offer in compromise case studyzsbapp.baruch.cuny.edu/download/seminar_series/offer-in...offer in...

E. MARTIN DAVIDOFF & ASSOCIATES

CERTIFIED PUBLIC ACCOUNTANTS

353 Georges Road - Suite K E. Martin Davidoff, CPA, ESQ. P.O. Box 835 Robbin R. Weiner, CPA Dayton, NJ 08810-0835

[email protected]_____________

TEL: 732-274-1600 FAX: 732-274-1666

OFFER IN COMPROMISE CASE STUDY

Presented at

Zicklin Tax Seminar Series #3Baruch College, NYC

December 7, 2010

by

E. Martin DavidoffCertified Public Accountant

Attorney at Law Page

About the Speaker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Offer in Compromise Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Offer in Compromise Case Study Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Offer in Compromise Case Study Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

IRS FS-2006-22 Summarizing July, 2006 TIPRA Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

CPA Magazine Article regarding 20% Down Payment Requirement on Lump Sum Offers . . . . . . . . . . . . . . . 6

Form 433-A Collection Information Statement for Wage Earners and Self-Employed Individuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 - 12

Rider with Respect to Stocks, Investments, and IRAs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Rider Regarding Personal Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Substitute Section 4 for Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 - 17

Form 656 for Forms 1040 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 - 21

Form 656 for Trust Fund Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Collection Financial Standards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 - 29

Real Estate Valuation - Online Example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Answer Keys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31-32

© Copyright 2010 E. Martin Davidoff (U.S.A.)All rights reserved

ABOUT THE SPEAKER

E. Martin Davidoff is a Certified Public Accountant and an Attorney at Law with an office in

Dayton, New Jersey. Mr. Davidoff is licensed to practice both professions I n New York and New

Jersey and is active in many associations.

Mr. Davidoff serves as the President of the American Association of Attorney - Certified Public

Accountants (“AAA-CPA") . Mr. Davidoff is also the founder and co-Chairperson of the Internal

Revenue Service Liaison Committee of the AAA-CPA. As such, he meets regularly with the

Internal Revenue Service on a national level working side by side with tax professionals from other

national organizations such as the American Institute of Certified Public Accountants (“AICPA”),

the American Bar Association, and the National Association of Enrolled Agents. .

Selected as one of the 2004, 2005, 2006, 2007, 2008, 2009 and 2010 Top 100 Most Influential People

in Accounting by Accounting Today, who noted that “Davidoff’s views on issues affecting tax

practice are heard at the highest levels of government.” CPA Magazine has also chosen Mr. Davidoff

as one of the Top 50 IRS Practitioners of 2008.

As a member of the AICPA's Tax Division, he has served on the Tax Legislative Liaison Committee.

He completed two years on the Executive Committee of the New Jersey Society of Certified Public

Accountants (“NJSCPA”), having served as the organization's Secretary and as Vice President for

Taxation and Legislation. Mr. Davidoff has also served as President of the Middlesex/Somerset

chapter of the NJSCPA and as the chairman of the NJSCPA Federal Taxation and Membership

Committees. Mr. Davidoff is a member of the tax section of the New Jersey Bar Association.

Among the honors he has received are the 1998/1999 New Jersey Society of CPAs Distinguished

Service Award for his dedicated service and commitment to the Society; the SBA 1997 Accountant

Advocate of the Year for New Jersey and Region II (New York, New Jersey, Virgin Islands, and Puerto

Rico); and the 1998 Nicholas Maul Leadership Award from the Middlesex County Regional Chamber

of Commerce.

Mr. Davidoff received his undergraduate degree from Massachusetts Institute of Technology, an MBA

from Boston University Graduate School of Management, and a JD from the Washington University

School of Law. He is a frequent lecturer, authors a regular column in CPA Magazine and co-authored

the New Jersey S-Corporation bill. Mr. Davidoff regularly testifies before federal and tax agencies and

legislatures regarding the impact of legislation and tax agency policies on small business and tax

practitioners.

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Page 2

OFFER IN COMPROMISE CASE STUDY

FACTS

John Doe was the sole stockholder and principal officer of J.J. Smith, Inc.. through June 30,2005, at which time the company ceased operations. At that time, the corporation owed $450,000in U.S. Payroll taxes, interest, and penalties, of which $242,000 represented trust funds. In addition,the corporation had unpaid New Jersey Sales, Use and Gross Income Tax Withholding of $12,500,inclusive of interest and penalties totaling $3,500. The corporation also owes unemployment taxesof $2,400 attributable, ratably, to the first 6 months of 2005.

John is married to Jane Doe. As of today, all income tax returns for John and Jane have beenfiled through 2008. Taxes are due for the years 2003 through 2006 of $84,000 to the U.S. Treasuryin connection with the jointly-filed returns for those years.

John and Jane come to you for advice seeking to do offers in compromise with the taxauthorities after hearing all those radio ads of yours for the 1-800-IhaveFriendsintheIRS telephonenumber. Their financial information is set forth in the accompanying Form 433-A. Note that all ofthe assets, except the insurance policy are Jane Doe’s and the credit card debt is joint. No Form 433-B has been prepared as J.J. Smith, Inc. is no longer in business and has no assets. Its charterwas revoked on May 31, 2005 for non-filing of New Jersey Secretary of State filings.

Upon further investigation, and securing a judgment/lien search, you find:

• New Jersey has a judgment for the $12,500 against John Doe personally;

• The IRS has liens against the Does for 2003 - 2006 income taxes;

• The IRS has assessed and has liens for $200,000 of the $242,000 in trust fundsagainst Mr. Doe individually (the remaining $42,000 is attributable to $14,000 permonth for the June, 2005 quarter);

Further questioning reveals that the Does will owe $12,000 to the U.S. Treasury and $1,500to the State of New Jersey for taxes attributable to the year that will be ending on December 31,2009. The tax returns have not yet been filed and neither amount has been included on the Form 433-A. Also, although no tax is due on 2007 and 2008, it is clear from your review of the filedreturns for the years that there are positions of significant audit risk on those returns.

Page 3

OFFER IN COMPROMISE CASE STUDY (continued)

QUESTIONS

1. How do you advise the Does regarding their personal tax returns and liabilities for the years 2007,2008, 2009, and 2010?

2. What is the impact of the May 31, 2005 termination of the Corporation’s status?

3. In the course of your interview, the Does advise you that the automobile owned by Jane, the 1994Volvo, is on its last legs and that they would like to lease or purchase another automobile, if thatis possible in light of their debts to the tax authorities. What, if any, impact will such a purchasehave on their offer. They ask you for advice on whether to purchase the new automobile beforeor after their offer in compromise is considered.

4. Prior to submitting the offers in compromise, what, if any, actions need to be taken by theInternal Revenue Service and the New Jersey Division of Taxation?

5. Mr. Doe inquires about using his paid up life insurance to pay off the debt due to his credit card. The credit card company has offered to forgive the $10,429 debt if Mr. Doe pays $7,000 by thenend of the current month. How do you advise?

6. Your retainer is $5,000 for your services. Mr. Doe is considering borrowing the money from hismother. How do you advise the Does to pay it?

7. What if Jane successfully argues that she is an innocent spouse with respect to 2003 - 2006, andhence, has no liability for those years?

8. What is the impact of the pending installment agreements?

9. Should the taxpayer be thinking about acquiring medical insurance?

Page 4

Excerpt of FS-2006-22, July 2006 as posted on the IRS website re: New Offer in Compromise Law

The Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA), section 509, made major changes to the IRS OICprogram. These changes affect all offers received by the IRS on or after July 16, 2006. The postmark date on the offeris irrelevant.

TIPRA section 509 amends IRC section 7122 by adding a new subsection (c) “Rules for Submission of Offers-in-Compromise.”

A taxpayer filing a lump-sum offer must pay 20% of the offer amount with the application (IRC 7122(c)(1)(A)). A lump-sum offer means any offer of payments made in five or fewer installments.

A taxpayer filing a periodic-payment offer must pay the first proposed installment payment with the application and payadditional installments while the IRS is evaluating the offer (IRC section 7122(c)(1)(B)). A periodic-payment offermeans any offer of payments made in six or more installments.

Taxpayers can avoid delays in processing their OIC applications by making all required payments in full and on time.Failure to pay the 20 percent on a lump-sum offer, or the first installment payment on a periodic-payment offer, willresult in the IRS returning the offer to the taxpayer as nonprocessable (IRC section 7122(d)(3)(C) as amended by TIPRA).

The 20 percent payment for a lump-sum offer and the installment payments on a periodic-payment offer are “paymentson tax” and are not refundable deposits (IRC section 7809(b) and Treasury Regulation 301.7122-1(h)).

Taxpayers must specify in writing when submitting their offers how to apply the payments to the tax, penalty and interestdue. Otherwise, the IRS will apply the payments in the best interest of the government (IRC section 7122(c)(2)(A)).

The OIC application fee reduces the assessed tax or other amounts due. A taxpayer may not specify how to apply the$150 application fee.

Taxpayers failing to make installment payments on periodic-payment offers after providing the initial payment will causethe IRS to treat the offer as a withdrawal. The IRS will return the offer application to the taxpayer (IRC section7122(c)(1)(B)(ii)).

A lump-sum offer accompanied by a payment that is below the required 20 percent threshold will be deemed processable.However, the taxpayer will be asked to pay the remaining balance in order to avoid having the offer returned. Failureto submit the remaining balance will cause the IRS to return the offer and retain the $150 application fee.

Taxpayers filing periodic-payment offers must submit the full amount of their first installment payment in order to meetthe processability criteria. Otherwise, the IRS will deem the offer as unprocessable and will return the application to thetaxpayer along with the $150 fee.

Under the new law, taxpayers qualifying as low-income or filing an offer solely based on doubt as to liability qualifyfor a waiver of the new partial payment requirements. Taxpayers qualifying for the low-income exemption or filing adoubt-as-to- liability offer only are not liable for paying the application fee, or the payments imposed by TIPRA section509.

A low-income taxpayer is an individual whose income falls at or below poverty levels based on guidelines establishedby the U.S. Department of Health and Human Services (HHS). Taxpayers claiming the low-income exception mustcomplete and submit the Income Certification for Offer in Compromise Application Fee worksheet, along with theirForm 656 application package.

The IRS will deem an OIC “accepted” that is not withdrawn, returned, or rejected within 24 months after IRS receipt.When calculating the 24-month timeframe, the IRS will disregard any time periods during which a liability included inthe OIC is the subject of a dispute in any judicial proceeding (IRC section 7122(f) as amended by TIPRA).

Also see Notice 2006-68, providing official interim guidance.

Page 5

10 For Practitioners … By Practitioners April/May 2007

L “The IRS will use current income for purposes of deter-mining whether there should be a 20 percent TIPRA payment.”IRS RepReSentatIon advISoRE. Martin Davidoff, CPA, Esq.

How Taxpayers Can Be Exempted from 20% Payment Offers in CompromiseLast July when Congress enacted changes in the law (IRC §7122) on Offers in Compromise, the most significant aspect of the legislation was the requirement of a 20 percent down payment on lump sum offers and the payment of monthly installments on deferred periodic payment offers Tax Increase Prevention and Reconciliation Act (TIPRA payments).

By the time this column is published, the IRS is likely to have come out with new forms and guidance with respect to these rules. Based on conversations with the IRS, I believe the guid-ance will be along the following lines:1. Taxpayers whose income falls at or below 250 percent of the

DHS poverty guidelines are exempt from the $150 application fee and TIPRA payments.

2. Forms used for offers were redesigned and new forms added:• Form 656 will continue to be used for most offers.• Form 656-L will be used to process offers as to doubt and

as to liability.• Forms 656-A will be used to process lump sum payments

and claims for exemption from such payments.• Form 656-PPV will be used to submit monthly periodic

payments while the offer is pending.3. Forms 433-A and 433-B also are being redesigned. These

forms will continue to be used to secure financial data from taxpayers for use in offers and in determining amounts col-lectible through levy or installment agreements.

4. If an offer is increased through the filing of an amended form 656, 20 percent of the increased offer amount must be submit-ted prior to any further consideration of the offer.The 250 percent guideline provides a huge opportunity to tax-

payers. When considering whether a taxpayer qualifies for such consideration, the IRS will look at the taxpayer’s income at the time the offer is submitted! In my opinion, this is surprising and may allow taxpayers to eliminate the 20 percent TIPRA payment by the timing of their offers.

Remember that an offer will be accepted by the IRS if the amount equals or exceeds the taxpayer’s Reasonable Collection Potential (RCP), defined by the IRS as the total of the taxpayer’s realizable value in real and personal assets, and his/her future net income.

Realizable value is, essentially, gross value less secured debt. For example, unsecured credit card debt is usually not consid-ered. In addition, the IRS will discount valuations based on “Quick Sale Value.” In New Jersey, that generally means a 20 percent discount for residential property from its true fair market value.

Future net income is based on a forecast of the excess of gross income over allowable expenses – food, clothing, housing, trans-

portation, medical and taxes – over a minimum of 48 months. For the most part, other expenses such as alimony, life and dis-ability insurance, child care, and the cost of tax representation, also are allowable. The expenses are defined by guidelines pub-lished by the IRS, although the guidelines provide some certainty in the determination, there is room for negotiation.

Since future net income is gross income less allowable expens-es, the starting point for computing future net income is gross income. By policy, the IRS will not merely accept one’s current income as a predictor of future income. Absent special circum-stances, the IRS’s first attempt at computing gross income will be to take the higher of the taxpayer’s current income as evidenced by paycheck stubs or financial statements, and a three-year aver-age of the taxpayer’s income based on the immediate prior three years.

As a result, the announcement that the IRS will use the cur-rent income for purposes of determining whether there should be a 20 percent TIPRA payment, is surprising and refreshing. I believe that this approach is correct. The unanswered question is what will happen if the taxpayer’s income level changes while the offer is pending? Will he or she then be required to pay in the 20 percent? I suspect this issue will only come up at the time an amended offer is submitted or the taxpayer is asked to update his/her financial information.

E. Martin Davidoff, CPA, Esq. is a sole proprietor with more than 25 years’ experience practicing as a CPA and tax attorney in Dayton, N.J. He is the founder and current chairman of the IRS Tax Liaison Committee of the American Association of Attorney-CPAs and currently serves as its vice president. Further information about Davidoff ’s upcoming speaking engagements can be found by emailing [email protected].

Reader Service Card No. 16

Page 6

Form 433-A(Rev. January 2008) Department of the Treasury Internal Revenue Service

Collection Information Statement for Wage Earners and Self-Employed Individuals

Wage Earners Complete Sections 1, 2, 3, and 4, including signature line on page 4. Answer all questions or write N/A. Self-Employed Individuals Complete Sections 1, 2, 3, 4, 5 and 6 and signature line on page 4. Answer all questions or write N/A. For Additional Information, refer to Publication 1854, “How To Prepare a Collection Information Statement” Include attachments if additional space is needed to respond completely to any question. Name on Internal Revenue Service (IRS) Account Social Security Number SSN on IRS Account Employer Identification Number EIN

Section 1: Personal Information 1a Full Name of Taxpayer and Spouse (if applicable)

1b Address (Street, City, State, ZIP code) (County of Residence)

1c Home Phone 1d Cell Phone

1e Business Phone 1f Business Cell Phone

2a Marital Status: Married Unmarried (Single, Divorced, Widowed)

2b Name, Age, and Relationship of dependent(s)

Social Security No. (SSN) Date of Birth (mmddyyyy) Driver’s License Number and State

3a Taxpayer

3b Spouse

Section 2: Employment Information If the taxpayer or spouse is self-employed or has self-employment income, also complete Business Information in Sections 5 and 6.

Taxpayer4a Taxpayer’s Employer Name

4b Address (Street, City, State, ZIP code)

4c Work Telephone Number 4d Does employer allow contact at work

Yes No4e How long with this employer

(years) (months)

4f Occupation

4g Number of exemptions claimed on Form W-4

4h Pay Period:

Weekly Bi-weekly

Monthly Other

Spouse5a Spouse’s Employer Name

5b Address (Street, City, State, ZIP code)

5c Work Telephone Number 5d Does employer allow contact at work

Yes No5e How long with this employer

(years) (months)

5f Occupation

5g Number of exemptions claimed on Form W-4

5h Pay Period:

Weekly Bi-weekly

Monthly Other

Section 3: Other Financial Information (Attach copies of applicable documentation.)

6 Is the individual or sole proprietorship party to a lawsuit (If yes, answer the following) Yes No

Plaintiff Defendant

Location of Filing Represented by Docket/Case No.

Amount of Suit

$

Possible Completion Date (mmddyyyy) Subject of Suit

7 Has the individual or sole proprietorship ever filed bankruptcy (If yes, answer the following) Yes No

Date Filed (mmddyyyy) Date Dismissed or Discharged (mmddyyyy) Petition No. Location

8 Any increase/decrease in income anticipated (business or personal) (If yes, answer the following) Yes NoExplain. (Use attachment if needed) How much will it increase/decrease

$

When will it increase/decrease

9 Is the individual or sole proprietorship a beneficiary of a trust, estate, or life insurance policy (If yes, answer the following) Yes No

Place where recorded: EIN:

Name of the trust, estate, or policy Anticipated amount to be received $

When will the amount be received

10 In the past 10 years, has the individual resided outside of the United States for periods of 6 months or longer (If yes, answer the following) Yes No

Dates lived abroad: from (mmddyyyy) To (mmddyyyy)

www.irs.gov Form 433-A (Rev. 1-2008)STF ZTVX1001.1

ISA

JOHN J. DOE 123-45-6789

JOHN J. DOE & JANE J DOE

123 MAIN STREET (Middlesex Co.)ANYWHERE, NJ 08666

732-274-1600

X

John Jr., 11 SonMary, 7 Daughter

123-45-6789 10/05/1941 D012-345-678-9-12 NJ987-65-4321 12/29/1955 D987-654-321-0-98 NJ

ABC Janitorial, LLC

5555 Route 1 - Suite RMonmouth Junction, NJ 08852

908-281-2222 X

3 3 Manager

4X

XYZ Consulting, Inc.

123 Mockingbird LandDayton, NJ 08810

732-274-3333 X

12 4 Clothing Designer

4X

X

X

X

X

X

xxxx Attorney

Page 7

Form 433-A (Rev. 1-2008) Page 2Section 4: Personal Asset Information for All Individuals

11 Cash on Hand. Include cash that is not in a bank. Total Cash on Hand $

Personal Bank Accounts. Include all checking, online bank accounts, money market accounts, savings accounts, stored value cards (e.g., payroll cards, government benefit cards, etc.) List safe deposit boxes including location and contents.

Type of Account

Full Name & Address (Street, City, State, ZIP code) of Bank, Savings & Loan, Credit Union, or Financial Institution.

Account Number Account Balance As of ____________ mmddyyyy

12a

$

12b

$

12c Total Cash $(Add lines 12a, 12b, and amounts from any attachments)

Investments. Include stocks, bonds, mutual funds, stock options, certificates of deposit, and retirement assets such as IRAs, Keogh, and 401(k) plans. Include all corporations, partnerships, limited liability companies or other business entities in which the individual is an officer, director, owner, member, or otherwise has a financial interest.

Type of Investment or

Financial Interest Full Name & Address (Street, City, State, ZIP code) of Company Current Value

Loan Balance (if applicable)

As of ____________ mmddyyyy

EquityValue Minus Loan

13a

Phone $ $ $

13b

Phone $ $ $

13c

Phone $ $ $

13d Total Equity $(Add lines 13a through 13c and amounts from any attachments)

Available Credit. List bank issued credit cards with available credit. Full Name & Address (Street, City, State, ZIP code) of Credit Institution Credit Limit

Amount Owed As of ____________

mmddyyyy

Available Credit As of ____________

mmddyyyy

14a

Acct No.: $ $ $

14b

Acct No.: $ $ $

14c Total Available Credit $(Add lines 14a, 14b and amounts from any attachments)

15a Life Insurance. Does the individual have life insurance with a cash value (Term Life insurance does not have a cash value.) If Yes complete blocks 15b through 15f for each policy:Yes No

15b Name and Address of Insurance Company(ies):

15c Policy Number(s)

15d Owner of Policy

15e Current Cash Value $ $ $

15f Outstanding Loan Balance $ $ $

15g Total Available Cash. $(Subtract amounts on line 15f from line 15e and include amounts from any attachments)

Form 433-A (Rev. 1-2008) STF ZTVX1001.2

300

Checking

PNC Bank842 State RoadPrinceton, NJ 1000-5678

03/31/2010

275

Checking

Fleet Bank1 Washington StreetRocky Hill, NJ 1000-0123 100

375.00

SEE RIDER #1

12,495 12,495.00

12,495.00

American ExpressP.O. Box 297804Ft. Lauderdale, FL 33329

4526385412256 n/a

03/31/2010

10,429

03/31/2010

0.00

0.00

XEast RiverSavings BankP.O. Box 4528Brick, NJ 0872463-0123456John Doe

12,0000

East RiverSavings BankP.O. Box 4528Brick, NJ 0872463-9876542John Doe

8,0007,293

12,707.00

Page 8

Form 433-A (Rev. 1-2008) Page 3

16 In the past 10 years, have any assets been transferred by the individual for less than full value (If yes, answer the following. If no, skip to 17a) Yes No

List Asset Value at Time of Transfer Date Transferred (mmddyyyy) To Whom or Where was it Transferred

$

Real Property Owned, Rented, and Leased. Include all real property and land contracts.

Purchase/Lease Date (mmddyyyy)

Current Fair Market Value

(FMV)

Current Loan Balance

Amount of MonthlyPayment

Date of FinalPayment

(mmddyyyy)

EquityFMV Minus Loan

17a Property Description $ $ $ $

Location (Street, City, State, ZIP code) and County Lender/Lessor/Landlord Name, Address, (Street, City, State, ZIP code) and Phone

17b Property Description $ $ $ $

Location (Street, City, State, ZIP code) and County Lender/Lessor/Landlord Name, Address, (Street, City, State, ZIP code) and Phone

17c Total Equity $(Add lines 17a, 17b and amounts from any attachments)

Personal Vehicles Leased and Purchased. Include boats, RVs, motorcycles, trailers, etc.

Description(Year, Mileage, Make, Model)


Market Value Current Fair

(FMV)Current Loan

Balance



(mmddyyyy)


18a Year Mileage$ $ $ $

Make Model Lender/Lessor Name, Address, (Street, City, State, ZIP code) and Phone

18b Year Mileage

$ $ $ $

Make Model Lender/Lessor Name, Address, (Street, City, State, ZIP code) and Phone

18c Total Equity $(Add lines 18a, 18b and amounts from any attachments) Personal Assets. Include all furniture, personal effects, artwork, jewelry, collections (coins, guns, etc.), antiques or other assets.



(FMV)




(mmddyyyy)



Location (Street, City, State, ZIP code) and County Lender/Lessor Name, Address, (Street, City, State, ZIP code) and Phone

19b Property Description

$ $ $ $

Location (Street, City, State, ZIP code) and County Lender/Lessor Name, Address, (Street, City, State, ZIP code) and Phone



X

Residence 04/25/2000 410,000 322,000 3,32404/25/2030 88,000.00

123 Main StreetAnywhere, NJ 08666

L.I. Savings Bank1256 Montauk HighwayBridgehampton, NY 11952

88,000.00

1994 199,000

Volvo Wagon 240

06/21/1994 4,850 0 0 n/a 4,850.00

2006 58,685

Nissan Maxima

01/01/2006 LEASE 14,351 37501/01/2011 N/A

Nissan Leasing CompanyDayton, NJ

4,850.00

Furniture/Personal Effects 7,500 0 n/a 7,500.00

7,500.00

Page 9

Form 433-A (Rev. 1-2008) Page 4If the taxpayer is self-employed, sections 5 and 6 must be completed before continuing.

Monthly Income/Expense Statement (For additional information, refer to Publication 1854.)

Total Income

Source Gross Monthly

20 Wages (Taxpayer) 1 $

21 Wages (Spouse) 1 $

22 Interest - Dividends $

23 Net Business Income 2 $24 Net Rental Income 3 $

25 Distributions 4 $

26 Pension/Social Security (Taxpayer) $

27 Pension/Social Security (Spouse) $

28 Child Support $

29 Alimony $

30 Other (Rent subsidy, Oil credit, etc.) $

31 Other $

32 Total Income (add lines 20-31) $

Total Living Expenses

Expense Items 5 Actual Monthly

33 Food, Clothing, and Misc. 6 $

34 Housing and Utilities 7 $

35 Vehicle Ownership Costs 8 $

36 Vehicle Operating Costs 9 $

37 Public Transportation 10 $

38 Health Insurance $

39 Out of Pocket Health Care Costs 11 $

40 Court Ordered Payments $

41 Child/Dependent Care $

42 Life insurance $

43 Taxes (Income and FICA) $

44 Other Secured Debts (Attach list) $

45 Total Living Expenses (add lines 33-44) $

1 Wages, salaries, pensions, and social security: Enter gross monthly wages and/or salaries. Do not deduct withholding or allotments taken out of pay, such as insurance payments, credit union deductions, car payments, etc. To calculate the gross monthly wages and/or salaries:

If paid weekly - multiply weekly gross wages by 4.3. Example: $425.89 x 4.3 = $1,831.33 If paid biweekly (every 2 weeks) If paid semimonthly (twice each month) - multiply semimonthly gross wages by 2. Example: $856.23 x 2 = $1,712.46

2 Net Income from Business: Enter monthly net business income. This is the amount earned after ordinary and necessary monthly business expenses are paid. This figure is the amount from page 6, line 82. If the net business income is a loss, enter “0”. Do not enter a negative number. If this amount is more or less than previous years, attach an explanation.

3 Net Rental Income: Enter monthly net rental income. This is the amount earned after ordinary and necessary monthly rental expenses are paid. Do not include deductions for depreciation or depletion. If the net rental income is a loss, enter “0”. Do not enter a negative number.

4 Distributions: Enter the total distributions from partnerships and subchapter S corporations reported on Schedule K-1, and from limited liability companies reported on Form 1040, Schedule C, D or E.

5 Expenses not generally allowed: We generally do not allow tuition for private schools, public or private college expenses, charitable contributions, voluntary retirement contributions, payments on unsecured debts such as credit card bills, cable television and other similar expenses. However, we may allow these expenses if it is proven that they are necessary for the health and welfare of the individual or familyor for the production of income.

6 Food, Clothing, and Misc.: Total of clothing, food, housekeeping supplies, and personal care products for one month.

7 Housing and Utilities: For principal residence: Total of rent or mortgage payment. Add the average monthly expenses for the following: property taxes, home owner’s or renter’s insurance, maintenance, dues, fees, and utilities. Utilities include gas, electricity, water, fuel, oil, other fuels, trash collection, telephone, and cell phone.

8 Vehicle Ownership Costs: Total of monthly lease or purchase/loan payments.

9 Vehicle Operating Costs: Total of maintenance, repairs, insurance, fuel, registrations, licenses, inspections, parking, and tolls for one month.

10 Public Transportation: Total of monthly fares for mass transit (e.g., bus, train, ferry, taxi, etc.)

11 Out of Pocket Health Care Costs: Monthly total of medical services, prescription drugs and medical supplies (e.g., eyeglasses, hearing aids, etc.)

Certification: Under penalties of perjury, I declare that to the best of my knowledge and belief this statement of assets, liabilities, and other information is true, correct, and complete.

Taxpayer’s Signature Spouse’s Signature Date

Attachments Required for Wage Earners and Self-Employed Individuals: Copies of the following items for the last 3 months from the date this form is submitted (check all attached items):

Income - Earnings statements, pay stubs, etc. from each employer, pension/social security/other income, self employment income (commissions, invoices, sales records, etc.).

Banks, Investments, and Life Insurance - Statements for all money market, brokerage, checking and savings accounts, certificates of deposit, IRA, stocks/bonds, and life insurance policies with a cash value.

Assets - Statements from lenders on loans, monthly payments, payoffs, and balances for all personal and business assets. Include copies of UCC financing statements and accountant’s depreciation schedules.

Expenses - Bills or statements for monthly recurring expenses of utilities, rent, insurance, property taxes, phone and cell phone, insurance premiums, court orders requiring payments (child support, alimony, etc.), other out of pocket expenses.

Other - credit card statements, profit and loss statements, all loan payoffs, etc.

A copy of last year’s Form 1040 with all attachments. Include all Schedules K-1 from Form 1120S or Form 1065, as applicable.

Form 433-A (Rev. 1-2008)

IRS USE ONLY

Allowable Expenses

STF ZTVX1001.4

- multiply biweekly gross wages by 2.17. Example: $972.45 x 2.17 = $2,110.22

See Attachmentto this section

which isincorporated

herein.

7,1607,160.00

See attachmentto this section

which isincorporated

herein.

6,799.00

Page 10

Form 433-A (Rev. 1-2008) Page 5

Sections 5 and 6 must be completed only if the taxpayer is SELF-EMPLOYED. Section 5: Business Information

46 Is the business a sole proprietorship (filing Schedule C) Yes, Continue with Sections 5 and 6. No, Complete Form 433-B. All other business entities, including limited liability companies, partnerships or corporations, must complete Form 433-B.

47 Business Name 48 Employer Identification Number 49 Type of Business

Federal Contractor Yes No

50 Business Website 51 Total Number of Employees 52a Average Gross Monthly Payroll

52b Frequency of Tax Deposits

53 Does the business engage in e-Commerce (Internet sales) Yes No

Payment Processor (e.g., PayPal, Authorize.net, Google Checkout, etc.) Name & Address (Street, City, State, ZIP code) Payment Processor Account Number

54a

54b

Credit Cards Accepted by the Business. Credit Card Merchant Account Number Merchant Account Provider, Name & Address (Street, City, State, ZIP code)

55a

55b

55c

56 Business Cash on Hand. Total Cash on Hand $Include cash that is not in a bank. Business Bank Accounts. Include checking accounts, online bank accounts, money market accounts, savings accounts, and stored value cards (e.g. payroll cards, government benefit cards, etc.) Report Personal Accounts in Section 4.

Type of Account

Full name & Address (Street, City, State, ZIP code) Savings & Loan, Credit Union or Financial Institution.

Account NumberAccount Balance As of ____________

mmddyyyy

57a

$

57b

$

57c Total Cash in Banks $(Add lines 57a, 57b and amounts from any attachments)

Accounts/Notes Receivable. Include e-payment accounts receivable and factoring companies, and any bartering or online auction accounts. (List all contracts separately, including contracts awarded, but not started.) Include Federal Government Contracts.

Accounts/Notes Receivable & Address (Street, City, State, ZIP code) Status (e.g., age, factored, other)

Date Due (mmddyyyy)

Invoice Number or Federal Government Contract Number Amount Due

58a

$

58b

$

58c

$

58d

$

58e Total Outstanding Balance $(Add lines 58a through 58d and amounts from any attachments)


of Bank,

Page 11

Form 433-A (Rev. 1-2008) Page 6Business Assets. Include all tools, books, machinery, equipment, inventory or other assets used in trade or business. Include Uniform Commercial Code (UCC) filings. Include Vehicles and Real Property owned/leased/rented by the business, if not shown in Section 4.

Purchase/Lease/RentalDate (mmddyyyy)


(FMV)



Date of Final Payment

(mmddyyyy)



Location (Street, City, State, ZIP code) and County Lender/Lessor/Landlord Name, Address (Street, City, State, ZIP code)

59b Property Description $ $ $ $

Location (Street, City, State, ZIP code) and County Lender/Lessor/Landlord Name, Address (Street, City, State, ZIP code)


Section 6 should be completed only if the taxpayer is SELF-EMPLOYED

Section 6: Sole Proprietorship Information (lines 60 through 81 should reconcile with business Profit and Loss Statement) Accounting Method Used: Cash Accrual

Income and Expenses during the period (mmddyyyy) to (mmddyyyy) .Total Monthly Business Income

Source Gross Monthly

60 Gross Receipts $

61 Gross Rental Income $

62 Interest $

63 Dividends $

64 Cash $

Other Income (Specify below)

65 $

66 $

67 $

68 $

69 Total Income (Add lines 60 through 68) $

Total Monthly Business Expenses (Use attachments as needed.)

Expense Items Actual Monthly

70 Materials Purchased 1 $

71 Inventory Purchased 2 $

72 Gross Wages & Salaries $

73 Rent $

74 Supplies 3 $

75 Utilities/Telephone 4 $

76 Vehicle Gasoline/Oil $

77 Repairs & Maintenance $

78 Insurance $

79 Current Taxes 5 $80 Other Expenses, including installment payments (Specify) $

81 Total Expenses (Add lines 70 through 80) $

82 Net Business Income (Line 69 minus 81) 6 $

Enter the amount from line 82 on line 23, section 4. If line 82 is a loss, enter “0” on line 23, section 4.

Self-employed taxpayers must return to page 4 to sign the certification and include all applicable attachments.

1 Materials Purchased: Materials are items directly related to the production of a product or service.

2 Inventory Purchased: Goods bought for resale. 3 Supplies:or used up within one year. This could be the cost of books, office supplies, professional equipment, etc. 4 Utilities/Telephone: Utilities include gas, electricity, water, oil, other fuels, trash collection, telephone and cell phone.

5 Current Taxes: Real estate, excise, franchise, occupational, personal property, sales and employer’s portion of employment taxes.

6 Net Business Income: Net profit from Form 1040, Schedule C may be used if duplicated deductions are eliminated (e.g., expenses for business use of home already included in housing and utility expenses on page 4). Deductions for depreciation and depletion on Schedule C are not cash expenses and must be added back to the net income figure. In addition, interest cannot be deducted if it is already included in any other installment payments allowed.

FINANCIAL ANALYSIS OF COLLECTION POTENTIAL FOR INDIVIDUAL WAGE EARNERS AND SELF-EMPLOYED INDIVIDUALS (IRS USE ONLY)

Cash Available (Lines 11, 12c, 13d, 14c, 15g, 56, 57c and 58e) Total Cash $

Distrainable Asset Summary (Lines 17c, 18c, 19c, and 59c) Total Equity $

Monthly Total Positive Income minus Expenses (Line 32 minus Line 45) Monthly Available Cash $

Privacy Act: The information requested on this Form is covered under Privacy Acts and Paperwork Reduction Notices which have already been provided to the taxpayer.


and Phone

and Phone

Supplies are items used in the business that are consumed

Page 12

Jane DoeSS#: 123-45-6789

Form 433-A, Section 4, #13Rider #1

Name of Institution Address Type of Account Account # Balance

Merrill Lynch 333 Phornall Ave. Money Market 11111111 847Edison, NJ

Oppenheimer PO Box 5270 Brokerage 4444444 768Denver, CO

200 Shares J.J. Smith, Inc. 123 Main Street N/A N/A 0Anywhere, NJ

208 shares of 5 Hartman Place Trust Co. of NJ Belle Mead, NJ 4,603

Subtotal 6,218

Merrill Lynch 333 Phornall Ave. IRA 22222222 5,855Edison, NJ

Oppenheimer PO Box 5270 IRA 33333333 2,746Denver, CO

Scudder Trust Co. PO Box 2291 IRA 5555555 985 International Growth Boston, MA

Newberger Berman 605 Third Ave. IRA 6666666 876New York, NY

Subotal - IRA Accounts 10,462

-Less: Anticipated Taxes Upon Liquidation (40%) (4,185)

Subtotal - IRA Accounts 6,277

Total Value 12,495

Note: Jane Doe is the owner of record or the beneficiary of each of the items above.

Page 13

L:\EMD\433Case:B

Personal Liabilities of John & Jane Doe 06/02/2010Form 433-A,

Rider #2

Section 6 - Question 17B - Are there any judgments against you?

The following are debts due to tax authorities. Some are secured by liens or judgments. Some are not.

DUE TO INTERNAL REVENUE SERVICE

'FORM 1040TAX PERIOD AMOUNT DUE

2003 20,000.00

2004 27,500.00

2005 15,000.00

2006 21,500.00

'TOTAL DUE FORM 1040 84,000.00

TRUST FUNDS (from J.J. SMITH, INC.)

Through 1st Quarter 2005 200,000.00 Already Assessed2nd Quarter 2005 42,000.00 Not yet Assessed

TOTAL TRUST FUNDS DUE 242,000.00

DUE TO THE STATE OF NEW JERSEY

SALES TAX 12,500.00

TOTAL DUE NJ 12,500.00

The following are miscellaneous amounts owed. Monthly payments are being made to these outstanding balances.

Dr. Tapov 205 E. 64th St New York, NY 4,600.00Somerset Medical Somerset, NJ 747.00

TOTAL DUE - MISCELLANEOUS 5,347.00

Page 14

433CASE10.123 John & Jane Doe 06/02/2010L:\EMD\ Questions 20 - 45; Section 4 Substitute Page 1 of 2

I.R.S. Form 433A

Total Income Monthly---------------- ----------------

20 Wages - Taxpayer 3,60021 Wages - Spouse 022 Interest & Dividends - Spouse 26023 Net Business Income - Spouse 3,30024 Net Rental Income 025 Distributions 026 Pension/Social Security (Taxpayer) 027 Pension/Social Security (Spouse) 028 Child Support29 Alimony 030 Other (Rent subsidy, Oil credit, etc.) --- 31 Other Income ---

32 Total Income 7,160

Page 15

433CASE10.123 John & Jane Doe 05/10/2010L:\EMD\ Questions 20 - 45; Section 4 Substitute Page 2 of 2

I.R.S. Form 433A

Living Expenses Total John---------------

33 Food, Clothing, and Misc. (National Standards) 1,371 690 P34 Housing & Utilities (J)

-Mortgage 3,324 -Real Estate Taxes 500 -Gas, Electric, & Other Utilities 175 -Insurance 65 -Telephone 75 -Excess over National Standards (1,660)

2,479 1,247 P35 Vehicle Ownership Costs

-Automobile #1 - Leased 375 375 D -Automobile #2 - 1994 Volvo Wagon 240 0

37536 Vehicle Operating Costs

-Automobile Operating Expenses 342 342 T/D -Automobile Operating Expenses 342

68437 Public Transportation Costs 0 0

38 Health Insurance

39 Out of Pocket Health Care Costs -Per Tables - John 144 -Per Tables - Jane 60 -Insurance -Dental Bills -Physician Bills -Eyecare, glasses & contact lenses -Prescription Medicines

204 144 D40 Court Ordered Payments 041 Child/Dependent Care 042 Life Insurance (T) 65 65 D

43 Taxes -U.S. Income (Adjusted for disallowed interest/taxes) 475 239 P -U.S. FICA (Taxpayer) 275 275 D -U.S. FICA (Spouse) 466 0 D -New Jersey Gross Income Taxes 170 86 P -N.J. SUI/SDI 20 20 D

1,406

44 Other Secured Debt 0

Other Expenses -Tax Advice & Preparation (J) 150 75 P -Taxpayer Credit Card Minimum Payments (T) N/A -Dr. Tapov 40 40 D -Somerset Medical 25 25 D

215

45 Total Living Expenses 6,799 3,623

Excess (Shortfall) of Total Income over Total Expenses 361 (23)

Taxpayer Percentage: 50.3% N/A

Taxpayer Excess (shortfall) 182 (23)

Ability to Pay times 48: -Family 17,328 N/A -Taxpayer only 8,736 0

Notes: P = Proportionate to Income; D = Direct; T = IRS Tables

Page 16

Sarah

Typewritten Text

Monthly

Sarah

Typewritten Text

433CASE08.123 John & Jane Doe 05/10/2010L:\EMD\ Questions 20 - 45; Section 4 NEW AUTO Page 2 of 2

I.R.S. Form 433A

Living Expenses Total John---------------

33 Food, Clothing, and Misc. (National Standards) 1,371 690 P34 Housing & Utilities (J)

-Mortgage 3,324 -Real Estate Taxes 500 -Gas, Electric, & Other Utilities 175 -Insurance 65 -Telephone 75 -Excess over National Standards (1,660)

2,479 1,247 P35 Vehicle Ownership Costs

-Automobile #1 - Leased 375 375 D -Automobile #2 - Newly Acquired Automobile 325

70036 Vehicle Operating Costs

-Automobile Operating Expenses 342 342 T/D -Automobile Operating Expenses 342

68437 Public Transportation Costs 0 0

38 Health Insurance

39 Out of Pocket Health Care Costs -Per Tables - John 144 -Per Tables - Jane 60 -Insurance -Dental Bills -Physician Bills -Eyecare, glasses & contact lenses -Prescription Medicines

204 144 D40 Court Ordered Payments 041 Child/Dependent Care 042 Life Insurance (T) 65 65 D

43 Taxes -U.S. Income (Adjusted for disallowed interest/taxes) 475 239 P -U.S. FICA (Taxpayer) 275 275 D -U.S. FICA (Spouse) 466 0 D -New Jersey Gross Income Taxes 170 86 P -N.J. SUI/SDI 20 20 D

1,406

44 Other Secured Debt 0

Other Expenses -Tax Advice & Preparation (J) 150 75 P -Taxpayer Credit Card Minimum Payments (T) N/A -Dr. Tapov 40 40 D -Somerset Medical 25 25 D

215

45 Total Living Expenses 7,124 3,623

Excess (Shortfall) of Total Income over Total Expenses 36 (23)

Taxpayer Percentage: 50.3% N/A

Taxpayer Excess (shortfall) 18 (23)

Ability to Pay times 48: -Family 1,728 N/A -Taxpayer only 864 0

Notes: P = Proportionate to Income; D = Direct; T = IRS Tables

Page 17

Sarah

Typewritten Text

Monthly

Department of the Treasury — Internal Revenue Service

Offer in Compromise

IRS RECEIVED DATE

DATE RETURNEDSocial Security Number (SSN) Employer Identification Number (EIN)

(Primary) (Secondary) (EIN included in offer) (EIN not included in offer)

Form 656(March 2009)

Attach Application Fee and Payment (check or money order) here.

Taxpayer Contact InformationSection I Taxpayer’s First Name and Middle Initial Last Name

If a joint offer, spouse’s First Name and Middle Initial Last Name

Mailing Address (if different from above) (number, street, and room or suite no., city, state, ZIP code)

Business Name

Taxpayer’s Address (Home and Business) (number, street, and room or suite no., city, state, ZIP code)

Section II To: Commissioner of Internal Revenue Service

I/We (includes all types of taxpayers) submit this offer to compromise the tax liabilities plus any interest, penalties, additions to tax, and additional amounts required by law (tax liability) for the tax type and period marked below: (Please mark an “X” in the box for the correct description and fill-in the correct tax period(s), adding additional periods if needed).

1040/1120 Income Tax - Year(s)

941 Employer's Quarterly Federal Tax Return - Quarterly period(s)

940 Employer’s Annual Federal Unemployment (FUTA) Tax Return — Year(s)

Trust Fund Recovery Penalty as a responsible person of (enter corporation name) ,

for failure to pay withholding and Federal Insurance Contributions Act taxes (Social Security taxes), for period(s) ending

Other Federal Tax(es) [specify type(s) and period(s)]

Note: If you need more space, use a separate sheet of paper and title it “Attachment to Form 656 Dated .” Sign and date the attachment following the listing of the tax periods.

Section III Reason for Offer in Compromise

I/We submit this offer for the reason(s) checked below: Doubt as to Collectibility — “I have insufficient assets and income to pay the full amount.” You must include a complete Collection Information Statement, Form 433-A and/or Form 433-B.Effective Tax Administration — “I owe this amount and have sufficient assets to pay the full amount, but due to my exceptional circumstances,requiring full payment would cause an economic hardship or would be unfair and inequitable.” You must include a complete Collection InformationStatement, Form 433-A and/or Form 433-B and complete Section VI.

Section IV Offer in Compromise Terms

I/We offer to pay $ (must be more than zero). Complete Section VII to explain where you will obtain the funds to make this offer. Check only one of the following:

Lump sum cash offer – 20% of the amount of the offer $ must be sent with Form 656. Upon written acceptance of the offer, the balance must be paid in 5 or fewer installments. $ payable within months after acceptance$ payable within months after acceptance $ months after acceptancepayable within$ months after acceptancepayable within$

will be submitted with the Form 656. Beginning in the month after the offer is submitted (insert month

months after acceptance Short Term Periodic Payment Offer - Offer amount is paid within 24 months from the date IRS received your offer. The first payment must besubmitted with your Form 656. You must make regular payments during your offer investigation. Complete the following:

$

payable within

), on the day of each month, $ will be sent in for a total of months. (Cannot extend more than 24 months from the date

the offer was submitted.)

www.irs.gov Form 656 (Rev. 3-2009)

STF BZRJ1001.1

ISA

JOHN J. DOE

JANE DOE

123 MAIN STREETANYWHERE, NJ 08666

123-45-6789 987-65-4321

X 2003,2004,2005 & 2006

X

1,000

X 200

800 3

Page 18

of 4

Section IV Cont.

Deferred Periodic Payment Offer – Offer amount will be paid over the remaining life of the collection statute. The first payment must besubmitted with your Form 656. You must make regular payments during your offer investigation. Complete the following:

$ will be submitted with the Form 656. Beginning in the month after the offer is submitted (insert month ), on the day of each month, $ will be sent in for a total of months.

Optional - Designation of Required Payment under IRC 7122(c) You have the option to designate the required payment you made under Section IV above. If you choose not to designate your required payment, then the IRS will apply your payment in the best interest of the government. If the required payment is not paid, the offer will be returned even if you make a payment you designated as a deposit. Please complete the following if you choose to designate your payment: $ paid under IRC 7122 (c) is to be applied to my Tax Year/Quarter(s) (whichever is applicable) for my/our tax

form .If you pay more than the required payment when you submit your offer and want any part of that additional payment treated as a deposit, check the box below and insert the amount. It is not required that you designate any portion of your payment as a deposit.

I am making a deposit of $ with this offer.

Section V By submitting this offer, I/we have read, understand and agree to the following conditions:

(a) I/We voluntarily submit all tax payments made on this offer, including the mandatory payments of tax required under section 7122(c). These tax payments are not refundable even if I/we withdraw the offer prior to acceptance or the IRS returns or rejects the offer. If the offer is accepted, the IRS will apply payments made after acceptance in the best interest of the government.

(b) Any payments made in connection with this offer will be applied to the tax liability unless I have specified that they be treated as a deposit. Only amounts that exceed the mandatory payments can be treated as a deposit. Such a deposit will be refundable if the offer is rejected or returned by the IRS or is withdrawn. I/we understand that the IRS will not pay interest on any deposit.

(c) The application fee for this offer will be kept by the IRS unless the offer was not accepted for processing.

(d) I/We will comply with all provisions of the Internal Revenue Code relating to filing my/our returns and paying my/our required taxes for 5 years or until the offered amount is paid in full, whichever is longer. In the case of a jointly submitted Offer in Compromise of joint liabilities, I/we understand that default with respect to the compliance provisions described in this paragraph by one party to this agreement will not result in the default of the entire agreement. The default provisions described in Section V(i) of this agreement will be applied only to the party failing to comply with the requirements of this paragraph.

(e) I/We waive and agree to the suspension of any statutory periods of limitation (time limits provided by law) for the IRS assessment of the liability for the periods identified in Section II. I/We understand that I/we have the right not to waive these statutory periods or to limit the waiver to a certain length or to certain periods. I/we understand, however, that the IRS may not consider this offer if I/we refuse to waive the statutory periods for assessment or if we provide only a limited waiver. The amount of any Federal tax due for the periods described in Section II may be assessed at any time prior to the acceptance of this offer or within one year of the rejection of this offer. I/We understand that the statute of limitations for collection will be suspended during the period an offer is considered pending by the IRS (paragraph (k) of this section defines pending).

(f) The IRS will keep all payments and credits made, received or applied to the total original liability before submission of this offer and all payments required under section 7122(c). The IRS will also keep all payments in excess of those required by section 7122(c) that are received in connection with the offer and that are not designated as deposits in Section IV. The IRS may keep any proceeds from a levy served prior to submission of the offer, but not received at the time the offer is submitted. As additional consideration beyond the amount of my/our offer, the IRS will keep any refund, including interest, due to me/us because of overpayment of any tax or other liability, for tax periods extending through the calendar year in which the IRS accepts the offer. The date of acceptance is the date on the written notice of acceptance issued by the IRS to me/us or to my/our representative. I/We may not designate an overpayment ordinarily subject to refund, to which the IRS is entitled, to be applied to estimated tax payments for the following year.

(g) I/We will return to the IRS any refund identified inparagraph (f) received after submission of this offer.

(h) The IRS cannot collect more than the full amount of the liability under this offer.

(i) I/We understand that I/we remain responsible for the full amount of the liabilities, unless and until the IRS accepts the offer in writing and I/we have met all the terms and conditions of the offer. The IRS will not remove the original amount of the liabilities from its records until I/we have met all the terms and conditions of the offer. I/we understand that the liabilities I/we offer to compromise are and will remain liabilities until I/we meet all the terms and conditions of this offer. If I/we file for bankruptcy before the terms and conditions of this offer are completed, any claim the IRS files in the bankruptcy proceedings will be a tax claim.

(j) Once the IRS accepts the offer in writing, I/we have no right to contest, in court or otherwise, the amount of the liability.

(k) The offer is pending starting with the date an authorized IRS official signs the form. The offer remains pending until an authorized IRS official accepts, rejects, returns or acknowledges withdrawal of the offer in writing. If I/we appeal an IRS rejection decision on the offer, the IRS will continue to treat the offer as pending until the Appeals Office accepts or rejects the offer in writing.

STF BZRJ1001.2

www.irs.gov Form 656 (Rev. 3-2009) Page 19

of 4

If I/we don’t file a protest within 30 days of the date the IRS notifies me/us of the right to protest the decision, I/we waive the right to a hearing before the Appeals Office about the Offer in Compromise.

(l) If I/we fail to meet any of the terms and conditions of the offer and the offer defaults, the IRS may:

• immediately file suit to collect the entire unpaid balance of the offer;

• immediately file suit to collect an amount equal to the original amount of the liability, minus any payment already received under the terms of this offer;

• disregard the amount of the offer and apply all amounts already paid under the offer against the original amount of the liability; and/or

• file suit or levy to collect the original amount of the liability, without further notice of any kind.

The IRS will continue to add interest, as section 6601 of the Internal Revenue Code requires, on the amount the IRS determines is due after default. The IRS will add interest from the date the offer is defaulted until I/we completely satisfy the amount owed.

(m) The IRS generally files a Notice of Federal Tax Lien to protect the Government’s interest on offers with deferred payments. Also, the IRS may file a Notice of Federal Tax Lien during the offer investigation. This tax lien will be released when the payment terms of the offer agreement have been satisfied.

(n) I/We understand that IRS employees may contact third parties in order to respond to this request and I/we authorize the IRS to make such contacts. Further, by authorizing the IRS to contact third parties, I/we understand that I/we will not receive notice, pursuant to section 7602(c) of the Internal Revenue Code, of third parties contacted in connection with this request.

(o) I/We are offering to compromise all the liabilities assessed against me/us as of the date of this offer and under the taxpayer identification numbers listed in Section II above. I/We authorize the IRS to amend Section II, above, to include any assessed liabilities we failed to list on Form 656.

Section VI Explanation of Circumstances

I am requesting an Offer in Compromise for the reason(s) listed below:

Note: If you believe you have special circumstances affecting your ability to fully pay the amount due, explain your situation. You may attach additional sheets if necessary. Please include your name and SSN or EIN on all additional sheets or supporting documentation.

Section VII Source of Funds

I / We shall obtain the funds to make this offer from the following source(s):

STF BZRJ1001.3


Loans from family/friends.

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Section VIll Mandatory Signatures

TaxpayerAttestation

If I / we submit this offer on a substitute form, I/ we affirm that this form is a verbatim duplicate of the official Form 656,and I/we agree to be bound by all the terms and conditions set forth in the official Form 656.

Under penalties of perjury, I declare that I have examined this offer, including accompanying schedules and statements, and to the best of my knowledge and belief, it is true, correct and complete.

Signature of Taxpayer Daytime Telephone Number Date (mmddyyyy)

Signature of Taxpayer Date (mmddyyyy)

Official Use Only I accept the waiver of the statutory period of limitations on assessment for the Internal Revenue Service, as described in Section V(e).

Signature of Authorized Internal Revenue Service Official Title Date (mmddyyyy)

Section IX Application Prepared by Someone Other than the Taxpayer

If this application was prepared by someone other than the taxpayer, please fill in that person’s name and address below.

Name

Address (if known) (Street, City, State, ZIP code)

Section X Paid Preparer Use Only

Name of Preparer

Date (mmddyyyy)Signature of Preparer Check if self-employed

Preparer’s CAF no. or PTIN

Firm’s name (or yours if self-employed), address, and ZIP code

Section XI Third Party Designee

Do you want to allow another person to discuss this offer with the IRS? Yes. Complete the information below. NoDesignee’s Name Telephone Number

Privacy Act Statement

We ask for the information on this form to carry out the internal revenue laws of the United States. Our authority to request this information is Section 7801 of the Internal Revenue Code.

Our purpose for requesting the information is to determine if it is in the best interests of the IRS to accept an Offer in Compromise. You are not required to make an Offer in Compromise; however, if you choose to do so, you must provide all of the taxpayer information requested. Failure to provide all of the information may prevent us from processing your request.

If you are a paid preparer and you prepared the Form 656 for the taxpayer submitting an offer, we request that you complete and sign Section X on Form 656, and provide identifying information. Providing this information is voluntary. This information will be used to administer and enforce the internal revenue laws of the United States and may be used to regulate practice before the Internal Revenue Service for those persons subject to Treasury Department Circular No. 230, Regulations Governing the Practice of Attorneys, Certified Public Accountants, Enrolled Agents, Enrolled Actuaries, and Appraisers before the Internal Revenue Service. Information on this form may be disclosed to the Department of Justice for civil and criminal litigation.

We may also disclose this information to cities, states and the District of Columbia for use in administering their tax laws and to combat terrorism. Providing false or fraudulent information on this form may subject you to criminal prosecution and penalties.

Attention:Instructions and pertaining forms for completing an accurate Offer in Compromise are available in the

Form 656-B, Offer in Compromise Booklet. The Form 656-B is available through the IRS website www.irs.gov.

STF BZRJ1001.4


E. Martin Davidoff, CPA, Esq.

P.O. Box 835, Dayton, NJ 08810

X

E. Martin Davidoff, CPA, Esq. 732-274-1600

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Department of the Treasury — Internal Revenue Service

Offer in Compromise

IRS RECEIVED DATE

DATE RETURNEDSocial Security Number (SSN) Employer Identification Number (EIN)

(Primary) (Secondary) (EIN included in offer) (EIN not included in offer)

Form 656(March 2009)

Attach Application Fee and Payment (check or money order) here.

Taxpayer Contact InformationSection I Taxpayer’s First Name and Middle Initial Last Name

If a joint offer, spouse’s First Name and Middle Initial Last Name

Mailing Address (if different from above) (number, street, and room or suite no., city, state, ZIP code)

Business Name

Taxpayer’s Address (Home and Business) (number, street, and room or suite no., city, state, ZIP code)

Section II To: Commissioner of Internal Revenue Service

I/We (includes all types of taxpayers) submit this offer to compromise the tax liabilities plus any interest, penalties, additions to tax, and additional amounts required by law (tax liability) for the tax type and period marked below: (Please mark an “X” in the box for the correct description and fill-in the correct tax period(s), adding additional periods if needed).

1040/1120 Income Tax - Year(s)

941 Employer's Quarterly Federal Tax Return - Quarterly period(s)

940 Employer’s Annual Federal Unemployment (FUTA) Tax Return — Year(s)

Trust Fund Recovery Penalty as a responsible person of (enter corporation name) ,

for failure to pay withholding and Federal Insurance Contributions Act taxes (Social Security taxes), for period(s) ending

Other Federal Tax(es) [specify type(s) and period(s)]

Note: If you need more space, use a separate sheet of paper and title it “Attachment to Form 656 Dated .” Sign and date the attachment following the listing of the tax periods.

Section III Reason for Offer in Compromise

I/We submit this offer for the reason(s) checked below: Doubt as to Collectibility — “I have insufficient assets and income to pay the full amount.” You must include a complete Collection Information Statement, Form 433-A and/or Form 433-B.Effective Tax Administration — “I owe this amount and have sufficient assets to pay the full amount, but due to my exceptional circumstances,requiring full payment would cause an economic hardship or would be unfair and inequitable.” You must include a complete Collection InformationStatement, Form 433-A and/or Form 433-B and complete Section VI.

Section IV Offer in Compromise Terms

I/We offer to pay $ (must be more than zero). Complete Section VII to explain where you will obtain the funds to make this offer. Check only one of the following:

Lump sum cash offer – 20% of the amount of the offer $ must be sent with Form 656. Upon written acceptance of the offer, the balance must be paid in 5 or fewer installments. $ payable within months after acceptance$ payable within months after acceptance $ months after acceptancepayable within$ months after acceptancepayable within$

will be submitted with the Form 656. Beginning in the month after the offer is submitted (insert month

months after acceptance Short Term Periodic Payment Offer - Offer amount is paid within 24 months from the date IRS received your offer. The first payment must besubmitted with your Form 656. You must make regular payments during your offer investigation. Complete the following:

$

payable within

), on the day of each month, $ will be sent in for a total of months. (Cannot extend more than 24 months from the date

the offer was submitted.)


STF BZRJ1001.1

ISA

JOHN J. DOE

123 MAIN STREETANYWHERE, NJ 08666

123-45-6789

X J.J. SMITH, INC.

See Attachment to Form 656

8/22/2010

X

1,000

X 200

800 3

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Page Last Reviewed or Updated: February 22, 2010

National Standards: Food, Clothing and Other Items

Disclaimer: IRS Collection Financial Standards are intended for use in calculating repayment of delinquent taxes. These Standards are effective on March 1, 2010 for purposes of federal tax administration only. Expense information for use in bankruptcy calculations can be found on the website for the U.S. Trustee Program.

National Standards have been established for five necessary expenses: food, housekeeping supplies, apparel and services, personal care products and services, and miscellaneous.

The standards are derived from the Bureau of Labor Statistics (BLS) Consumer Expenditure Survey (CES).

Taxpayers are allowed the total National Standards amount monthly for their family size, without questioning the amounts they actually spend. If the amount claimed is more than the total allowed by the National Standards, the taxpayer must provide documentation to substantiate those expenses are necessary living expenses. Generally, the total number of persons allowed for National Standards should be the same as those allowed as exemptions on the taxpayer’s most recent year income tax return.

References/Related Topics

� Collection Financial Standards� Local Standards: Transportation� Local Standards: Housing and Utilities� National Standards: Out-of-Pocket Health Care

Rate the Small Business and Self-Employed Web Site

Expense One Person Two Persons Three Persons Four Persons

Food $293 $537 $626 $752

Housekeeping supplies $28 $66 $61 $74

Apparel & services $86 $162 $209 $244

Personal care products & services $32 $55 $59 $66

Miscellaneous $87 $165 $197 $235

Total $526 $985 $1,152 $1,371

More than four persons Additional Persons Amount

For each additional person, add to four-person total allowance: $262

National Standards: Food, Clothing and Other Items

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New Jersey - Local Standards: Housing and Utilities

MarchDisclaimer: IRS Collection Financial Standards are intended for use in calculating repayment of delinquent taxes. These Housing and Utilities Standards are effective on March 1, 2010 for purposes of federal tax administration only. Expense information for use in bankruptcy calculations can be found on the Web site for the U.S. Trustee Program.

The housing and utilities standards are derived from U.S. Census Bureau and Bureau of Labor Statistics data, and are provided by state down to the county level. The standard for a particular county and family size includes both housing and utilities allowed for a taxpayer’s primary place of residence. Generally, the total number of persons allowed for determining family size should be the same as those allowed as exemptions on the taxpayer’s most recent year income tax return.

Housing and utilities standards include mortgage or rent, property taxes, interest, insurance, maintenance, repairs, gas, electric, water, heating oil, garbage collection, telephone and cell phone. The tables include five categories for one, two, three, four, and five or more persons in a household.

The taxpayer is allowed the standard amount, or the amount actually spent on housing and utilities, whichever is less. If the amount claimed is more than the total allowed by the housing and utilities standards, the taxpayer must provide documentation to substantiate those expenses are necessary living expenses.

Maximum Monthly Allowance

CountyHousing and Utilities for a Family of 1

Housing and Utilities for a Family of 2



Housing and Utilities for a Family of 5 or

more

Atlantic County 1,426 1,675 1,765 1,968 2,000

Bergen County 2,227 2,616 2,756 3,073 3,123

Burlington County 1,600 1,879 1,980 2,207 2,243

Camden County 1,451 1,704 1,795 2,002 2,034

Cape May County 1,373 1,612 1,699 1,894 1,925

C b l d

New Jersey - Local Standards: Housing and Utilities

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� Collection Financial Standards

County

Cumberland County 1,231 1,446 1,524 1,699 1,727

Essex County 2,133 2,506 2,640 2,944 2,992

Gloucester County 1,473 1,730 1,823 2,033 2,065

Hudson County 1,836 2,157 2,273 2,534 2,575

Hunterdon County 2,179 2,559 2,696 3,006 3,055

Mercer County 1,740 2,043 2,153 2,401 2,439

Middlesex County 1,797 2,110 2,224 2,479 2,519

Monmouth County 1,944 2,283 2,406 2,683 2,726

Morris County 2,150 2,525 2,660 2,966 3,014

Ocean County 1,531 1,798 1,895 2,112 2,147

Passaic County 1,927 2,263 2,385 2,659 2,702

Salem County 1,346 1,581 1,666 1,858 1,888

Somerset County 2,102 2,469 2,602 2,901 2,948

Sussex County 1,748 2,053 2,164 2,412 2,451

Union County 1,939 2,277 2,399 2,675 2,718

Warren County 1,692 1,988 2,094 2,335 2,373

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Local Standards: Transportation


The transportation standards consist of nationwide figures for monthly loan or lease payments referred to as ownership costs, and additional amounts for monthly operating costs. The operating costs include maintenance, repairs, insurance, fuel, registrations, licenses, inspections, parking and tolls (These standard amounts do not include personal property taxes).

The ownership costs provide maximum allowances for the lease or purchase of up to two automobiles, if allowed as a necessary expense. A single taxpayer is normally allowed one automobile.

If a taxpayer has a car payment, the allowable ownership cost added to the allowable operating cost equals the allowable transportation expense. The taxpayer is allowed the amount actually spent, or the standard, whichever is less.

If a taxpayer has a car, but no car payment, only the operating costs portion of the transportation standard is used to figure the allowable transportation expense. The taxpayer is allowed the amount actually spent, or the standard, whichever is less.

There is a single nationwide allowance for public transportation based on Bureau of Labor Statistics expenditure data for mass transit fares for a train, bus, taxi, ferry, etc. Taxpayers with no vehicle are allowed the standard amount monthly, per household, without questioning the amount actually spent.

If a taxpayer owns a vehicle and uses public transportation, expenses may be allowed for both, provided they are needed for the health and welfare of the taxpayer or family, or for the production of income. However, the expenses allowed would be actual expenses incurred for ownership costs, operating costs and public transportation, or the standard amounts, whichever is less.

If the amount claimed is more than the total allowed by the transportation standards, the taxpayer must provide documentation to substantiate those expenses are necessary living expenses.

Public Transportation

National $182

Ownership Costs


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Ownership Costs

One Car Two Cars

National $496 $992

Operating Cost

One Car Two Cars

Northeast Region $265 $530

Boston $250 $500

New York $342 $684

Philadelphia $299 $598

Midwest Region $210 $420

Chicago $251 $502

Cleveland $226 $452

Detroit $294 $588

Minneapolis-St. Paul $207 $414

South Region $239 $478

Atlanta $234 $468

Baltimore $250 $500

Dallas-Ft. Worth $270 $540

Houston $307 $614

Miami $320 $640

Washington, D.C. $270 $540

West Region $236 $472

Los Angeles $283 $566

Phoenix $262 $524

San Diego $274 $548

San Francisco $306 $612

http://www.irs.gov/businesses/small/article/0,,id=104623,00.html

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For Use with Allowable Transportation Table

The data for the Operating Costs section of the Transportation Standards are provided by Census Region and Metropolitan Statistical Area (MSA). The following table lists the states that comprise each Census Region. Once the taxpayer’s Census Region has been ascertained, to determine if an MSA standard is applicable, use the definitions below to see if the taxpayer lives within an MSA (MSAs are defined by county and city, where applicable). If the taxpayer does not reside in an MSA, use the regional standard.

MSA Definitions by Census Region

Northeast Census Region: Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut, Pennsylvania, New York, New Jersey

Seattle $192 $384

MSA COUNTIES

Boston in MA: Bristol, Essex, Hampden, Middlesex, Norfolk, Plymouth, Suffolk, Worcester

in NH: Hillsborough, Merrimack, Rockingham, Strafford

in CT: Windham

in ME: York

New York in NY: Bronx, Dutchess, Kings, Nassau, New York, Orange, Putnam, Queens, Richmond, Rockland, Suffolk, Westchester

in NJ: Bergen, Essex, Hudson, Hunterdon, Mercer, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset, Sussex, Union, Warren

in CT: Fairfield, Litchfield, Middlesex, New Haven

in PA: Pike

Philadelphia in PA: Bucks, Chester, Delaware, Montgomery, Philadelphia

in NJ: Atlantic, Burlington, Camden, Cape May, Cumberland, Gloucester, Salem

in DE: New Castle

in MD: Cecil


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Page Last Reviewed or Updated: February 22, 2010

National Standards: Out-of-Pocket Health Care


The table for health care expenses, based on Medical Expenditure Panel Survey data, has been established for minimum allowances for out-of-pocket health care expenses.

Out-of-pocket health care expenses include medical services, prescription drugs, and medical supplies (e.g. eyeglasses, contact lenses, etc.). Elective procedures such as plastic surgery or elective dental work are generally not allowed.

Taxpayers and their dependents are allowed the standard amount monthly on a per person basis, without questioning the amounts they actually spend. If the amount claimed is more than the total allowed by the health care standards, the taxpayer must provide documentation to substantiate those expenses are necessary living expenses. Generally, the number of persons allowed should be the same as those allowed as exemptions on the taxpayer’s most recent year income tax return.

The out-of-pocket health care standard amount is allowed in addition to the amount taxpayers pay for health insurance.


� Collection Financial Standards� Local Standards: Transportation� Local Standards: Housing and Utilities� National Standards: Food, Clothing and Other Items

Out-of-Pocket Costs

Under 65 $60

65 and Older $144

National Standards: Out-of-Pocket Health Care

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Print Email Reports Export Reports

This data set was prepared on 06/30/2009 as electronic file number 68706342 .

204 SANDFORD NEW BRUNSWICK,NJ 08901

Owner: KEY MANAGEMENT CO County: MIDDLESEX, NJ

Value $313,000 Confidence 46

Highest Reasonable $349,000 Forecasted StandardDeviation

20

Lowest Reasonable $277,000

This property is a SFR Success - Valuation Successful.

Reported Property Information

Sale Date 07/01/1987 APN13-00238-

0000-00020

Sale Price $171,000 Census Tract

Sale Code Full Year Built

Loan Amount Living Area (sf)

Prior Sale Date 12/1977 Lot Area (sf) 2,700

Prior Sale Price $40,500 Total Rooms

Prior Sale Code Undefined Bedrooms

Assessed Date 2009 Baths

Assessor's Value $135,400 Stories 2

Assessor's Land Value $23,400 A/C

Assessor's Improvement Value Pool

Neighborhood Sales for204 SANDFORD

NEW BRUNSWICK,NJ 08901The following properties are recently reported sales found in the immediate vicinity of the subject property.These properties, and others, are believed to be full value transfers or may represent an estimate of sale.

Sale 1 - 228 POWERS, NEW BRUNSWICK NJ 08901 (Radius: 0.00 miles)

Sale Date 10/01/2008 APN Assessed $135,900

Sale Price $275,000 Owner A/C

Loan Amount Year Built Pool

Prior Sale Date Rooms / / Fireplace

Prior Sale Price Living Area (sf) 2,536 Parking

- - Lot Area (sf) 2,500 Stories 2

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http://pro.realquest.com/...&action=confirm&type=getreport&recordno=0&reportoptions=0&1246382418891&1246382418891[6/30/2009 1:20:51 PM]

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E. Martin Davidoff – Offer in Compromise

Federal & State Tax Summary

Net Realizable Value

John Jane Cash $375

Investments $12,495

Life Insurance $12,707

Auto $3,880

Home @ 80% $6,000

Totals $12,707 $22,750

\/ Joint Total $35,457

Answer Sheets – December 2010

John Jane

2003-2006 $84,000 (joint) $84,000

2009 U.S. $12,000 (joint) $12,000

2009 N.J. $1,500 (joint) $1,500

Trust Funds

IRS $242,000 -----

N.J. $12,500

-----

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E. Martin Davidoff – Offer in Compromise

Partially Adjusted R.C.P.

Excess Income As Is With New Auto

Monthly Excess $361 $36

48 Times Factor $17,328 $1,728

Assets/Equity $35,457 $35,457

R.C.P. $52,785 $37,185

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