Charlie Sheen, an actor, owes the IRS millions of dollars for many years. He has been trying to stop them for long. It is difficult to convince the IRS that they are wrong, especially when the IRS has discretion and you admit you owe taxes. Trying to strike a handout with the IRS to pay in deffered payments or to get them to accept an offer in compromise–accepting less than you admit you owe–is tricky. The Two & a Half Men actor owed nearly $7 million to the IRS and was tired of their collection efforts. He had tried for many years to reach a compromise with the IRS. These numbers and their history are complex. For 2015, he owed $5.7million. He owed $5.7 million for 2015, 2017, and 2018. After much negotiation, the IRS agreed that $3.3 million would be taken. There was also a potential catch: if his income rises significantly, he could owe more. The IRS attempts to collect taxes with notices and liens, which is a pain for everyone. There are two ways you can try to reach a compromise with the IRS. There are two options: installment payment arrangements or offers in a settlement. Sheen tried both but failed. Because the IRS doesn’t cut its bill but gets paid over time, it is easier to obtain installment agreements.
Compromising is more difficult. If you offer the IRS less than a million dollars, they will accept it. Sheen did exactly that. It isn’t easy to accept an IRS offer if the IRS believes it can collect the entire amount. Sheen owed $1,240,000 for 2015, 2017, and 2018. Sheen later increased the amount to $3.1million to cover all three years. As the 20% down payment, Sheen even paid $626,000 to the IRS. The IRS refused to accept his $626k deposit and said no. In 2018, he filed a Tax Court case arguing that the IRS had abused its discretion. He then filed another case in Tax Court, arguing that IRS had abused its discretion. Sheen claimed that several people at IRS approved his $3.1million deal.
Sheen claims that the official rejected it without explaining or allowing Sheen to address his concerns. Sheen next requested that an IRS office outside Los Angeles handle the case. Sheen also asked the judge to combine his 2018 tax cases. Steven L. Jager is a CPA in Los Angeles and a tax partner at Fineman West & Company LLP. He also practices in Tax Court. He was persistent and persuasive, despite the odds being against him. It’s easy to sympathize with Sheen if you have ever dealt with the IRS. In his court papers, he recounts being shuffled from one IRS employee to the next in different areas of the country. Some of these figures are staggering. The IRS advised him that he could pay $51,275 per month if he tried to enter into an installment agreement.
The IRS stated that Sheen’s ability to pay $3.1 million was three to four times the amount. The judge in Tax Court mostly agreed with Sheen’s handling, and Sheen accepted a compromise offer (and $3.3million, up from $3.1). Sheen also decided she would be a part of a future income collateral agreement. The IRS can revisit the agreement if Sheen suddenly makes more income. While it is best to avoid such contracts, it can be difficult for the IRS to accept a large tax bill. The future income collateral agreement allows you to reach a business deal but also gives the IRS protection in the event of a alter in your fortunes and a rise in your earnings.
Sheen was able to avoid sales, which was an additional accomplishment. He owns a Beverly Hills house and other properties. It happens to even the most famous and wealthy. Forest Whitaker fought the IRS in court a few years back. Whitaker, unlike Sheen, was only seeking an installment payment agreement. However, the IRS claimed that he had not followed their procedures. The IRS won the Tax Court’s support, noting that Whitaker hadn’t done what was required. Whitaker refused to provide substantiation when asked by the IRS numerous times. Whitaker lost in Tax Court. Whitaker appealed to Ninth Circuit, which upheld IRS’s actions. After losing in Tax Court, Whitaker appealed to the Ninth Circuit. The Ninth Circuit upheld the IRS’s efforts.
Although the IRS loves to be paid, they are more comfortable granting installment agreements. You must first file all tax returns and cooperate before you can apply for any installment agreement. If you are a taxpayer needing time, fill out an IRS form 9465, Installment Agreement Request, and HTML433-A. Sometimes, a Form 433B is required. The Form 433 series forms are financial statements. They list your income, expenses, assets, and other information.