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Old 05-31-2016, 04:28 PM
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Questions about IRS payment plans/undue hardship

My parents just retired and dipped into their retirement to help buy my wife and I a home. They bought the home outright in 2015. Now that they filed their taxes, they owed are a staggering 47k. They were told by an attorney that since they own three houses, (their home, a family home they took a mortgage out on a few years back that they rent to a family member and the house they bought us, but is still in their name), they would not qualify for the payment program.

My questions is, if they sign over the house to us as a gift would that possibly increase the chances of them qualifying for the payment program or even the undue hardship as the two other houses? If sold at full market value, the other houses would not be enough to pay the total due to the mortgages on the property.

Their credit and ours are not good enough to secure a loan on the house. I have been working on my credit, but I do not believe it will be ready to get the mortgage to pay them for the house by the end of their 6 month extension which ends in October.

Any suggestions/ideas/comments would be appreciated. Our main goal is to not lose the house, as well as trying to find enough time to get my credit right, so we can get the mortgage to pay them the value of the house. Which was the plan all along

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Old 05-31-2016, 08:07 PM
Join Date: Oct 2010
Posts: 5,254
I guess it depends; aslongas they're financially unable to pay their tax debt immediately, they can make monthly payments through an installment agreement. they'll still owe penalties and interest for paying their taxes late, but it can help make the payments more affordable.However, as long as they pay their tax debt in full, they can reduce or eliminate their payment of penalties or interest; If their financial documentation proves that they are unable to pay the taxesthey owe at this time and they have exhausted all other resources, the IRS may agree to place them in an IRS payment agreement called Hardship Status. This agreement actually collects nothing on their debt. Also, the IRS will not be able to collect money towards their debt through means of a bank or wage levy. This IRS payment arrangement will be reviewed every two years, and the statute of limitations does not pause while in this status.
In order to qualify for any of the IRS payment methods listed, they must provide ample documentation to the IRS. Proving their case can be quite hard.they need to find an IRS payment specialist that can help them prepare your application for one of these IRS payment programs
Even if they're ineligible for an online payment agreement, they can still pay in installments by completing and mailing Form 9465.
They can call 800-829-1040 for more accurate info in detail. It is possible to get an IRS installment agreement to repay their taxes without ever disclosing what their house is worth, or even what they can actually pay. But qualifying for a simple IRS plan of resolution with the direct debit installment agreement is not always so simple. The IRS bases qualifications for the direct debit installment agreement on a technical term called their ?assessed balance.?
An assessed balance is what they originally owed the IRS when you filed their return.their assessed balanced has to be under $50k to qualify for the direct debit installment agreement. But don't assume that a payment plan is their best option there are definite drawbacks. The biggest is that interest and penalties continue to accrue while they still owe. Combined with penalties, the interest rate is often 8% to 10% per year. It's possible to pay for years and owe more than when they started. The IRS may deem theirr expenses extravagant. For example, if they have hefty credit card payments, make any charitable contributions, or send their kids to private school, expect the IRS to balk. Although reasonable people would disagree on what is necessary and what is extravagant, the IRS is rather stingy here. The IRS may think they are hiding property or income. For example, if public records show their names on real estate or motor vehicles that they didn't list, or the IRS received W-2 or 1099 forms showing more income than they listed, they should be prepared to explain.

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