prison inmate

[cmb2106]

I have a client who was incarcerated in October 2020.  I have prepared his 2020 tax return with income earned before his incarceration.  He owes and has no way to pay and family member will not pay it.  How does he avoid penalty and interest that will accumulate?  He will be in prison for at least 15 years. A family member will be taking the tax return for him to sign it.  

[sjrcpa]

The statute of limitations on collection is 10 years after assessment. Maybe it will run while he serves his time.

[abctax55]

Consider requesting CNC status, but do you really want to do a lot of work when he can't pay you?

And just because he is incarcerated, that is NOT a reason for penalties/interest to be waived.

https://www.hrblock.com/tax-center/irs/audits-and-tax-notices/how-to-get-currently-not-collectible/

[abctax55]

@sjrcpa  - Maybe they'll garnish is prison wages?

[BobKamman]

Same thing as if he were diagnosed with long Covid (or cancer, or COPD) in October and doesn't expect to have income for the next 15 years.  The interest rate is low and I think the FTP penalty runs out after 50 months, doesn't it?  File the return and maybe there will be a pardon.  Otherwise, I have had more than one client get an unexpected check for more than $100,000 from a long-lost relative who had money but no Will.  

[joshuabarksatlcs]

Haven't updated OIC for a long time.  Sounds a possible candidate...

Did a bunch of those 10+ years ago.   Last OIC I did was for state sales tax, which (as a trustee tax) for a long time the state would not accept for OIC, but CA was so rich that it did at one point.

If the amount is significant, look into it.  But then, how can he/she/it/they afford to pay you for filing???

[sjrcpa]

They get paid less than $1/hr I've heard but I guess it is subject to garnishment.

[BobKamman]

Once again we're playing "I've Got A Secret."  How much does he owe -- $500?  $5,000?  $50,000?  Was the conviction related to tax evasion, so once the criminal case ends the IRS is allowed to step in and make assessments?  Is there a restitution order?  How old is he?  Prisoners can't collect Social Security, but once he gets out the IRS can try for a 15% continuing levy.  

[chenschuh]

He should file as soon as he can to get the clock ticking. Then after 10 years, statute of limitation will kick in.