Potential new Lost Heads Victim

[Agent Observer]

For those of you who post over there, it might be a good idea to give this guy a reality check before he jumps off the TP "koolaide cliff." He appears to be positioned to go from a bad situation to catastrophe.

http://www.losthorizons.com/Forum3/topi ... IC_ID=1856

Intuition Said:

Let me start with an brief introduction.

I am a 3d graphic animator working in Hollywood CA. I am 30 years old.

I have been following the tax movements since 1995 when the C.A.T.S. were pushing for the national retail sales tax.

I read up on Irwin Schiff and even got to help Aaron Russo put his "Mad as Hell" documentary together.

I have always managed to scratch by in Los angeles since 1995 on doing freelance 3d graphics and animation. There were two times in my 12 years here where I had to up and leave back to my home state of Wyoming due to financial hardships (i.e. not enough work to pay rent)

Anyways as of 2004 I had built up enough clients that I have had pretty constant workflow and now do pretty well.

I had been following the Tom Cryer cases and had hoped the Fair Tax (new work for revamped NRSTax idea) would get attention and get passed.

I hoped the fairtax would be passed merely due to the fact that I don't mind paying taxes at the purchase level just as long as I could take 100% of my income home due to budget constraints and the fact that I feel that I get better health care and benefits due to my own saving/managing money then the long line at the govt doorstep.

Since the Bush administration said they were going to revamp the taxes in 2005 I made a dice roll on hoping things would get cleaned by now.

They havent.

Well, in 2004 I made just over 40,000 and in 2005 and 2006 is just over 60,000.

In June of this year (2007) the IRS served my employer with a wage garnish notice. The IRS evedently did my 2004 taxes for me and said I owe $17,000 out of $40,000 which is now up to $20,000 due to penalties.

I want to get the "bottom line" from the tax pros here on this forum.

But before I go any further I want to say that I have never had wages withheld due to SS or medicare or anything. I always get my full paycheck and I recieve 1099s from all my employers.

I have not filed taxes before except maybe in 1995 and 1996 when I did have wages withheld and was due a refund.

Now, from what I am reading here, that is way more substantial then Irwin Schiff's arguments and further prove Tom Cryer is right, that I am not liable to pay the IRS any income taxes?

The main "gotcha" I think I am finding is that this would apply to me but I did not file my 2004 2005 or 2006 tax returns yet.

I have a 30 day notice from the IRS to file the 2005 return or they will do it for me like 2004.

If I am reading this site correctly I am in trouble for not filing my 1099s more so then actually not paying any income tax right?

I am not looking for SS or medicare benefits. I merely want to keep my full paycheck and buy my own health care.

SO here comes my questions now that I have stated the situation.

1. Am I liable for the 20,000 the IRS says I owe in 2004?

2. Can I get the wages garnished removed yet still be employed at the company I work for?

3. If I file for 2005 or 2006 and put 0 in the "income" amount will I get in more trouble?

4. What is the best choice of action for me at this point.

Please get back to me asap since this is a timely matter.

I will not hold anyone here accountable for any advice and all decisions I make on this matter I will take responsibility for of my own accord. I just want to do whats right and within the law in my situation. I know this is alot and the first respnse would be "read the book". Don't worry, I will read the book but I want to get a quick summary from the experienced here.

Thank you,

Casey C Benn

[webhick]

Odd, the response claims that Quatloos calls CtCers "Crackheads". Since when?

[Agent Observer]

When I initially posted it, there were no replies, so I had to go back and read the response you were referring to.

the Quatloos forum types refer to us as 'Crackheads', a referent I'll wear proudly because of what it actually represents

Apparently, Webhick, that guy enjoys being called a crackhead because it's true? I guess we know where this guy spent his money (Crack isnt cheap, afterall...)

[Evil Squirrel Overlord]

I thought meth was the choice of Wyoming druggies. Then again, if one looks at the billboards* it might not be this guys demographic.

(*the stereotyped meth-head is a white or Native American women, at least in the Upper Midwest)

[The Observer]

Odd, the response claims that Quatloos calls CtCers "Crackheads". Since when?

Obviously the name "crackhead" was derived from the phrase "Cracking the Code" (which is what Pete called his scheme) in much the same way Grateful Dead fans were called "deadheads."

[.]

3d graphics and animation

That's the answer. Graphics and animation! Surely some court will see the high-tech light.

I guess he forgot that Schiff will die in prison.

This poor gullible slob is another good reason why Cryer needs to disbarred.

[LPC]

Odd, the response claims that Quatloos calls CtCers "Crackheads". Since when?

That's what I call them, and I think I'm the only one that has ever used that term.

[Quixote]

I've been banned from LH for telling the truth, so I'll answer his questions here. Maybe he visits.

SO here comes my questions now that I have stated the situation.

1. Am I liable for the 20,000 the IRS says I owe in 2004?

Yes, if that is the amount that has been assessed. The tax, income and self employment, on exactly $40,000 of net business income is $10,407.82. How sure are you of your facts?You can ask for a reconsideration, but unless IRS decides to reduce the assessment, you are liable for it.

2. Can I get the wages garnished removed yet still be employed at the company I work for?

No, because there is no wage levy. You are, according to your post, self employed. Again, how sure are you of your facts? The levy took only what the company owed you under your contract, but had not yet paid. If IRS wants the money you're earning now, it will have to send another levy.

3. If I file for 2005 or 2006 and put 0 in the "income" amount will I get in more trouble?

You're kidding, right? Haven't you been paying attention to all the LH posts about frivolous return penalties?

4. What is the best choice of action for me at this point.

File correct 2005 and 2006 returns, ASAP. Dig up your records for 2004 to see if you have any documented business expenses to reduce your net income for 2004. If you do, file an amended return, taking those expenses on Schedule C. If not, try for an IA once the 2005 and 2006 returns post.

[gottago]

Since the OP has not filed for 2004 would he not need to file an original 1040 with schedules (including schedule C) since a SFR can not be amended? At least that was what I was told by the IRS appeals officer (and what we did back in June--the previous amended returns were filed last August but were inadequate).

I would think a good tax accountant or enrolled agent could help him possibly reconstruct some of his expenses being self employed (business expenses, health care expenses, etc.) and file for the 3 years and then help him negotiate an installment agreement or OIC depending on his situation.

If I knew how to contact him, I would try to stage an intervention before he jumps off the cliff

[Nikki]

Since the OP has not filed for 2004 would he not need to file an original 1040 with schedules (including schedule C) since a SFR can not be amended? At least that was what I was told by the IRS appeals officer (and what we did back in June--the previous amended returns were filed last August but were inadequate).

I would think a good tax accountant or enrolled agent could help him possibly reconstruct some of his expenses being self employed (business expenses, health care expenses, etc.) and file for the 3 years and then help him negotiate an installment agreement or OIC depending on his situation.

If I knew how to contact him, I would try to stage an intervention before he jumps off the cliff

First

Next, you can sign up on the forums at losthorizons.com and try to get your message to him before Bulton bans you and deletes your post.

You'll have to use a different name to start, because you're probably preemptively banned for planning to offer advice other than CtC.

[The Observer]

You'll have to use a different name to start, because you're probably preemptively banned for planning to offer advice other than CtC.

If she isn't already being preemptively banned for resolving her tax situation lawfully and legally.

[gottago]

While on the subject, I read something on ENM's thread regarding bankruptcy and liens, releases etc.

What is Isom? Is that a case or something?

I have been reading about TX bankruptcy as a contingency plan if all else fails. At this point, (almost) everything we own would be exempt. Only debts are IRS, mortgage company and credit cards. Realistically, I might realize $20-25K from sale of house (assuming a buyer could be found) since it is only 3 years old. House is homesteaded in Texas. If I have to do bankruptcy and some or all of the amounts owed the IRS are discharged, it appears that they can still seize my house since the liens are already there. Is that correct? If so, it would be a waste to do a bankruptcy since it will not change anything. Just add my name to the foreclosure bonanza...
I realize I need to get these answers from a bankruptcy atty. but I was mostly curious about the Isom thing...

[Famspear]

gottago wrote:

What is Isom? Is that a case or something?

I have been reading about TX bankruptcy as a contingency plan if all else fails. At this point, (almost) everything we own would be exempt. Only debts are IRS, mortgage company and credit cards. Realistically, I might realize $20-25K from sale of house (assuming a buyer could be found) since it is only 3 years old. House is homesteaded in Texas. If I have to do bankruptcy and some or all of the amounts owed the IRS are discharged, it appears that they can still seize my house since the liens are already there. Is that correct? If so, it would be a waste to do a bankruptcy since it will not change anything. Just add my name to the foreclosure bonanza...
I realize I need to get these answers from a bankruptcy atty. but I was mostly curious about the Isom thing...

Yes, Isom v. United States (In re Isom), 901 F.2d 744, 90-1 U.S. Tax Cas. (CCH) paragr. 50,216 (9th Cir. 1990). The discharge of personal liability for a tax debt in bankruptcy does not discharge the debt to the extent of the underlying tax lien.

Using a simple example: Unpaid tax of $100,000, with related tax lien perfected prior to bankruptcy. Fair market value of assets subject to the lien, $90,000. Bankruptcy discharge granted, and that the discharge applies to the tax. What is actually discharged is only $10,000 of personal liability for tax, essentially. The tax debt remains viable to the extent of the value of the property securing the lien, which property can ultimately be taken to satisfy the tax.

[Prof]

Discharge of taxes on income owed by the debtor is a complex subject in Bankruptcy (title 11, which is positive law, for those of you who are nutcases). First, for years in which a false or fraudulent return was filed or there is a missing return, there is no discharge at all. Late filed returns must have been on file for at least two years. Timely filed (including extensions) must be on file for three years and from the three years certain time periods are deducted. Then, the debt becomes dischargeable but not any tax debt secured by lien. Homestead laws are superceded by the IRC, but -- wouldn't you know it -- the Texas statute and Constitution recognize tax liens against the Homestead.

The IRS only recognizes limited personal property exemptions and can levy on wages, even in Texas.

Finally, a discharge can be denied if the Debtor had the money but did not pay the IRS. In other words, if you spend your money on "wine, women and song," or a new Escalade, the IRS can object to your discharge and will often win. Since I am at home, maybe LPC can give us the cite to that particular federal statute.

[Quixote]

Yes, Isom v. United States (In re Isom), 901 F.2d 744, 90-1 U.S. Tax Cas. (CCH) paragr. 50,216 (9th Cir. 1990). The discharge of personal liability for a tax debt in bankruptcy does not discharge the debt to the extent of the underlying tax lien.

Using a simple example: Unpaid tax of $100,000, with related tax lien perfected prior to bankruptcy. Fair market value of assets subject to the lien, $90,000. Bankruptcy discharge granted, and that the discharge applies to the tax. What is actually discharged is only $10,000 of personal liability for tax, essentially. The tax debt remains viable to the extent of the value of the property securing the lien, which property can ultimately be taken to satisfy the tax.

The phrase "to the extent of the underlying tax lien" implies that the amount of tax that the IRS can eventually collect is limited to the value of its interst at the time the debt is discharged. I have not independently investigated that issue, but did recently discuss it with a soon to be retired Chief Counsel attorney. The IRS's position is that its interest will increase as the FMV increases, or superior lienholders' interests decrease. It could, therefore, theoretically collect the full $100,000 plus accrued interest and penalties by foreclosure if the property's value went up.

BTW, does anyone know if the 5th Circuit has adopted the Isom doctrine? In the only 5th Circuit case citing Isom, the parties stipulated to the Isom doctrine, so the court never had to address it. The 5th circuit may have arrived at the Isom result without mentioning Isom. I haven't had any need to research the issue. The Isom doctrine may be the law, but it is far from obviously correct.

[Dezcad]

Yes, Isom v. United States (In re Isom), 901 F.2d 744, 90-1 U.S. Tax Cas. (CCH) paragr. 50,216 (9th Cir. 1990). The discharge of personal liability for a tax debt in bankruptcy does not discharge the debt to the extent of the underlying tax lien.

Using a simple example: Unpaid tax of $100,000, with related tax lien perfected prior to bankruptcy. Fair market value of assets subject to the lien, $90,000. Bankruptcy discharge granted, and that the discharge applies to the tax. What is actually discharged is only $10,000 of personal liability for tax, essentially. The tax debt remains viable to the extent of the value of the property securing the lien, which property can ultimately be taken to satisfy the tax.

The phrase "to the extent of the underlying tax lien" implies that the amount of tax that the IRS can eventually collect is limited to the value of its interst at the time the debt is discharged. I have not independently investigated that issue, but did recently discuss it with a soon to be retired Chief Counsel attorney. The IRS's position is that its interest will increase as the FMV increases, or superior lienholders' interests decrease. It could, therefore, theoretically collect the full $100,000 plus accrued interest and penalties by foreclosure if the property's value went up.

BTW, does anyone know if the 5th Circuit has adopted the Isom doctrine? In the only 5th Circuit case citing Isom, the parties stipulated to the Isom doctrine, so the court never had to address it. The 5th circuit may have arrived at the Isom result without mentioning Isom. I haven't had any need to research the issue. The Isom doctrine may be the law, but it is far from obviously correct.

A discharge under 727 only discharges the in personam liability of the debtor and not any in rem liability, see 11 USC 524.. This would be true of any secured debt in a bankruptcy case, whether it is a consensual lien, judgment lien, statutory lien or tax lien. All four types of lien will survive the bankruptcy case as a debt against the property of the debtor unless these liens are avoided by the debtor under a provision of Section 522.

Since there is no longer any personal liability, the lien does not attach to any property acquired after the bankruptcy case. It will, however, remain against the pre-petition property of the debtor until satisfied in full or the property is surrendered to the lienholder. This is what the Isom court means by the phrase "to the extent of the underlying tax lien" and not to the extent of the value of the underlying tax lien. It only extends to the property of the debtor in existence at the time of the filing of the bankruptcy petition.

There is no provision of the Bankruptcy Code which would limit the increase of the in rem debt against the property. Just as a mortgage against property will survive against the specific property of the debtor, the mortgage debt can increase if payments are not made, late fees incurred, or any other charge(s) are incurred under the mortgage. The same is true for a debt supported by any other lien, including a tax lien.

It is my understanding that Isom is the correct statement of the law in all circuits.