did not start to run till you filed the return. I would try first to obtain a partial pay installment agreement.

Agree.  Offer in Compromise most likely will not work.

[jklcpa]

The 10 years did not start to run till you filed the return. I would try first to obtain a partial pay installment agreement.

I don't agree with the above statement on when the 10 year statute began, and the OP didn't provide enough information for anyone here to determine that.

Here's a snippet from the IRS manual on collection procedures, specifically about the the "Collection Statute Expiration Date" or CSED as abbreviated below. First, we don't know when a Substitute for Return was generated by the IRS or when the first deficiency assessment was dated. That is the date when the 10-year collection period starts, and that date is not adjusted later on if the taxpayer files an "original" return that then replaces the SFR created by the IRS.  Here's that section from the manual I linked from:

5.1.19.3.15  (01-01-2006)
Substitute for Return

1. When a taxpayer fails to file a timely income tax return or files a false or fraudulent return, the Service may execute a return under the authority of the IRC 6020(b) deficiency procedures. If the taxpayer fails to respond to the 90 day notice, the Service makes a deficiency assessment. The Service may also make a deficiency assessment if the deficiency is upheld by the Tax Court. Upon that assessment, the 10 year period of limitations on collection, provided for in IRC 6502(a)(1) begins.

2. If the taxpayer later files their own "original" return showing a tax liability smaller than the assessed liability, and that return is accepted by the Service as filed, the tax liability may be reduced to show the amount of tax reflected on the taxpayer's return. The original CSED date remains intact.

3. If the taxpayer's "original" return reflects more tax than that assessed from the statutory notice based on the section 6020(b) return, then an additional assessment is input for the increased amount. In this scenario, the original CSED remains intact and a second CSED will be systemically established based on the additional assessment.

 

[kcjenkins]

The 10 years did not start to run till you filed the return. I would try first to obtain a partial pay installment agreement.

It started when the SFR was created, so you are probably still within the time frame, but I agree that an Installment Plan is the best bet.  An OIC is not likely to work in this situation.