Federal Tax Clinic Reduces Low-Income Taxpayer’s Liability by $20,000

Unemployed and with no source of income, a low-income taxpayer came to the Federal Tax Clinic during the summer of 2014 for help. Having lost his job after the recession, the taxpayer had been working odd jobs ever since, in search of steady work and with the hope of going back to school. But he quickly got behind on his taxes, owing the IRS over $22,000 for tax years 2007 through 2011. The IRS was close to placing a tax lien on the taxpayer as he continued to struggle to make ends meet even without paying his tax debt.

Photo credit: Ken Teegardin: www.SeniorLiving.Org; Creative Commons License.

Photo credit: Ken Teegardin: www.SeniorLiving.Org; Creative Commons License. 

“He wanted to be able to settle his debt, and go back to school,” says Rebecca Epsten, the legal intern initially assigned to his case, and now the Law Clerk for the Federal Tax Clinic. “He was in the process of applying for financial aid, in the hopes of returning to school that fall. I contacted the IRS on his behalf and explained his financial hardship and requested that he be placed on Currently Not Collectible (CNC) status so we could then begin working on an Offer in Compromise (OIC).”

An Offer in Compromise would settle his IRS tax debt completely, whereas CNC status temporarily stops IRS collection efforts in the meantime. The taxpayer expressed how grateful he was to the USD Federal Tax Clinic for obtaining an IRS hold on all collections, as those demands were very stressful and caused him a lot of anxiety. The clinic also assessed that he was a good candidate for an OIC, as he had high expenses, little to no income, and was also a student. The clinic then gathered the necessary information from the taxpayer to substantiate his financial hardship to the IRS, including documents that would display his expenses and lack of assets.

In spring 2015, legal intern Nathan Kiyam was assigned to the case. “From the beginning of our conversations, it was clear how difficult it was for the taxpayer to make a living and pay the tax liability,” reflects Kiyam. “The taxpayer had been mostly unemployed since the recession when he had a great job and accrued the tax liability. After the recession, it was difficult for him to find the same type of job. The taxpayer also wanted to go back to school to transition to a new career, but his tax liability was holding him back. I was very happy to help him try to get back on track.”

Kiyam worked closely with the taxpayer to collect the required information, and he submitted an OIC to the IRS in May 2015. The IRS officer assigned to the taxpayer’s case requested additional proof for certain items in the OIC. In the fall semester of 2015, legal intern Shriraj Pathak was assigned the case and worked closely with the taxpayer to provide the additional information to the IRS. In the fall of 2015, the OIC was accepted by the IRS, and the taxpayer’s initial liability was reduced from $22,000.00 to only $2,000.00.

“The work of our Federal Tax Clinic legal interns continues to be amazing,” says supervising attorney Richard Carpenter. “Our most recent success story is no exception.”

“It’s so rewarding to watch a client’s story come full circle, and to have a hand in helping him achieve his goals,” comments Rebecca Epsten. Professor Carpenter further stated, “I am so proud of the work done by all of the interns at the USD Federal Tax Clinic on this case – especially Rebecca Epsten. Currently, the taxpayer has gone back to school to further enhance his employment prospects. His future is looking bright again.”

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