Free Sample Letter For Late Contributions for IRA, Retirement Rollovers

 

Fresh Start Tax

Here is a free Sample letter you can use to avoid penalties!!!

Reasons for Late Contribution:

I intended to make the rollover within 60 days after receiving the distribution but was unable to do so for the following reason(s) (check all that apply): ___ An error was committed by the financial institution making the distribution or receiving the contribution. ___ The distribution was in the form of a check and the check was misplaced and never cashed. ___ The distribution was deposited into and remained in an account that I mistakenly thought was a retirement plan or IRA. ___ My principal residence was severely damaged. ___ One of my family members died. ___ I or one of my family members was seriously ill. ___ I was incarcerated. ___ Restrictions were imposed by a foreign country. ___ A postal error occurred.

Name
,Address,
City, State, ZIP Code
 Date: ______________________ -5- ___ The distribution was made on account of an IRS levy and the proceeds of the levy have been returned to me. ___ The party making the distribution delayed providing information that the receiving plan or IRA required to complete the rollover despite my reasonable efforts to obtain the information.

Signature I declare that the representations made in this document are true and that the IRS has not previously denied a request for a waiver of the 60-day rollover requirement with respect to a rollover of all or part of the distribution to which this contribution relates.

I understand that in the event I am audited and the IRS does not grant a waiver for this contribution, I may be subject to income and excise taxes, interest, and penalties.

If the contribution is made to an IRA, I understand you will be required to report the contribution to the IRS. I also understand that I should retain a copy of this signed certification with my tax records.

Signature: ________________________________

Tax Preparedness Series: How to Avoid a Refund Delay;

 

Fresh Start Tax

 

Tax Preparedness Series: How to Avoid a Refund Delay;

This is the second in a series of reminders to help taxpayers prepare for the upcoming tax filing season.

As tax filing season approaches, the Internal Revenue Service is reminding taxpayers about steps they can take now to ensure smooth processing of their 2016 tax return and avoid a delay in getting their tax refund next year.

The IRS reminds taxpayers to be sure they have all the documents they need, such as W-2s and 1099s, before filing a tax return.

You may also need a copy of your 2015 tax return to make it easier to fill out a 2016 tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income amount from a prior tax return to verify their identity.

Learn more about how to verify your identity and electronically sign your tax return at Validating Your Electronically Filed Tax Return.

The IRS will begin accepting and processing tax returns once the filing season begins. Under the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), any Individual Taxpayer Identification Numbers (ITIN) issued prior to 2013 or that haven’t been used for tax-years 2013, 2014 and 2015 will no longer be valid for use on a tax return as of Jan. 1, 2017.

Individuals with expiring ITINs who need to file a return in 2017 will need to renew their ITIN.

This process typically takes 7 weeks to receive an ITIN assignment letter, but the process can take longer – 9 to 11 weeks if taxpayers wait to submit Form W-7 during the peak filing season, or send it from overseas. Taxpayers who do not renew an expired ITIN before filing a tax return next year, could face a delayed refund and may be ineligible for certain tax credits.

For more information, visit the ITIN information page on IRS.gov. If you claim the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) on your tax return, the IRS must hold your refund until February 15. This new law requires the IRS to hold the entire refund — even the portion not associated with EITC or ACTC.

This change helps ensure that you receive the refund you are owed by giving the agency more time to help detect and prevent fraud. The IRS always cautions taxpayers not to rely on getting a refund by a certain date, especially when making major purchases or paying bills.

Though the IRS issues more than nine out of 10 refunds in less than 21 days, some returns are held for further review. The easiest way to avoid common errors that delay processing a tax return is to e-file. E-file is the most accurate way to prepare a return and file.

There are a number of e-file options: • IRS Free File, • Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs, • commercial tax preparation software, or • a tax professional Use Direct Deposit.

With direct deposit, the refund goes directly into the taxpayer’s bank account. There is no risk of having the refund check stolen or lost in the mail.

This is the same electronic transfer system used to deposit nearly 98 percent of all Social Security and Veterans Affairs benefits into millions of accounts. Direct deposit also saves taxpayer dollars.

It costs the nation’s taxpayers more than $1 for every paper refund check issued but only a dime for each direct deposit made.

Michael D. Sullivan + Former IRS Quoted on Donald Trump Audit

Fresh Start Tax

 

Thanks to Nixon, President Trump’s taxes will be audited automatically every year President-elect Donald Trump waves as he arrives at the Trump National Golf Club Bedminster clubhouse, Sunday, Nov. 20, 2016, in Bedminster, N.J. Carolyn Kaster AP By Kevin G. Hall and Greg Gordon khall@mcclatchydc.com

WASHINGTON:

When Donald Trump is sworn in as the nation’s 45th president, his complex business empire will immediately be subject to an audit by the Internal Revenue Service. Thanks to an obscure provision in the IRS manual, Trump and his vice president, Mike Pence, will each be under a mandatory audit annually. “The requirement for mandatory audits of the tax returns of the president and vice president dates back to the Watergate era in the 1970s,” the IRS said in a statement to McClatchy, noting that nonpartisan career employees adopted the requirement. “Since then, this provision has remained in place during both Republican and Democratic administrations as well as under IRS Commissioners appointed by both parties.”

The little-known provision in the IRS manual spells out strict rules under which the returns are audited. They require expeditious processing, and unusual security precautions.

For example, the returns “should be kept in an orange folder at all times.” Those audits, it adds, must be completed at the Baltimore Technical Services office of the IRS. They must be kept out of view of other IRS employees and locked “in a secure drawer or cabinet when the examiner is away from the work area.” It’s unlikely that Trump’s tax returns will fit in a drawer or cabinet, though.

In October 2015, he tweeted a photo of himself next to a tall stack of papers he said were his tax returns. His financial disclosure forms filed with the Federal Election Commission list 584 companies on which he is a director or officer, not to mention his investment holdings.

Portions of Trump tax returns leaked during the presidential campaign showed that much of his business income flows through to his individual tax return. It means his tax filing as president will likely look much different than say President Barack Obama’s modest IRS-audited 38-page tax return.

For the 2014 tax year, it listed wage income of almost $395,000 and business income of $88,181.

Changes to tax law in 1998 made it illegal for members of the executive branch to interfere with an ongoing audit. But the presidential audit provision in the IRS tax manual is an internal requirement.

It does not stem from a law that mandated a corresponding regulation. They ought to do an audit, they ought to make sure it’s right and they ought to release it to the public. Richard Painter, chief White House ethics counsel for President George W. Bush Trump could challenge the requirement, or direct his Treasury secretary overseeing the IRS to seek changes to the longstanding practice. “I don’t believe there is anything that would prevent the president from … instructing that this precautionary measure of the IRS audits be rescinded,” said Norman Eisen, who as special counsel to the Obama White House during the first term put in place new ethics guidelines. “He could theoretically do it.”

If the IRS audits Trump and finds an issue, it would remain between the IRS and him unless it reflected criminal activity.

This would be like the back and forth of any other ordinary audit between a taxpayer and the agency. Trump could use the automatic audit as an explanation for continuing to refuse to release his tax returns to the public. Being under audit was his main reason during the campaign, though there is no legal reason he could not release them even while an audit is in progress.

Presidents before Trump have routinely released their tax returns after the annual IRS audit, but it is not required.

Trump could simply say that the IRS knows everything, and given his business interests across the globe he’d prefer to keep it private. “The returns are protected by law,” said Joe Thorndike, a tax historian who runs the website taxhistory.org and has tracked four decades of tax returns of presidential candidates and sitting presidents. “He’s not required to release anything so we have to rely on the agency.”

And that agency is under fire. Congressional Republicans have criticized the agency for alleged targeting of conservatives. Budget cuts by Republicans in Congress have left the IRS facing “chronic underfunding,” according to a 2013 report from the National Taxpayer Advocate. Lawmakers also have tried to impeach IRS Commissioner John Koskinen, 77.

His five-year term ends on Nov. 12, 2017, but he could resign before then to give Trump a chance to put in his own person. Interference with the IRS is unlikely, said Mark W. Everson, George W. Bush’s IRS commissioner from 2003 to 2007. “People have learned the hard way you can’t reach in,” said Everson, now vice chairman of alliant group, a specialty tax advisory for small and mid-sized firms. “I operated with total independence in terms of enforcement matters.” That was a reference to Richard Nixon, whose vice president Spiro Agnew resigned in 1973 after pleading guilty to tax evasion.

Nixon was audited twice by the IRS, the second time settling with the agency in 1974 and paying $465,000 in back taxes after paying almost none over three years. Nixon made his tax returns public in a bid to quell public outcry, and since then every U.S. president has released them.

Nixon’s successor Gerald Ford is the only president since who didn’t release the actual tax forms, offering instead a summary of the taxes he paid on his salary and modest tax deductions.

Unless there is an unlawful leak of Trump’s tax documents, he faced criminal prosecution for tax fraud or he chose to release his tax returns, there’s little chance the public will know how much Trump pays in taxes or what if any tax shelters he uses. “That’s the only public information that you are going to have on anything,” said Michael Sullivan, a former IRS agent specializing in large-dollar cases and with Fresh Start Tax in Fort Lauderdale, Fla., which represents taxpayers in disputes with the IRS.  

Former IRS Agent, Teaching Instructor + Ask Me Question about IRS

 

 

Michael D. Sullivan - Former IRS Revenue Officer

Michael D. Sullivan    1-866-700-1040

Former IRS Agent & Teaching Instructing

Michael D. Sullivan is one of the founders of Fresh Start Tax LLC. He had a distinguished career with the Internal Revenue Service for 10 years.

As a veteran IRS Revenue Officer / Agent, he served as an Offer in Compromise Tax Specialist and Large Dollar Case Specialist.

He also collaborated with the U.S. Attorney’s office on undercover operations.

Michael received several awards for his work and dedication as a IRS Agent . During his tenure with the IRS, he was a Certified Tax Instructor who taught out of the Atlanta Regional IRS Training Offices.

He also taught out of the local and district offices of the IRS. Mr. Sullivan trained many of the new IRS Agents.

Michael has been in private practice for the last 34 years in the field of Taxpayer  Consultation for IRS Audit and Collection tax resolution issues.

He often consults with corporations and individuals, which involves a wide range of tax issues. Michael has worked many large complex cases for high net worth individuals and large corporations.

Mr. Sullivan is a committed professional with dedicated involvement in the tax profession community as a frequent speaker on the South Florida circuit and also served as an officer and on the Board of the Greater South Florida Tax Council.

Michael has been the program host and moderator for several Internal Revenue Service forums both in the public and professional sectors.

Mr. Sullivan is also registered with the Department of Business and Professional Regulation and has an approved class for IRS Collection Matters for Certified Public Accountants and Attorneys. Course # 0012279 expires 11/04/2019.

Mr. Sullivan has been a featured speaker in the credit card industry, student  loan and the debt settlement vertical as well.

Mr. Sullivan has also appeared on FOX BUSINESS NEWS

http://video.foxbusiness.com/v/4147654259001/tips-for-getting-through-to-the-irs/?#sp=show-clips

 

 

How To Get Your Offer in Compromise Accepted + Former Agent Speaks

 

Fresh Start Tax

 

How To Get Your Offer in Compromise Accepted

 

We are true tax experts for the IRS offer in Compromise. As a former Agent, I worked the offer program for the IRS.

We are true experts in the process of settling your IRS tax debt.

To get your IRS offer in compromise accepted, you must know the system. The Internal Revenue Service is very particular about what offers are accepted and will look to reject an offer in compromise faster then they will to accept it because of the amount of work they have to put in.

Also, each offer in compromise accepted becomes a matter of public record for one year at the regional offices.

The offer in compromise must be signed off by three different people before is accepted so much caution is given before IRS simply signs their name even if an offer makes common business sense.

The offer must be filled out correctly and accurately and all documentation needs to be given before any offer is accepted. The best chance of having an offer in compromise accepted is having a professional tax firm who has worked hundreds and hundreds of cases process the offer.

Another point to remember is the larger the dollar offer the more due diligence the IRS uses to conduct the offer investigation.

There are ads all over the television and the Internet is draped with splash ads and companies advertising you can settle your tax debt for pennies on the dollar through the IRS offer in compromise program.

You can contact us today for a free initial consultation and we can walk you through the offer in compromise program at the Internal Revenue Service.

The Internal Revenue Service receives about 78,000 offers in compromise each year and accepts about 38% of those filed. The average settlement dollars 3500.

 

Before we tell you everything you need to know please understand that I would not contemplate filing an offer in compromise on your own because of the very specific standards that IRS uses to qualify a taxpayer for an offer in compromise.

The average Internal Revenue Service agent probably spends about 20 hours investigating every offer in compromise and the IRS have very tight financials formulas and acceptance standards for the OIC.

The offer in compromise is not for everybody.

The IRS Pre-qualifier tool for the IRS Offer in Compromise used in the process of tax debt settlement

You should also know that there is a pre-qualifier tool that is available to you.

You can find on our website and any taxpayer/ client can walk through to find out if they are a qualified candidate for the offer in compromise or tax settlement program.

No offer in compromise should be filed unless the individual has walked through the pre-qualifier tool to make sure they have a solid chance of getting their offer in compromise accepted.

If you qualify through the IRS pre-qualifier tool for the offer in compromise you have an excellent chance of getting your offer in compromise accepted by the Internal Revenue Service.

You will find below all the questions that are asked on the pre-qualifier tool and the financial statement that is required to be turned into Internal Revenue Service for the offer in compromise program.

The pre- qualifier tool is used by Internal Revenue Service to make sure taxpayers understand the offer in compromise program.

 

Below you will find out the questions that are asked on the pre-qualifier tool.

So be apprised, these are the questions you will to be asked by the Internal Revenue Service for your offer in compromise.

Also it should be noted that this tool is used by the IRS collection division anytime you owe the IRS money on back taxes.

The questions asked on the Pre-qualifier Tool + This tool should only be used as a guide.

The reason that I say that this should be used as a guide is simple.

Sometimes there are very unique circumstances that shape a particular offer in compromise and sometimes IRS is willing to settle for less if the theory of the effective tax administration comes in the play.

Preliminary Questions that are asked :

 

Before IRS can proceed to accept your offer in compromise you must answer yes to these questions:

1. Are you in an open bankruptcy proceeding?
2. Have you filed all required federal tax returns?
3. Have you made all required estimated tax payments?
4. If you are self-employed and have employees, have you submitted all required federal
tax deposits?

If you answer NO to these questions IRS has the right to stop the offer in compromise and rejected immediately. In nine times out of 10 you can bet they will stop the offer in compromise because they are too lazy to work the case.

IRS cannot work your offer in compromise if you were are in an open bankruptcy proceeding and they can choose to reject your offer if you have not filed all your federal income tax returns and are not current in the year you are filing the offer.

Being current simply means you have made all required estimated tax payments or you have the proper amount of withholding being taken out of your payroll check to cover your taxes.

I hate to say this but, as a general rule on IRS will look to reject any offer in compromise before they accept it because of the sheer amount of work it takes for a person to get an offer in compromise accepted.

It must be signed off by their manager, by the regional manager in the district Council of the Internal Revenue Service. The reason these cases are reviewed so much is because of the simply fact they are open for public expect inspection for one year at the district office.

As a former IRS agent I can tell you it’s a lot easier to find reasons to reject the OIC than to bring them to managers to have them accepted, sad but true.

The IRS is only interested in two assets to settle your case with an offer in compromise and they are:

1. Your income,

2. Your assets.

 

General Information the IRS will want to acquire. The income and expense side.

The Internal Revenue Service will only allow certain necessary living expenses and those only.

They will plug your expenses against the national, regional, and geographical expense standards and allow you the “average monthly expenses”.

IRS will only accept reasonable expenses to make sure you’re living within your means therefore in every area in the United States the Department of Labor have come out with statistics to show what average reasonable expenses .

IRS will expect you fall within those means.

The Internal Revenue Service will disallow the expenses over above the standard. The sum total of the expenses over the standard are thus multiplied by 12 and become part of the income side of the offer in compromise.

Information relative to the National Standards used by the IRS

 

Collection Financial Standards are used to help determine a taxpayer’s ability to pay a delinquent tax liability.

Allowable living expenses include those expenses that meet the necessary expense test. The necessary expense test is defined as expenses that are necessary to provide for a taxpayer’s (and his or her family’s) health and welfare and/or production of income.

National Standards for food, clothing and other items apply nationwide. Taxpayers are allowed the total National Standards amount for their family size, without questioning the amount actually spent.

National Standards have also been established for minimum allowances for out-of-pocket health care expenses. Taxpayers and their dependents are allowed the standard amount on a per person basis, without questioning the amount actually spent.

Maximum allowances for housing and utilities and transportation, known as the Local Standards, vary by location. In most cases, the taxpayer is allowed the amount actually spent, or the local standard, whichever is less.

Generally, the total number of persons allowed for necessary living expenses should be the same as those allowed as exemptions on the taxpayer’s most recent year income tax return.

If the IRS determines that the facts and circumstances of a taxpayer’s situation indicate that using the standards is inadequate to provide for basic living expenses, we may allow for actual expenses. However, taxpayers must provide documentation that supports a determination that using national and local expense standards leaves them an inadequate means of providing for basic living expenses.

As far as the asset side:

As far as the asset side is considered IRS wants 100% of the total liquidation value of all your assets. You will find out below what list of assets IRS will consider.

Information required by the Pre-Qualifier Tool

 

IRS will want you to enter information about your location, household and tax debt. They will want to know your:

1. ZIP or postal code

2. State

3. County

4. Total members of household

5. Total members of household 65 years or older.

The IRS wants this information to apply the national standards for expenses in the area and the location you have plus the number of exemptions.

Total IRS tax debt (whole dollars)

1. What is the most recent tax year you are requesting to compromise?

Your Assets – These are the assets IRS will be inquiring about.

The Internal Revenue Service will require all liquidation values to be part of your offer. If you add up the following liquidation values on the below assets IRS will accept nothing less.

Total bank balances (checking, savings, money market, CDs, etc.)

Home market value

Home loan balance

Vehicles

All Retirement account equity (401k, IRA, etc.)

Other real property (rental, business, land, timeshare, etc.)

Other asset equity (airplane, motorcycle, recreational vehicle, etc.)

Stocks, bonds and other investments

Miscellaneous (art, coin and gun collections, etc.)

Information about your monthly household income.

The Internal Revenue Service will use the accurate/LEXIS-NEXIS and Google search engines to inquire about you and your assets.

Make sure you turn in an accurate and complete financial statement.

IRS will want proof of:

a. Gross wages

b. Interest and dividends

c. Distributions from partnerships, sub-S corporations, etc.

d. Net rental income

e. Net business income

f. Child support received

g. Alimony received

h. Rent or mortgage and utilities

i. Vehicle 1 loan or lease payment

j. Vehicle operating costs (gas, repairs, etc.)

k. Total vehicles owned

l. Public transportation costs

m. Health insurance premiums

n. Federal, state and local taxes (Enter a 0 if no taxes)

o. Court-ordered payments (child support, alimony, etc.)

p. Child dependent care costs

q. Life insurance premiums and cash surrender values

Selecting a payment option for tax debt settlement

Your initial payment will vary based on your offer and the payment option you choose:

 

Lump Sum Cash:

Submit an initial payment of 20 percent of the total offer amount with your application. Wait for written acceptance, then pay the remaining balance of the offer in five or fewer payments.

Periodic Payment:

Submit your initial payment with your application. Continue to pay the remaining balance in monthly installments while the IRS considers your offer. If accepted, continue to pay monthly until it is paid in full.
Downside to Submitting an OIC, yes there is a downside.

Completing the forms is just the beginning. After you submit the forms, the IRS will ask you for rafts of financial documentation — pay stubs, bank records, vehicle registrations, and myriad other items.

This is an exhaustive, time-consuming process on the part of the Agent.

Some taxpayers wind up submitting files upon files of documents to the IRS to support their OIC request.

If your OIC is rejected, the disclosures you made about your assets give the IRS all the information it needs to accelerate its collection efforts against you. It gives the Internal Revenue Service or road map to collect your money.

For this reason, it makes sense not to submit an offer unless it is likely to be accepted. That is why going through the pre-qualifier tool on our website to help assure you have a more likely chance of acceptance.

Remember that interest keeps accruing during the offer in compromise negotiation process, meaning you’ll end up owing more than ever if you cannot make a deal.

Contact us today to learn more about the filing of an offer in compromise.

Free consultations are available upon request.

What You Need to Know + IRS Tax Debt Settlements + Former IRS Settlement Officer

 

Fresh Start Tax

 

The process of settling Your Tax Debt with the IRS, What you Need to Know

 

We are true tax experts for the IRS offer in Compromise. As a former Agent, I worked the offer program for the IRS.

We are true experts in the process of settling your IRS tax debt.

There are ads all over the television and the Internet is draped with splash ads and companies advertising you can settle your tax debt for pennies on the dollar through the IRS offer in compromise program.

You can contact us today for a free initial consultation and we can walk you through the offer in compromise program at the Internal Revenue Service.

The Internal Revenue Service receives about 60,000 offers in compromise each year and accepts about 38% of those filed.

Before we tell you everything you need to know please understand that I would not contemplate filing an offer in compromise on your own because of the very specific standards that IRS uses to qualify a taxpayer for an offer in compromise.

The average Internal Revenue Service agent probably spends about 20 hours investigating every offer in compromise and the IRS have very tight financials formulas and acceptance standards for the OIC.

The offer in compromise is not for everybody.
The IRS Pre-qualifier tool for the IRS Offer in Compromise used in the process of tax debt settlement

You should also know that there is a pre-qualifier tool that is available to you.

You can find on our website and any taxpayer/ client can walk through to find out if they are a qualified candidate for the offer in compromise or tax settlement program.

No offer in compromise should be filed unless the individual has walked through the pre-qualifier tool to make sure they have a solid chance of getting their offer in compromise accepted.

If you qualify through the IRS pre-qualifier tool for the offer in compromise you have an excellent chance of getting your offer in compromise accepted by the Internal Revenue Service.

You will find below all the questions that are asked on the pre-qualifier tool and the financial statement that is required to be turned into Internal Revenue Service for the offer in compromise program.

The pre- qualifier tool is used by Internal Revenue Service to make sure taxpayers understand the offer in compromise program.

Below you will find out the questions that are asked on the pre-qualifier tool.

So be apprised, these are the questions you will to be asked by the Internal Revenue Service for your offer in compromise.

Also it should be noted that this tool is used by the IRS collection division anytime you owe the IRS money on back taxes.

The questions asked on the Pre-qualifier Tool + This tool should only be used as a guide.

The reason that I say that this should be used as a guide is simple.

Sometimes there are very unique circumstances that shape a particular offer in compromise and sometimes IRS is willing to settle for less if the theory of the effective tax administration comes in the play.

Preliminary Questions that are asked :

 

Before IRS can proceed to accept your offer in compromise you must answer yes to these questions:

1. Are you in an open bankruptcy proceeding?
2. Have you filed all required federal tax returns?
3. Have you made all required estimated tax payments?
4. If you are self-employed and have employees, have you submitted all required federal
tax deposits?

If you answer NO to these questions IRS has the right to stop the offer in compromise and rejected immediately. In nine times out of 10 you can bet they will stop the offer in compromise because they are too lazy to work the case.

IRS cannot work your offer in compromise if you were are in an open bankruptcy proceeding and they can choose to reject your offer if you have not filed all your federal income tax returns and are not current in the year you are filing the offer.

Being current simply means you have made all required estimated tax payments or you have the proper amount of withholding being taken out of your payroll check to cover your taxes.

I hate to say this but, as a general rule on IRS will look to reject any offer in compromise before they accept it because of the sheer amount of work it takes for a person to get an offer in compromise accepted.

It must be signed off by their manager, by the regional manager in the district Council of the Internal Revenue Service. The reason these cases are reviewed so much is because of the simply fact they are open for public expect inspection for one year at the district office.

 

As a former IRS agent I can tell you it’s a lot easier to find reasons to reject the OIC than to bring them to managers to have them accepted, sad but true.

 

The IRS is only interested in two assets to settle your case with an offer in compromise and they are:

1. Your income,

2. Your assets.

General Information the IRS will want to acquire. The income and expense side.

The Internal Revenue Service will only allow certain necessary living expenses and those only.

They will plug your expenses against the national, regional, and geographical expense standards and allow you the “average monthly expenses”.

IRS will only accept reasonable expenses to make sure you’re living within your means therefore in every area in the United States the Department of Labor have come out with statistics to show what average reasonable expenses .

IRS will expect you fall within those means.

The Internal Revenue Service will disallow the expenses over above the standard. The sum total of the expenses over the standard are thus multiplied by 12 and become part of the income side of the offer in compromise.

 

Information relative to the National Standards used by the IRS

 

Collection Financial Standards are used to help determine a taxpayer’s ability to pay a delinquent tax liability.

Allowable living expenses include those expenses that meet the necessary expense test. The necessary expense test is defined as expenses that are necessary to provide for a taxpayer’s (and his or her family’s) health and welfare and/or production of income.

National Standards for food, clothing and other items apply nationwide. Taxpayers are allowed the total National Standards amount for their family size, without questioning the amount actually spent.

National Standards have also been established for minimum allowances for out-of-pocket health care expenses. Taxpayers and their dependents are allowed the standard amount on a per person basis, without questioning the amount actually spent.

Maximum allowances for housing and utilities and transportation, known as the Local Standards, vary by location. In most cases, the taxpayer is allowed the amount actually spent, or the local standard, whichever is less.

Generally, the total number of persons allowed for necessary living expenses should be the same as those allowed as exemptions on the taxpayer’s most recent year income tax return.

If the IRS determines that the facts and circumstances of a taxpayer’s situation indicate that using the standards is inadequate to provide for basic living expenses, we may allow for actual expenses. However, taxpayers must provide documentation that supports a determination that using national and local expense standards leaves them an inadequate means of providing for basic living expenses.

 

As far as the asset side:

As far as the asset side is considered IRS wants 100% of the total liquidation value of all your assets. You will find out below what list of assets IRS will consider.

Information required by the Pre-Qualifier Tool

IRS will want you to enter information about your location, household and tax debt. They will want to know your:

1. ZIP or postal code

2. State

3. County

4. Total members of household

5. Total members of household 65 years or older.

The IRS wants this information to apply the national standards for expenses in the area and the location you have plus the number of exemptions.

Total IRS tax debt (whole dollars)

1. What is the most recent tax year you are requesting to compromise?

Your Assets – These are the assets IRS will be inquiring about.

The Internal Revenue Service will require all liquidation values to be part of your offer. If you add up the following liquidation values on the below assets IRS will accept nothing less.

Total bank balances (checking, savings, money market, CDs, etc.)

Home market value

Home loan balance

Vehicles

All Retirement account equity (401k, IRA, etc.)

Other real property (rental, business, land, timeshare, etc.)

Other asset equity (airplane, motorcycle, recreational vehicle, etc.)

Stocks, bonds and other investments

Miscellaneous (art, coin and gun collections, etc.)

Information about your monthly household income.

The Internal Revenue Service will use the accurate/LEXIS-NEXIS and Google search engines to inquire about you and your assets.

Make sure you turn in an accurate and complete financial statement.

IRS will want proof of:

a. Gross wages

b. Interest and dividends

c. Distributions from partnerships, sub-S corporations, etc.

d. Net rental income

e. Net business income

f. Child support received

g. Alimony received

h. Rent or mortgage and utilities

i. Vehicle 1 loan or lease payment

j. Vehicle operating costs (gas, repairs, etc.)

k. Total vehicles owned

l. Public transportation costs

m. Health insurance premiums

n. Federal, state and local taxes (Enter a 0 if no taxes)

o. Court-ordered payments (child support, alimony, etc.)

p. Child dependent care costs

q. Life insurance premiums and cash surrender values

Selecting a payment option for tax debt settlement

Your initial payment will vary based on your offer and the payment option you choose:

Lump Sum Cash:

Submit an initial payment of 20 percent of the total offer amount with your application. Wait for written acceptance, then pay the remaining balance of the offer in five or fewer payments.

 

Periodic Payment:

Submit your initial payment with your application. Continue to pay the remaining balance in monthly installments while the IRS considers your offer. If accepted, continue to pay monthly until it is paid in full.

Downside to Submitting an OIC, yes there is a downside.

 

Completing the forms is just the beginning. After you submit the forms, the IRS will ask you for rafts of financial documentation — pay stubs, bank records, vehicle registrations, and myriad other items.

This is an exhaustive, time-consuming process on the part of the Agent.

Some taxpayers wind up submitting files upon files of documents to the IRS to support their OIC request.

If your OIC is rejected, the disclosures you made about your assets give the IRS all the information it needs to accelerate its collection efforts against you. It gives the Internal Revenue Service or road map to collect your money.

For this reason, it makes sense not to submit an offer unless it is likely to be accepted. That is why going through the pre-qualifier tool on our website to help assure you have a more likely chance of acceptance.

Remember that interest keeps accruing during the offer in compromise negotiation process, meaning you’ll end up owing more than ever if you cannot make a deal.

Contact us today to learn more about the filing of an offer in compromise. When dealing with our firm you will be talking to a tax attorney, tax lawyer, certified public accountant or former IRS agent, manager tax instructor.

Free consultations are available upon request.