IRS and the Effective Tax Administration Offers in Compromise
General Overview Effective Tax Administration Offers in Compromise
1.
This IRS section provides guidance for IRS offer examiners in considering effective tax administration Offer in Compromise requests.It is a very little used Offer in Compromise.
2.
Offer in Compromise, Form 656, and Form 656?A, Additional Basis for Compromise, should be completed by taxpayers requesting consideration of an offer to compromise based on effective tax administration.( ETA)
3. This is an offer in compromise is rarely used but a very effective tool to settle cases.
Considering the Effective Tax Administration Issue
1.
If there are no grounds for compromise under the doubt as to collectibility or doubt as to liability provisions, a compromise may be entered into to promote effective tax administration when compromise of he liability will not undermine compliance with the tax laws, and:
1.
Collection of the full liability will create economic hardship within the meaning of Treasury Regulation section 301.6343?1; or,
2.
Regardless of the taxpayer’s financial circumstances, exceptional circumstances exist such that collection of the full liability will be detrimental to voluntary compliance.
2.
Factors supporting a determination that compromise would not undermine compliance with the tax laws include:
1.
Taxpayer does not have a history of noncompliance with the filing and payment requirements of the Internal Revenue Code
2.
Taxpayer has not taken deliberate actions to avoid the payment of taxes; and,
3.
Taxpayer has not encouraged others to refuse to comply with the tax laws.
These factors should be considered but no minimum compliance requirement exists.
3.
Factors supporting a determination of economic hardship include:
1.
Taxpayer has a serious illness that renders the taxpayer incapable of earning a living and it is reasonably foreseeable that taxpayer’s financial resources will be exhausted providing for care and support during the course of the illness;
2.
Although taxpayer has certain assets, liquidation of those assets to pay outstanding liabilities would render the taxpayer unable to meet basic living expenses;
3.
Although taxpayer has certain assets, the taxpayer is unable to borrow against equity in those assets and disposition by seizure/sale of the assets would have sufficient adverse consequences such that enforced collection is unlikely.
4.
The following examples illustrate cases in which collection of the full liability will create economic hardship and could qualify for Effective Tax Administration
1.
Taxpayer is disabled and lives on a fixed income that will not, after allowance of adequate basic living expenses, permit full payment of his tax liability under an installment agreement. Taxpayer also owns a modest house that has been especially equipped to accommodate his disability. Taxpayer’s equity in the house is sufficient to permit payment of the liability he owes. However, because of his disability and limited earning potential, taxpayer is unable to obtain a mortgage or otherwise borrow against this equity. In addition, because the taxpayer’s home has been specially equipped to accommodate his disability, forced sale of the taxpayer’s residence would create severe adverse consequences for the taxpayer, making such a sale unlikely. Taxpayer’s overall compliance history does not weigh against compromise.
2.
Taxpayer has assets sufficient to satisfy the tax liability. Taxpayer provides full time care and assistance to her dependent child, who has a serious long-term illness. It is expected that the taxpayer will need to use the equity in her assets to provide for adequate basic living expenses and medical care for her child. Taxpayer’s overall compliance history does not weigh against compromise.
3.
Taxpayer is retired and his only income is from a pension. The taxpayer’s only asset is a retirement account, and the funds in the account are sufficient to satisfy the tax liability. Liquidation of the retirement
4. Each case is determined on its own merit and no two cases are alike.
The collection division of the Internal Revenue Service handles these cases
1.
Collection has jurisdiction over offers based on Effective Tax Administration. Collection will retain offers based on economic hardship, and Detriment to Voluntary Compliance offers will generally be forwarded to Examination for consideration.
2. 90% of all these Offer in compromise are worked by the Collection Division.
There are so many cases out there right now that qualify for Effective Tax Administration that the American public has know idea their  case can be settled for cheap.It should also be noted there are no guidelines for Effective Tax Administration , just judgment involved in the settling of these Offers in Compromise. A true hardship must be documented but these cases do go through and get accepted.
If you have a case the qualifies, call Fresh Start Tax today 1-866-700-1040