DEBT AND TAXES
BY ERIK LUNDEGAARD
PHOTOGRAPHY BY LUKE COPPING
Q: As a tax attorney, what do you do for
your clients? Obviously not their taxes.
A: We represent taxpayers who have tax
problems both with the IRS and New York
state. Let’s say something bad happened
to you six years ago: Somebody died, and
then you got depressed and stopped filing.
A lot of times, people don’t realize that
you can pick up the next year and then file
late the prior one. So one year turns into
So if you come to me and say, “I haven’t
filed in six years”—I’ve had people that
haven’t filed for 20 years—the first goal is to
get you back into compliance; to develop a
strategy to get you back into the system.
If there’s criminal exposure, we want to
make sure that we lock out the criminal
statute. And even if there’s no criminal
issue and it’s just a civil issue, if somebody
comes to me and they haven’t filed in five
or six years—let’s say it’s the middle of
filing season and the IRS just levied their
bank account—I call the revenue officer.
The revenue officer says, “Hey, Deb, I’ll
release the levy, but I want all these
Tax and estate planning attorney Deborah Weber talks eggshell audits,
offers in compromise, and why she doesn’t represent tax protesters
not a CPA in town that’s going to drop
everything and prepare back returns. So we
have a CPA on staff that can help us create
returns in an emergency.
Q: When does the civil become criminal?
A: There’s no perfect answer. I’ve worked on
criminal cases before, but they come to me
as criminal cases. I’ve never had a civil case
become a criminal case. But we are involved
in what I often refer to as “eggshell audits.”
They’re civil, and it’s my job to keep them
in the civil arena. I tell clients all the time,
“You’re going to owe money at the end of
this, but the main thing is you don’t want
to be in jail and owe money at the end of
this.” Because we can always work on the
collection case: either payment agreement
or bankruptcy or offer in compromise.
Q: Offer in compromise?
A: There’s a lot of misunderstanding about
what an offer in compromise is. Let’s say
you owe the IRS $500,000, OK? The IRS
has 10 years to collect the debt from the
date of assessment. So we’re two years
into it, the IRS has eight years left to collect
from you, and you still owe $500,000.
You’re making $40,000 a year, you have a
modest-sized house but no equity in your
home, and a few thousand dollars in the
bank account. Well, they’re never going to
see $500,000 from you.
In that scenario, you could submit an
offer in compromise, which is basically
going to be the quick-sale value—defined
as 80 percent of the fair market value—of
your assets. Then they look at your income
and your necessary expenses. End of the
day, whatever your net disposable income
is, you multiply that by a factor. Then,
quick-sale value of the assets plus net
disposable income multiplied by the factor
is the amount you would offer.
If you’re really destitute, the government
basically agrees to just leave you alone
unless your financial circumstances change.
Q: I’m curious. How would somebody who
makes $40,000 a year with a modest-
sized home owe half a million bucks in
back taxes? Does that ever happen?
A: Oh, absolutely. It could be somebody
who made significant money previously