Trouble for TV tax lady

[Famspear]

Circular 230 is a publication, by the U.S. Department of the Treasury, of the Treasury regulations codified at title 31 of the Code of Federal Regulations, subtitle A, Part 10, relating to practice before the Internal Revenue Service.

I'm going to look for an answer to Arthur's question.

[Famspear]

Based on a quick review, I didn't find anything in Circular 230 that prohibits a contingent fee in a collection dispute or matter.

There is a rule that prohibits a contingent fee in connection with the filing of an original tax return. Contingent fees are allowed in certain cases involving amended returns (or claims for refunds embodied in amended returns).

[LaVidaRoja]

The scam in audit representation on a contigent fee is simple. Let the IRS issue a "no-show" report. (Worst case scenario, everything disallowed) Then charge a percentage of the amount "saved" The scam is that NOTHING is presented until AFTER the report is issued. Perfectly possible that if the taxpayer had cooperated in the first place, they would have owed NO tax.

[gottago]

While on the subject of "scam" tax resolution law firms, I can personally recommend that no one consider hiring Alvin S Brown in Fairfax VA (irstaxattorney.com) --nothing but lies, misrepresentation and ineptitude. The "associate" he fobbed us off on after he got our money--her name was Inna Boyd-- was a clueless idiot who did absolutely nothing to help our situation and simply reported to me what the collection agent said when she talked to her and that she could not do anything to prevent her from cashing out my IRA while I was unemployed with an OIC "pending". I think she quit them to squeeze out issue in her $600,000 home...probably a better fit for her.

Yes, we were completely honest with him and told him we fucked up royally but he assured us he could help us--the $4000 we paid him (via credit card that probably cost us $6000 in the almost 3 years it took to pay it off) was a complete waste and he actually wanted ANOTHER $4000 to file ANOTHER OIC even though the first one was never even considered. I could never get him on the phone until I emailed him as a "new client" using the same name and phone number and he called me back on a Saturday morning. Had no idea who I even WAS...

I would love to see someone on here actually direct a (recovering) TP trying to resolve the situation toward someone that could actually help them. Honestly, I don't think such a person or agency exists.

Gottago

[fortinbras]

I can recommend a couple of GOOD tax attorneys. Frequently the best are former IRS attorneys. When the IRS hires attorneys it actually makes them sign a sort of enlistment for 5 years, because the IRS training is so valuable that once they have served their term the private law firms will be offering them serious money.

[Number Six]

Dan Pilla, Jr. gives a list of attorneys and CPAs he recommends: http://taxhelponline.com/tax-help-now/a ... e/107.html

I would say ask for a local referral, get estimates and try to negotiate a better deal. There are peer-reviewed experts in every field, through state referrals in professional organizations. There are many experts here who would probably willingly make recommendations if someone wants to come clean--contact them, and they would probably give you a fee schedule.

[Demosthenes]

I wonder if this means the IRS will no longer let Roni have a booth at the multi-city IRS continuing education conferences...

I went to school with her. She was undeniably the most famous female student on the Berkeley campus at the time. She was there on an athletic scholarship and could throw a fast pitch softball harder than most of the guys on the men's teams could throw a baseball.

[Gregg]

I wonder if this means the IRS will no longer let Roni have a booth at the multi-city IRS continuing education conferences...

I went to school with her. She was undeniably the most famous female student on the Berkeley campus at the time. She was there on an athletic scholarship and could throw a fast pitch softball harder than most of the guys on the men's teams could throw a baseball.

I'm deadly serious about this, but I always thought she had the build of an East German Olympic Swimmer.....

[Imalawman]

While on the subject of "scam" tax resolution law firms, I can personally recommend that no one consider hiring Alvin S Brown in Fairfax VA (irstaxattorney.com) --nothing but lies, misrepresentation and ineptitude. The "associate" he fobbed us off on after he got our money--her name was Inna Boyd-- was a clueless idiot who did absolutely nothing to help our situation and simply reported to me what the collection agent said when she talked to her and that she could not do anything to prevent her from cashing out my IRA while I was unemployed with an OIC "pending". I think she quit them to squeeze out issue in her $600,000 home...probably a better fit for her.

Yes, we were completely honest with him and told him we fucked up royally but he assured us he could help us--the $4000 we paid him (via credit card that probably cost us $6000 in the almost 3 years it took to pay it off) was a complete waste and he actually wanted ANOTHER $4000 to file ANOTHER OIC even though the first one was never even considered. I could never get him on the phone until I emailed him as a "new client" using the same name and phone number and he called me back on a Saturday morning. Had no idea who I even WAS...

I would love to see someone on here actually direct a (recovering) TP trying to resolve the situation toward someone that could actually help them. Honestly, I don't think such a person or agency exists.

Gottago

Sounds like you got a raw deal. Many times people are thrown into an OIC when they shouldn't be. Many times, there are better alternatives or more attainable alternatives. The rule of thumb is NEVER go out of state for an attorney on an IRS collection matter. Try not to go out of town, unless you live in a small town. Local is better.

[gottago]

At the time, when one gets fired from their job and has their bank account cleared out in the same week, a certain level of panic sets in that desperately wants someone that knows what to do help you. We talked to several attorneys/firms who had sent us mailings (they apparently got our address due to NOFTLs being filed) and found Mr. Brown to be the most knowledgeable about our particular situation. He assured us that the IRS had no choice but to settle our case because we had no way to pay them.

Of course, I know now that we could not possible qualify for an OIC (we had/have nothing, essentially, to offer and no extra income) at that time (or now) but they filled out the form and sent it in. We discovered later that the OIC was never "loaded" into the computer system and that the OIC was never considered. We did receive a letter stating it was received and under consideration shortly after it was sent in and then nothing for 1 1/2 years. Countless certified letters and emails to Alvin S Brown and Inna Boyd were ignored.

They (IRS) did designate us as "currently not collectible" which is accurate for our situation. I recently discovered that bankruptcy would be able to discharge our debts to the IRS but the liens on our home would stay in place and the IRS could put us on the street even after the bankruptcy so there is no point in doing that. We have no where to go if we lose our house although several friends have offered us a place to live. We shall see.

[Imalawman]

They (IRS) did designate us as "currently not collectible" which is accurate for our situation. I recently discovered that bankruptcy would be able to discharge our debts to the IRS but the liens on our home would stay in place and the IRS could put us on the street even after the bankruptcy so there is no point in doing that. We have no where to go if we lose our house although several friends have offered us a place to live. We shall see.

You know, I have always wanted to litigate the issue of a lien staying in place one the tax debt is discharged in bankruptcy. What is there to execute the lien on? There isn't a tax debt any longer. I'm currently working on a situation where I'm attempting to have the liens removed due to the fact that the underlying debt no longer exists. We'll see how it goes.

Well, best of luck to you. I see way too much of this sort of thing occur, I despise the fact that attorneys are doing this type of thing.

[Famspear]

You know, I have always wanted to litigate the issue of a lien staying in place one the tax debt is discharged in bankruptcy. What is there to execute the lien on? There isn't a tax debt any longer...

But I would argue that there is still a tax debt -- or to be precise, part of the debt remains.

Remember, what debt does the bankruptcy discharge "discharge"? It discharges only the personal liability, not the in rem liability. And that is just a circumlocutory way of saying that the debt is discharged only to the extent that the amount of the debt exceeds the fair market value of the collateral.

So, if you have a $100,000 tax debt, and the sole property of the taxpayer has a FMV of $80,000, the discharge amount is only $20,000. The Internal Revenue Service can take the asset, sell it, and use the proceeds of the sale to satisfy $80,000 of tax debt. It's not merely "the lien" that is being satisfied -- it's the tax itself, to the extent of $80,000. The only thing that's discharged is the $20,000 excess.

EDIT: Here's the key provision, from the U.S. Bankruptcy Code:

(a) A discharge in a case under this title—

(1) voids any judgment at any time obtained, to the extent that such judgment is a determination of the personal liability of the debtor with respect to any debt discharged under section 727, 944, 1141, 1228, or 1328 of this title.....

(2) operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor......

--from 11 U.S.C. section 524(a) (bolding added).

There is nothing in the Bankruptcy Code that says the "entire" debt is discharged. Only the "personal liability" is discharged.

EDIT 2: The title of section 524 of the Bankruptcy Code is, tellingly, "Effect of discharge".

[Imalawman]

You know, I have always wanted to litigate the issue of a lien staying in place one the tax debt is discharged in bankruptcy. What is there to execute the lien on? There isn't a tax debt any longer...

But I would argue that there is still a tax debt -- or to be precise, part of the debt remains.

Remember, what debt does the bankruptcy discharge "discharge"? It discharges only the personal liability, not the in rem liability. And that is just a circumlocutory way of saying that the debt is discharged only to the extent that the amount of the debt exceeds the fair market value of the collateral.

So, if you have a $100,000 tax debt, and the sole property of the taxpayer has a FMV of $80,000, the discharge amount is only $20,000. The Internal Revenue Service can take the asset, sell it, and use the proceeds of the sale to satisfy $80,000 of tax debt. It's not merely "the lien" that is being satisfied -- it's the tax itself, to the extent of $80,000. The only thing that's discharged is the $20,000 excess.

EDIT: Here's the key provision, from the U.S. Bankruptcy Code:

(a) A discharge in a case under this title—

(1) voids any judgment at any time obtained, to the extent that such judgment is a determination of the personal liability of the debtor with respect to any debt discharged under section 727, 944, 1141, 1228, or 1328 of this title.....

(2) operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor......

--from 11 U.S.C. section 524(a) (bolding added).

There is nothing in the Bankruptcy Code that says the "entire" debt is discharged. Only the "personal liability" is discharged.

EDIT 2: The title of section 524 of the Bankruptcy Code is, tellingly, "Effect of discharge".

Hmmm, I'm going to have to review this. Good points.

[Famspear]

Example, from the U.S. Supreme Court:

Pursuant to 11 U. S. C. § 727, the Bankruptcy Court discharged petitioner from personal liability on his promissory notes to the Bank. Notwithstanding the discharge, the Bank's right to proceed against petitioner in rem survived the Chapter 7 liquidation.

--from Johnson v. Home State Bank, 501 U.S. 78 (1991) (italics in original; bolding added).

EDIT. See, generally, Isom v. United States (In re Isom), 901 F.2d 744 (9th Cir. 1990).

[The Observer]

Doesn't this (in regards to Isom) only apply to property that the taxpayer has claimed as exempt property in bankruptcy? I am not sure the IRS will pursue property that has been placed in the bankruptcy estate, regardless of whether the lien attaches to it.

[Imalawman]

Example, from the U.S. Supreme Court:

Pursuant to 11 U. S. C. § 727, the Bankruptcy Court discharged petitioner from personal liability on his promissory notes to the Bank. Notwithstanding the discharge, the Bank's right to proceed against petitioner in rem survived the Chapter 7 liquidation.

--from Johnson v. Home State Bank, 501 U.S. 78 (1991) (italics in original; bolding added).

Hmmm, yeah, I've read some court cases this morning. I hadn't really looked into this issue in depth yet. I don't know. It just seems as if it goes against the whole purpose of bankruptcy and the idea of a fresh start. I have a client now who is a perfect candidate to discharge the debt because nothing is in her name so the tax liens are meaningless. I suppose otherwise you file and try to keep a hold of your home until the lien expires. If I could change one thing about debt collection of the IRS is to exempt the personal residence from the attachment of the lien if the value doesn't exceed say, $250,000.00.

[Famspear]

Doesn't this (in regards to Isom) only apply to property that the taxpayer has claimed as exempt property in bankruptcy? I am not sure the IRS will pursue property that has been placed in the bankruptcy estate, regardless of whether the lien attaches to it.

Technically, as long as the federal tax lien has been perfected (by the proper filing of a notice of federal tax lien, etc.) prior to the time of commencement of the case, the United States does have a tax lien that is valid against third parties (include the bankruptcy trustee) with respect to property of the estate (i.e., even property that has not been exempted). As long as the Internal Revenue Service complies with section 362 of the Bankruptcy Code (the automatic stay provision), the IRS can take assets of the estate to satisfy the tax debt, to the extent of the value of the property. The IRS rarely does this, though, at least in my experience.

.....It just seems as if it goes against the whole purpose of bankruptcy and the idea of a fresh start....

And debtors have certainly tried to make that argument in these cases. I don't remember whether it was a tax debt or some other debt involved, but I remember a court case where the debtor made the "fresh start" argument and the court said basically, yes, you're entitled to a "fresh start" but not a "head start."

The policies of the bankruptcy code conflict with each other, of course. You have the policy that the debtor should have a fresh start, but you also have the policy that the code protects properly perfected security interests, to the extent of the value of the collateral. A line has to be drawn somewhere -- and that's what Congress (and the courts) do. Whether a given line needs to be "moved over" a bit is certainly open to argument.

[Prof]

Liens perfected pre-petition (or in some cases, where the statute allows, post-petition), which also attach to property with value, survive bankruptcy, unless avoided under one of the chapter 5 strong arm powers.

The lien survives even if the debt is discharged as to the Debtor. This converts the obligation into one in rem, or, to use modern terms, the debt is "non-recourse." In other words, the debt secured by the property can only be "paid" by the sale of the property. The owner of the property has no obligation to pay unless he or she want to keep the property.

Some lenders will not allow this status to continue past the termination of the bankruptcy stay and will immediately seize the house, car, etc., unless the Debtor "reaffirms" the (entire) debt and remains personally liable.

This analysis applies to both exempt and non-exempt property.