[2]

Eva Rosenberg, MBA, EA - Los Angeles, CA - THIS IS A TEST.

This is a real, unedited conversation with a real person. I have added some editorial commentary in between the questions and answers. (The name has been changed to protect the "innocent".)

Read this, and tell us what you would advise Joan from Lima, Ohio. [3]

JOAN'S QUESTION:
My husband and I are paying back taxes at the rate of $100 per month. We owe on a couple of years still; now a new year is here and we most likely will owe more taxes. My husband retired at the age of 51. Within 2 yrs of retiring, he had to have a kidney transplant, which put him on Social Security. His SS benefits plus retirement pay is where we get hurt with taxes. We have not asked them to take more taxes out of his monthly checks because we need the money each month. In May of 2008 he also had an above the knee amputation. Our yeary income is around $60,000. We filed the long form last year. Is there anything I am missing that can help us pay less taxes? I am not sure if we qualify for the disabled credit since he retired before he became disabled. Any help would be greatly appreciated! THANKS!

EDITORIAL COMMENT:
I read this and my heart goes out to this woman and her husband. Clearly, she's struggling. I'd love to be able to help, wouldn't you? But what ARE they doing with all that money? $60,000 in Lima, Ohio is the equivalent of over $94,000 in a city like Los Angeles. [4] (Note: Homes cost well under $100,000.)

TAXMAMA REPLY:

Dear Joan,

Sigh, life IS tough. Clearly, you need help.

First of all, in order to get any relief at all from IRS, you must be current on the current year's taxes. You can't go around not paying taxes that you owe. It just doesn't work that way.

Now, the next question is, do you owe taxes at all?
If your medical expenses are really high, you should be able to use them to reduce your taxable income. Look carefully at your expenses to see what things qualify as medical costs.

If you don't have medical expenses, why can't two people live on $60,000? That's quite a bit of money. That's $5,000 a month - free and clear - since you're not having taxes withheld.

Do you have high mortgage interest, perhaps? Has the value of your home gone down? Or is your interest rate too high?
Maybe you qualify for a loan modification? Call your lender to see if you can reduce the interest rate and the payments.

You really need to look at your budgeting and start cutting expenses.

Once you get your house in order, and you get your spending under control AND you start having withholding taken out for the current year's taxes....then you can get help from IRS.

You may qualify for an Offer in Compromise.
Use the Form 656 package to see if you qualify.

Call IRS's forms line 800-TAX FORM (800-829-3676) and ask them to send you the package if you don't want to print out all 50 or 60 pages.

On the first pass, just fill in approximate amounts to see where you stand. If you look like you qualify, then gather all the documents and see if IRS can cut your old tax debt.

But remember, they won't help you if you are not presently current (in compliance). They will regard you as a chronic tax flake.

Don't pay anyone to do this for you. You will need to gather most of the information yourself anyway. But do call IRS when you're ready and see if they can help you. You have a perfectly credible hard-luck story. You should be able to get help.

JOAN'S REPLY:

One thing I failed to mention is that we have been helping family members who have chronic health problems. Last year we were able to claim three of them as dependents, which did help us get almost $700 refund which was applied to our past balance. We actually "give" away about 25% of our monthly income to help those in need. Cal us foolish, but we simply cannot stand to see our extended family homeless!

EDITORIAL COMMENT:
Huh? What is all this crying poor, when she's giving away 1/4 of her income? She sounds like a wonderful person to have in the family, or as a neighbor. But...

She's paying the huge, painful sum of $100 per month towards back taxes - and she's struggling to make ends meet? Somehow, the story has taken a 180 degree turn. I can see IRS looking at her spending and just jumping on board to give her an offer in compromise!

TAXMAMA REPLY:

As wonderful and generous as you are, that's not IRS' problem.

IRS will not give you an Offer in Compromise if you are diverting money that should be used to pay your tax obligation. And that, my friend, is how they see it.

However, if you're able to take them as dependents, you can deduct their medical expenses. So don't forget to do that.

Stay well - and stop taking care of everyone else.
You MUST take care of your own obligations.

JOAN'S REPLY:

Also, I don't think you saw in my first message that we do have taxes withheld...I am employed and taxed at the correct rate. It is the disability Social Security that hurts us. We are paying back taxes on a monthly basis, so it is not like we are "forgetting" to pay our taxes like some of the ploiticians who are in the news recently. Thanks for your replies.

EDITORIAL COMMENT:
If she does go through the exercise of picking up all the qualified dependents, any potential Dependent Care Credits, any Child Tax Credits and any other benefits she can get, with good planning she can wipe out all her current year taxes. In fact, she might even be able to amend 2007 and get a refund.

But, she ignores all the information, instructions, and advice - and starts comparing herself to "ploiticians" - to whom she does not compare favorably, by the way. They may have tried to get away without reporting income. But they paid the taxes when the shortfall came to light.(Whether they paid penalties or not, is another question...)


By this time, if she's dealing with and IRS assistor on the phone, or perhaps even a Taxpayers Advocate, you can just see the person helping her starting to lose patience - and sympathy. She's certainly lost my sympathy.

TAXMAMA REPLY (and it's not very nice)
(Surely there would have been a better way to respond?):

Dear Joan,

This is my last response on this topic.

You said that you didn't have withholding and you were going to owe money. IRS doesn't care what it is you don't have withholding on - wages or SS or...

The fact is - you will owe, come April, and you still have a balance due from the past. By definition, you are out of compliance. IRS will not give you an OIC. Period.

What politicians and other crooks do will not affect your request for tax debt relief.

If you want them to help you, follow the advice I've given you.

Otherwise, pay someone $3,000 or more to have them help you and get no results like everyone else - after stewing for 18 months.

Don't argue with me. I don't make the laws, or your choices.

Now, it's tax season and I have hundreds of people who need free help, in addition to my own clients and articles.

You have used up your quota of responses for this month.

Note: If you respond to IRS this defensively, I guarantee you that you will not get help from them when you need it.

Best wishes.

YOUR TURN:

How would you respond?

And how would you try to help this clueless taxpayer?