Offers in Compromise – Changes to Offers make life easier for taxpayers – Fresh Start Tax – Former IRS
Mr. Michael D. Sullivan is a Former IRS Agent and teaching Instructor with the Internal Revenue Service. Michael worked and taught the Offer in Compromise Program at the IRS. 1-866-700-1040.
Call us today for a no cost evaluation for your Offer, do not be ripped off. We are Florida’s premier tax resolution firm. Serving Florida since 1982.
After thousands of Offers in Compromises being rejected by the IRS, the government has now made it simple and easy to file for the tax debt settlement called the Offer in Compromise.
An offer in compromise or tax debt settlement allows you to settle your tax debt for less than the full amount you owe. Sometimes it is refereed to as the pennies on a dollar settlement. If you do not have the money to pay your back taxes in full your should certainly consider the filing of an Offer.
IRS primarily looks at three aspect of the taxpayers financial life. They look at:
a. Ability to pay,
b. Income,
c. Expenses, and
d. Asset equity.
Under the ” Tax Increase Prevention and Reconciliation Act of 2005 “IRS made major changes to the Offer Program
As the Tax Increase Prevention and Reconciliation Act of 2005 was signed into law on May 17, 2006. Section 509 of this law creates significant changes to the IRS Offer in Compromise (OIC) program by amending IRC 7122.
Rule change, technical but important never the less.
TIPRA, Section 509, amends IRC 7122 by creating a new subsection (c), titled “Rules for Submission of Offers in Compromise.” The new subsection (c) requires that offers submitted on or after July 16, 2006, (and not subject to the waiver with respect to low-income taxpayers or offers filed under doubt as to liability only) must be accompanied by partial payments of the proposed offer amount. The form of these partial payments depends on the taxpayer’s proposed offer and terms of payment.
Case in which the IRS will not process a Offer
Read carefully the list below to make sure you have a viable tax offer.
1.Taxpayer is a debtor in an open bankruptcy proceeding
2. Taxpayer does not submit the $150 application fee or a signed Form 656-A, Income Certification for Offer in Compromise Application Fee and Payment
3. Taxpayer does not submit the 20 percent payment with the lump sum offer, or a signed Form 656-A
4.Taxpayer does not submit the initial payment with the periodic payment offer or a signed Form 656-A
Another big change was the compliance issues
Compliance is not considered to be a processability criterion for OIC initial submissions. If compliance is the only issue, the offer will be deemed processable. However, IRS will contact the taxpayer by either telephone or correspondence requesting the delinquent return(s), federal tax deposits or required estimated tax payment(s).
A reasonable amount of time will be provided to the taxpayer to comply. Failure to comply will cause the IRS to return the offer to the taxpayer and retain the application fee, along with all TIPRA payments previously paid. The taxpayer will not have appeal rights to this decision.
Payment are not refundable if IRS does not accept your offer.
No, the TIPRA payments are not refundable. Based on IRC 7122(c), the 20 percent payment on a lump sum offer and the periodic payments on a short term or deferred payment offer are considered “payments on tax” and are not refundable.
Can you designate how these payments should be applied?
Yes. Taxpayers are not required to but may designate the application of the TIPRA payments. The designation must be made in writing when the offer is submitted or when the required payment is made
You must not miss making a payment while the Offer is being processed
The IRS will contact the taxpayer and provide one opportunity to pay the missing amount. The offer will be declared withdrawn and returned back to the taxpayer if the taxpayer fails to submit the required amount
All payment(s) previously made will be applied to the taxpayer’s account. The IRS will retain the application fee and the taxpayer will not have appeal rights to this decision.
New Financial Analysis
Changes to income and expenses;
a. Revising the calculation for the taxpayer’s future income.
b. Allowing taxpayers to repay their student loans.
c. Allowing taxpayers to pay state and local delinquent taxes.
d. Expanding the Allowable Living Expense allowance category and amount.
Calculations
When the IRS calculates a taxpayer’s reasonable collection potential, it will now look at only one year of future income for offers paid in five or fewer months, down from four years, and two years of future income for offers paid in six to 24 months, down from five years. All offers must be fully paid within 24 months of the date the offer is accepted.
The Form 656-B, Offer in Compromise Booklet, and Form 656, Offer in Compromise, has been revised to reflect the changes.
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