Preparer fee from refund when client owes back tax

[schirallicpa]

Client claims he has agreement with IRS agent and is making monthly tax payments. He has a nice refund on his personal return this year, and I was hoping to safely take my fee from his refund in order to avoid chasing him myself. Will the IRS let me have my portion of the refund, or will they snag the whole bit?

[Lion EA]

If he's up to date on a qualified installment agreement and everything works right, then he and you get his refund. If not, the IRS will take his refund up to the amount they're due. The worst that will happen is you will have to chase him, and that's the way things are now if you don't try. So, nothing more to lose and earlier receipt to gain. Is he having direct debit for his installment agreement? Did you see his bank statements?

[JohnH]

I didn't know that.

I thought that anyone who has an installment agreement in place would still see their refund confiscated to pay down the debt, even if the installment agreement is current. Doesn't the installment agreement include a right of offset for any refunds due?

[kcjenkins]

Every t/p with an IRS debt that I know of has his refund taken, even if making payments on their debt through an installment plan. And I do not believe it is possible to have a 'private' arrangement with an IRS agent, as stated here. So I think the t/p is trying to scam you into filing the return without his paying you first.

[Julie]

This is my experience, too. IRS will always pay themselves first.

Every t/p with an IRS debt that I know of has his refund taken, even if making payments on their debt through an installment plan. And I do not believe it is possible to have a 'private' arrangement with an IRS agent, as stated here. So I think the t/p is trying to scam you into filing the return without his paying you first.

[Terry O]

I always thought the IRS took any refunds first - - but , apparently, NOT the stimulus!

I had a client owe, they paid some & figured the stimulus would be taken to fulfill the rest - -but they got the rebate - - -

Sooooooooooo, the question is - - did they then send the $$ back to the IRS??

I'm guessing NOT!!!

[JohnH]

The IRS web site says the stimulus payment will be reduced by any taxes owed, but I'm sure there are situations where the system misses a beat & fails to detect an outstanding balance somewhere. In any case, if the client owes money and it is not deducted from the stimulus payment as expected, they still owe the money and somewhere along the way there will be a bill.

I've received feedback from a few clients who owed monwy on the 2007 return and they chose to short-pay the balance, expecting the rebate to offset against the remainder (plus a little bit of accrued interest). So far that's what has happened with each of them. I also have one who has an installment agreement in place with a balance in excess of $20K. The installment agreement is current. They have a $2,000 refund on their 2007 return and also a $1,200 rebate coming. I told them to expect the entire $3,200 to be offset against their balance due, but if for some reason they received any of the money from either teh refund or the rebate, they should remember that they will still owe an equal amount on the balance due on the installment agreement. The math really isn't that complex - it's a matter of pay them now or pay them later, plus interest & penalties.