by Fresh Start Tax | Feb 13, 2014 | Offer in Compromise, Tax Help, Tax Settlements
IRS Settlement Made Easy with the Offer in Compromise
I am a former IRS Agent and teaching Instructor.
It took them a long time but the Internal Revenue Service finally made it easy for taxpayers to settle their tax debt through the offer in compromise.
About three years ago management of the IRS came out with the new fresh start program or fresh start initiative that help taxpayers who owed back tax debt settle with the Internal Revenue Service.
When I was a former IRS agent and teaching instructor the offer in compromise was frowned upon.
Acceptance Rates for the Offer in Compromise
This last year 58,000 offers in compromise were filed and 38% of all those were accepted.
The average settlement on a dollar was $.14.
Right now the average wait to have your offer in compromise worked is four – eight months.
7500 cases right now or sitting in the IRS offer Queue.
The key to getting an offer in compromise settled
If you want to settle your tax debt with the offer in compromise it’s all about packaging and knowing the formulas.
The more work you do the less work IRS rest does.
Our recommendation is that you fill out the forms accurately and correctly and make sure all documentation is there so IRS can process your offer in compromise all at one time.
This makes the IRS settlement easy. IRS is looking for easy.
The most common mistakes taxpayers make is the lack of documentation.
Do not give the Internal Revenue Service or reason to reject your offer.
IRS will generally take the first road out of town and reject your offer if the packaging is incorrect. There are 7500 cases right now in the IRS queue that cannot be worked so IRS generally will reject the offer before they will tend to accept them. Basically anything on the offer in compromise financial statements that has a number on it must be verified to the Internal Revenue Service.
Documentation is key to settlement.
The key factor to settle on the lowest dollar.
To settle for the lowest hour possible you must understand the formulas.
IRS wants to get into your pocket as much as they can so they will look closely at the liquidity of your assets values and your income to expense ratios.
IRS has a system called the national standard expenses that they will apply against your income.
It is important to know national, local and geographical standards and apply them against your income.
Before any taxpayer submits an offer in compromise the taxpayer is best served by filling out and seeing for themselves that their offer has a chance to be accepted.
You can go to our homepage and click on forms and click on the link that says pre-qualifier tool for the offer in compromise.
There is a five step process that will tell you whether IRS will accept your offer in compromise.
If IRS feels you can keep making monthly payments however because you have substantial money left over monthly, IRS could reject your offer in compromise.
That’s why it is best to have a professional person review your offer in compromise before it is sent to the Internal Revenue Service.
Three Grounds of Acceptance
The IRS may accept an OIC based on three grounds.
First, acceptance is permitted if there is doubt as to liability.
This ground is only met when genuine doubt exists under applicable law that the IRS has correctly determined the amount owed.
Second, acceptance is permitted if there is doubt that the amount owed is fully collectible.
This means that doubt as to collectibility exists in any case where the taxpayer’s assets and income are less than the full amount of the tax liability.
Third, acceptance is permitted based on effective tax administration.
An offer may be accepted based on effective tax administration when there is no doubt that the tax is legally owed and that the full amount owed can be collected, but requiring payment in full would either create an economic hardship or would be unfair and inequitable because of exceptional circumstances.
Other Information Offers in Compromise
The IRS is also expanding a new streamlined Offer in Compromise (OIC) program to cover a larger group of struggling taxpayers.
This streamlined OIC is being expanded to allow taxpayers with annual incomes up to $100,000 to participate. In addition, participants must have tax liability of less than $50,000, doubling the current limit of $25,000 or less.
OICs are subject to acceptance based on legal requirements. An offer-in-compromise is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed.
Generally, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay.
IRS Making it Easier to Settle Tax with the Offer in Compromise – Former IRS Settlement
by Fresh Start Tax | Dec 16, 2013 | Offer in Compromise, Tax Help
Taxpayers filed 58,000 offers in compromise last year. 38% of all those offers in compromise filed were accepted by the Internal Revenue Service. The average settlement on a dollar was $.14.
The best advice I can give you is use a professional tax firm was filed multiple offers in compromise to prepare and negotiate your offer in compromise.
There are certain formulas that IRS use to accept an offer in compromise.
Knowing these formulas are great help to the success taxpayers getting this tax debt or tax burdens off their back.
IRS can only settle a case by the use of the offer in compromise formula.
Being a former IRS agent and teaching instructor I not only worked and settled cases with the IRS but I taught the offer in compromise program to revenue officers and former IRS agents.
Because of the number of marketing and Internet companies aggressively seeking dollars from consumers there are many false claims and fraudulent advertising driving people to file an offer compromise when in fact they do not qualify for the offer in compromise program.
The Offer in Compromise Pre- Qualifier Tool
The Internal Revenue Service couple years ago launched a pre-qualifier tool to help taxpayers navigate their way themselves to find out whether they qualify for the offer in compromise program.
You can find that pre-qualifier tool for the offer in compromise on our website.
You should understand that there is a lot of skewing and a lot of internal maneuvers to make within that formula to make sure your offer in compromise can get accepted if you are in fact a qualified candidate/taxpayer for offer in compromise help.
When the Internal Revenue Service accepts the offer in compromise a taxpayer who has a federal tax lien filed against their name will get that removed as soon as they fulfill the contract and terms of the offer in compromise.
You can call us today for free initial tax assessment and we can walk through the program and find out if you are a qualified candidate to settle your case and we can give you help with your offer in compromise.
Acceptance Formulas Revenue Service
IRS is interested in only things assets and income.
IRS will want the total liquidation values of all your assets and the IRS will value your income based on the monthly standards.
IRS will add your total value of your income and multiple by 12 the value of income over and above the necessary living expenses.
This is a rock solid formula.
The IRS Offer in Compromise General Information
The Offer in comprise will or can settle the taxpayer’s tax liabilities for less than the full amount owed.
It is important to remember that not all taxpayers are qualified candidates for the offer in compromise. You should check with the true tax professional to make sure you qualify for this program.
Make sure your are Eligible
In order to be eligible for an OIC, the taxpayer must have:
- filed all tax returns,
- made all required estimated tax payments for the current year, and
- made all required federal tax deposits for the current quarter if the taxpayer is a business owner with employees.
- In most cases, the IRS will not accept an OIC unless the amount offered by the taxpayer is equal to or greater than the reasonable collection potential (the RCP). The RCP is how the IRS measures the taxpayer’s ability to pay.
- The RCP includes the value that can be realized from the taxpayer’s assets, such as real property, automobiles, bank accounts, and other property. In addition to property, the RCP also includes anticipated future income, less certain amounts allowed for basic living expenses.
The IRS may accept an OIC based on three grounds.
- 1. Acceptance is permitted if there is doubt as to liability. This ground is only met when genuine doubt exists under applicable law that the IRS has correctly determined the amount owed.
- 2. Acceptance is permitted if there is doubt that the amount owed is fully collectible. This means that doubt as to collectibility exists in any case where the taxpayer’s assets and income are less than the full amount of the tax liability.
- 3. Acceptance is permitted based on effective tax administration. An offer may be accepted based on effective tax administration when there is no doubt that the tax is legally owed and that the full amount owed can be collected, but requiring payment in full would either create an economic hardship or would be unfair and inequitable because of exceptional circumstances.
OIC – Effective Tax Administration
When submitting an OIC based on doubt as to collectibility or based on effective tax administration taxpayers must use the most current version of form 656 (PDF), Offer in Compromise, and also submit form 433 oic (PDF), Collection Information Statement for Wage Earners and Self-Employed Individuals, and/or form 433B oic (PDF), Collection Information Statement for Businesses.
OIC – Doubt as to liability
A taxpayer submitting an OIC based on doubt as to liability must file a form 656-l (PDF), Offer in Compromise (Doubt as to Liability), instead of Form 656 and Form 433-A (OIC) and/or Form 433-B (OIC).
Application Fees for the Offer in Compromise
In general, a taxpayer must submit a $150 application fee with the Form 656. Do not combine this fee with any other tax payments.
There are, however, two exceptions to this requirement.
- First, no application fee is required if the OIC is based on doubt as to liability.
- Second, the fee is not required if the taxpayer is an individual (not a corporation, partnership, or other entity) who qualifies for the low-income exception. This exception applies if the taxpayer’s total monthly income falls at or below 250 percent of the poverty guidelines published by the Department of Health and Human Services.
- Section 4 of Form 656 contains the Low Income Certification guidelines to assist taxpayers in determining whether they qualify for the low-income exception. A taxpayer who claims the low-income exception must complete section 4 of Form 656.
Making a Decision of How to Pay the Offer in Compromise
Taxpayers may choose to pay the offer amount in a:
- lump sum or
- in installment payments.
A “lump sum offer” is defined as an offer payable in 5 or fewer installments and within 24 months after the offer is accepted.
If a taxpayer submits a lump sum offer, the taxpayer must include with the Form 656 a nonrefundable payment equal to 20 percent of the offer amount.
This payment is required in addition to the $150 application fee. The 20 percent amount is called “nonrefundable” because it cannot be returned to the taxpayer even if the offer is rejected or returned to the taxpayer without acceptance.
The 20 percent amount will be applied to the taxpayer’s tax liability.
The taxpayer has a right to specify the particular tax liability to which the IRS will apply the 20 percent amount.
The offer is called a “periodic payment offer” under the tax law if it is payable in 6 or more monthly installments and within 24 months after the offer is accepted.
When submitting a periodic payment offer, the taxpayer must include the first proposed installment payment along with the Form 656.
This payment is required in addition to the $150 application fee.
This amount is nonrefundable, just like the 20 percent payment required for a lump sum offer.
Also, while the IRS is evaluating a periodic payment offer, the taxpayer must continue to make the installment payments provided for under the terms of the offer.
These amounts are also nonrefundable.
These amounts are applied to the tax liabilities and the taxpayer has a right to specify the particular tax liabilities to which the periodic payments will be applied.
The statutory time within which the IRS may engage in collection activities is suspended during the period that the OIC is under consideration and is further suspended if the OIC is rejected by the IRS and where the taxpayer appeals the rejection to the IRS Office of Appeals within 30 days from the date of the notice of rejection.
If the IRS accepts the taxpayer’s offer, the IRS expects that the taxpayer will have no further delinquencies and will fully comply with the tax laws.
If the taxpayer does not abide by all the terms and conditions of the OIC, the IRS may determine that the OIC is in default.
For doubt as to collectibility and effective tax administration OICs, the terms and conditions include a requirement that the taxpayer timely file all tax returns and timely pay all taxes for 5 years from the date of acceptance of the OIC. Offers in compromise filed for effective tax administration are hard to get through. I’ll imagine the last five years there are no more than five offers in compromise accepted under effective tax administration.
When an OIC is declared to be in default, the agreement is no longer in effect and the IRS may then collect the amounts originally owed, plus interest and penalties.
Additionally, any refunds due within the calendar year in which the offer is accepted will be applied to the tax debt.
If the IRS rejects your offer you can Appeal for File another OIC
If the IRS rejects an OIC, then the taxpayer will be notified by mail. The letter will explain the reason that the IRS rejected the offer and will provide detailed instructions on how the taxpayer may appeal the decision to the IRS Office of Appeals. If you think you have a valid appeal fight for your offer.
The appeal must be made within 30 days from the date of the letter. In some cases, an OIC is returned to the taxpayer, rather than rejected, because the taxpayer has not submitted necessary information, has filed for bankruptcy, has failed to include a required application fee or nonrefundable payment with the offer, or has failed to file tax returns or pay current tax liabilities while the offer is under consideration.
A return is different from a rejection because there is no right to appeal the IRS’s decision to return the offer. Believe it or not there is an extraordinarily high number of offers in compromise returned because the taxpayer simply do not know how to complete the form.
There are no limitations to the filing of offers in compromise.
You could file as many offers in compromise is you wish. The highest acceptance chance that you will possibly have is using tax professional firm who knows the offer in compromise program inside out.
by Fresh Start Tax | Dec 6, 2013 | Offer in Compromise, Tax Help
I am a former IRS agent and teaching instructor. I worked out of the local South Florida IRS offices and also out of the regional training centers where I taught the offer in compromise program.
Our firm is comprised of tax attorneys, certified public accountants, and former IRS agents, managers and tax instructors that have a combined 60 years right here in the local South Florida area.
We are A+ rated by the Better Business Bureau and have been in practice since 1982.
If you owe monies to the Internal Revenue Service the only way to settle your IRS tax bill is through the use of an offer in compromise.
The offer in compromise has been around for a long time but it was not until the last three years did the Internal Revenue Service take settlements seriously.
When I worked at Internal Revenue Service and was a teaching instructor of the offer in compromise the first thought by Agents were sadly to find a way to reject the offer because of all the work it took to put the case through. The agents didn’t like them, the managers didn’t like them nor did District Counsel.
Because the Offer in Compromise is open the public inspection for one year and no agent wanted their work open to managerial and public scrutiny.
The offer in compromise takes an agent anywhere from 10 to 30 hours to work however a lot of that is changed due to the Internet and computer systems.
What taxpayers do not realize is with the couple clicks of the finger the IRS can check out your complete financial statement and also determine your credibility.
The Fresh Start Program of the IRS
With the Advent of the IRS fresh start initiative or fresh start program and the very fact that the government needs money the Internal Revenue Service is finally taking seriously the use of the offer in compromise. Many taxpayers are now settling their tax debts.
Offer in Compromise Tax Facts
1. Last year the Internal Revenue Service accepted 38% of all offers in compromise.Finally!
2. Last year there were 58,000 offers in compromise filed.
3. The average settlement was $.14 on a dollar.
Before any taxpayer uses the offer in compromise to settle their tax bill they should know that not everybody can settle their tax bill with the Internal Revenue Service.
Every taxpayer needs to know that they can be pre-qualified and pre-screened to find out whether they are a suitable candidate for the offer in compromise to settle their tax bill.
You can find that pre-qualifier tool on our website and find out if you are eligible before you give your money to any professional firm.
Simply go to our homepage for the top toolbar and click on IRS forms. Once on the forms page you will find a pre-qualifier tool
What is IRS looking for a Settle my Tax Bill ?
The only two things IRS is looking for on the offer in compromise is;
1. the liquidity value of your assets and,
2. your disposable monthly income.
Basically those two figures will comprise your settlement of your tax bill.
How the Settlement is determined
Internal Revenue Service will add up the liquidity value of your assets and find out what your disposal monthly income and add the two together. That is a starting point for your offer in compromise.
The big wow factor for an offer in compromise are the national standard expenses.
The IRS will only accept the national, regional and local standards for all your monthly expenses.
You must make sure you understand the national concept standards before applying for the offer in compromise.
You can find those standards on our website for each area in the United States.
Other factors play into this formula and you should speak directly to a true tax professional before the contemplation of your offer in compromise filing to settle your IRS taxable.
The IRS may accept an OIC based on three grounds. There is only 3 grounds for acceptance.
1. Acceptance is permitted if there is doubt as to liability. This means you never owned the tax.
This ground is only met when genuine doubt exists under applicable law that the IRS has correctly determined the amount owed.
2. Acceptance is permitted if there is doubt that the amount owed is fully collectible. this simply means you want to settle your tax for pennies on a dollar.
This means that doubt as to collectibility exists in any case where the taxpayer’s assets and income are less than the full amount of the tax liability.
3. Acceptance is permitted based on effective tax administration. This means because of an unusual circumstance because of age, health or other conditions IRS should take a real close look at your situation because it is most unusual.
An offer may be accepted based on effective tax administration when there is no doubt that the tax is legally owed and that the full amount owed can be collected, but requiring payment in full would either create an economic hardship or would be unfair and inequitable because of exceptional circumstances.
Call us today for free initial consultation or evaluation to find out whether you are qualified or suitable candidate to file an offer in compromise to settle your tax bill.
Miami, Ft.Lauderdale – Use the Offer in Compromise to Settle your Tax Bill – Former IRS
by Fresh Start Tax | Dec 6, 2013 | Offer in Compromise
Call us for a no cost professional consult.
If you owe monies to the Internal Revenue Service the only way to settle your IRS tax bill is through the use of an offer in compromise.
The offer in compromise has been around for a long time but it was not until the last three years did the Internal Revenue Service take settlements seriously.
When I worked at Internal Revenue Service and was a teaching instructor of the offer in compromise the first thought by Agents were sadly to find a way to reject the offer because of all the work it took to put the case through.
Offers in Compromise take a long hours to work and it is a long time the process because they are open the public inspection for one year and no agent wanted their work open to managerial and public scrutiny.
With the Advent of he IRS fresh start initiative or fresh start program and the very fact that the government needs money the Internal Revenue Service is finally taking seriously the use of the offer in compromise. Many taxpayers are now settling their tax debts.
Offer in compromise Facts
- Last year the Internal Revenue Service accepted 38% of all offers in compromise.
- Last year there were 58,000 offers in compromise filed.
- The average settlement was $.14 on a dollar.
Before any taxpayer uses the offer in compromise to settle their tax bill they should know that not everybody can settle their tax bill with the Internal Revenue Service.
Every taxpayer needs to know that they can be pre-qualified and pre-screened to find out whether they are a suitable candidate for the offer in compromise to settle their tax bill.
You can find that pre-qualifier tool on our website and find out if you are eligible before you give your money to any professional firm.
What is IRS looking for a Settle my Tax Bill ?
The only two things IRS is looking for on the offer in compromise is;
- the liquidity value of your assets and
- disposable monthly income.
- Basically those two figures will comprise your settlement of your tax bill.
Internal Revenue Service will add up the liquidity value of your assets and find out what your disposal monthly income and add the two together. That is a starting point for your offer in compromise.
The big wow factor for an offer in compromise are the national standard expenses.
The IRS will only accept the national, regional and local standards for all your expenses.
You must make sure you understand the national concept standards before applying for the offer in compromise.
You can find those standards on our website for each area in the United States
Other factors play into this formula and you should speak directly to a true tax professional before the contemplation of your offer in compromise filing to settle your IRS taxable.
The IRS may accept an OIC based on three grounds.
1. Acceptance is permitted if there is doubt as to liability.
This ground is only met when genuine doubt exists under applicable law that the IRS has correctly determined the amount owed.
2. Acceptance is permitted if there is doubt that the amount owed is fully collectible.
This means that doubt as to collectibility exists in any case where the taxpayer’s assets and income are less than the full amount of the tax liability.
3. Acceptance is permitted based on effective tax administration.
An offer may be accepted based on effective tax administration when there is no doubt that the tax is legally owed and that the full amount owed can be collected, but requiring payment in full would either create an economic hardship or would be unfair and inequitable because of exceptional circumstances.
Call us today for free initial consultation or evaluation to find out whether you are qualified or suitable candidate to file an offer in compromise to settle your tax bill.
Use a IRS Offer in Compromise to Settle IRS Tax Bill – Former IRS Settlement Agent
by Fresh Start Tax | Dec 6, 2013 | Offer in Compromise
I am a former IRS agent who worked and taught the offer in compromise program while I was at Internal Revenue Service.
I worked both out of the local office and the regional training center.
The best way for taxpayers to settle their cases is through the offer in compromise but before we get started you should know that not everybody is an offer in compromise candidate.
There are very strict qualifications and I would recommend that nobody give their money to an Internet firm or professional tax company unless they know they are a pre-qualified and a suitable candidate to file for an offer in compromise.
You can go directly to our website and search for the pre-qualifier tool for the offer in compromise.
You can find out for yourself whether you are a qualified candidate or you can call us today for free initial tax consultation and we can tell you within minutes whether you should proceed with the filing of an offer in compromise.
About three years ago the Internal Revenue Service got very serious about offers in compromise, prior to that they were almost impossible to get to the system.
Today IRS accepts about 38% of all offers in compromise filed.
Last year 58,000 offers in compromise were filed and the average settlement was $.14 on a dollar.
Once again, before you file for offer in compromise make sure you’re a qualified candidate to do so.
What is IRS Looking for to Settle?
When IRS is looking to settle a case they are basically looking at two things;
1. assets,
2. income
The Internal Revenue Service has specific standards of acceptance and the only two things that are interested in is available and income in liquidity and assets.
IRS is basically want to know the liquidation value of all your assets and they want to know what disposable monthly income that you have. There is a formula were they combine income and assets and come up with a base figure.
In general, the Internal Revenue Service will add up your assets, multiply your available monthly income times 12 and ask you for that as a settlement. Of course there are some exceptions and those you should speak directly to us about.
Overview of the FAQ’s
1. What is the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA)?
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.
2. When did the TIPRA law go into effect?
The law went into effect for all offers that are submitted to the IRS on or after July 16, 2006.
3. How did TIPRA, Section 509, impact the OIC program?
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.
The law also establishes a time period after which an offer would be deemed accepted by the IRS.
4. What are the proposed offer terms that became effective as of July 16, 2006?
Taxpayers filing offers (excluding doubt as to liability offers) will have to specify whether they are filing a lump sum or “periodic payment” offer.
The new IRC 7122(c)(1)(A) subsection requires that a taxpayer filing a lump sum offer must pay 20 percent of the offer amount with the application. A lump sum offer means any offer of payments made in five or fewer installments.
The new IRC 7122(c)(1)(B) subsection requires that a taxpayer filing a periodic payment offer pay the first proposed installment payment with the offer application and pay additional installments while the IRS is evaluating the offer.
A periodic payment offer means any offer of payments made in six or more installments.
5. What time period has been established by TIPRA in relation to declaring offers accepted?
IRC 7122(f), as amended by the TIPRA legislation, will cause the IRS to deem an offer “accepted” if it is not withdrawn, returned or rejected within 24 months after the IRS receipt date.
If a liability included in the offer amount is disputed in any judicial proceeding, that time period is omitted from calculating the 24-month time frame.
6. Are all taxpayers required to pay the payments imposed by TIPRA in order for the IRS to evaluate their offer in compromise?
No. Taxpayers qualifying as low-income or filing a doubt as to liability offer are not required to pay the $150 application fee, the 20 percent payment on a lump sum offer, or the initial partial payments on a periodic short term or deferred payment offer.
7. What is a low-income taxpayer?
For offer purposes, and as redefined with the release of Form 656 (Revision February 2007), a low income taxpayer is an individual whose income is 250 percent of the 2006 HHS Poverty Guidelines.
These new standards are incorporated into the IRS OIC Monthly Low Income Guidelines that went into effect with the release of Form 656 (Revision February 2007).
8. What does a taxpayer need to submit in order to claim to qualify as a low-income taxpayer who is not be required to pay the payments imposed by TIPRA?
As is the case when claiming exemption from payment of the $150 application fee, the taxpayer will need to complete the OIC Application Fee and Payment Worksheet and Form 656-A, Income Certification for Offer in Compromise Application Fee and Payment. Both the worksheet and Form 656-A must be submitted with the Form 656 application.
9. Does a taxpayer need to submit two Form 656-A forms to claim exemption from the application fee and the TIPRA payments?
No, only one Form 656-A will be required and it will apply to both the application fee and the required TIPRA payments.
10. What happens if the taxpayer submits a Form 656-A claiming to qualify as low-income and the IRS later determines that the taxpayer did not qualify?
If the OIC investigator determines that the taxpayer’s income for the family size exceeds the levels for which a Form 656-A certification is allowed (e.g. the taxpayer should have paid the application fee and the partial offer payments), the offer investigation will immediately cease and the offer will be returned to the taxpayer.
The taxpayer will not have appeal rights to this decision.
11. What happens if the taxpayer, who is not filing a doubt as to liability offer, does not submit the payment imposed by TIPRA and does not qualify as low-income?
Failure to pay the 20 percent payment on a lump sum offer or the first installment payment on a periodic payment offer will cause the IRS to return the offer back to the taxpayer as not processable.
12. Has the impact of TIPRA caused the IRS to change its processability criteria for offer submissions?
Yes. As a result of TIPRA, offers will be deemed not processable and will be returned to the taxpayer along with the $150 application fee in the following situations:
Taxpayer is a debtor in an open bankruptcy proceeding
Taxpayer does not submit the $150 application fee or a signed Form 656-A, Income Certification for Offer in Compromise Application Fee and Payment
Taxpayer does not submit the 20 percent payment with the lump sum offer, or a signed Form 656-A
Taxpayer does not submit the initial payment with the periodic payment offer or a signed Form 656-A
13. What happens if a taxpayer only submits the $150 application fee with the offer?
If a taxpayer submits only the application fee and does not submit either the 20 percent payment or the first installment payment, the offer will be deemed not processable and the $150 application fee will be returned to the taxpayer.
15. Is compliance no longer a processability criterion for OIC submissions?
Correct. 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.
16. Does the taxpayer need to submit two separate remittance documents when filing an offer (e.g., one for the application fee and another for the required payments)?
Yes. The taxpayer should remit two checks, one for the application fee and the other one for the required TIPRA payment.
If only one check is received, the IRS will apply the application fee first and then the remainder as the payment amount.
17. Are the payments imposed by TIPRA refundable to the taxpayer if the IRS later returns the offer back to the taxpayer?
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.
18. Does TIPRA allow the taxpayer to 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
19. What happens if the taxpayer does not submit a written request stating how the payments should be applied?
In the absence of any written request by the taxpayer when the offer is submitted or when the required payment is made, the IRS will apply the partial payment(s) in the best interest of the government.
20. Can a taxpayer designate how the $150 application fee is applied?
No. A taxpayer may not designate how the application fee is applied. The OIC application fee reduces the assessed tax or other amounts due.
21. What happens if a taxpayer who has paid the initial payment on a periodic payment offer fails to submit subsequent payments while the offer is under investigation?
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.
22. Is the IRS bound by the offer amount and terms submitted by the taxpayer in determining an acceptable offer?
No. The IRS is not bound by either the offer amount or the terms. The OIC investigator may negotiate a different offer amount and terms, when appropriate. The investigator may determine that the proposed offer amount is too low or the payment terms too protracted to recommend acceptance.
In this situation, the OIC investigator may advise the taxpayer as to what larger amount or different terms would likely be recommended for acceptance.
23. What will happen to payments the taxpayer makes during the offer investigation if the IRS later rejects the offer?
The IRS will credit the taxpayer’s account(s) with any payment(s) submitted with the original offer, as well as any payments that were made during the course of the offer investigation.
24. Will a taxpayer be able to designate any partial payments in excess of the 20 percent paid with a lump sum offer, or in excess of the proposed installments paid under a periodic payment offer?
Yes, if the taxpayer submits the request in writing.
All payments will be treated as payments of tax including any overpayment, and applied to the Government’s best interest unless designated by the taxpayer.
If the taxpayer requests the overpayment be considered a deposit, the overpayment cannot be designated, but may be refunded if the offer is rejected or returned by the IRS or is withdrawn by the taxpayer.
The IRS will not pay interest on the deposit.
25. How many offers in compromise am I allowed to file?
you can file as many offers in compromise if you wish there are no limitations. If one is rejected you can go ahead correct your mistakes and file another offer in compromise.
26. If my offer in compromise is rejected is there an appeal process?
If your offer in compromise is rejected there is an appeal form that will be sent out to you with your notice of rejection. Simply file that within the timeframe and your case will go to an appellate agent to hear your appeal.
27. How long does it take an offer in compromise to be determined?
To date, there are 7500 offering compromises in the IRS Queue. and offering compromise right now is taking anywhere between six months in a year to be settled due to a lack of manpower.
Remember the offer in compromise is not for everybody.
It is always best to speak to a qualified professional before you spend any money on the filing of an offer in compromise.
You can call us today for a free initial tax consultation and we can walk you through the process and see if he should go forward and proceed.
Answers to Offer in Compromise Questions – Former IRS Settlement Agent
by Fresh Start Tax | Nov 18, 2013 | Offer in Compromise
IRS Offer in Compromise
We are a South Florida tax firm that has been practicing right here in South Florida since 1982.
We are A+ rated by the Better Business Bureau.
We are comprised of tax attorneys, CPAs, and former IRS agents, managers and tax instructors who worked right here out of the local South Florida IRS offices.
Many Internet companies and tax professionals claim to be offer in compromise specialist. The truth of the matter, very few are what they say.
I am a former IRS agent and revenue officer with the Internal Revenue Service. I not only worked the program (OIC) at the Internal Revenue Service, I settled cases as a former IRS agent and then became an IRS instructor for the offer in compromise program.
What you are hearing is from the horses mouth.
A Word of Caution
I would caution any taxpayer before filing the IRS offer in compromise that they should walk through the pre-qualifier tool on our website.
They can find out firsthand whether they are in IRS offer in compromise candidate to settle their tax debt with the Internal Revenue Service.
The form is very simple.
Should you have any questions about the form contact me today and I will walk you through the program.
Give your money to no person unless you know you’re a qualified and suitable candidate to file an IRS offer in compromise.
Facts about IRS Offer in Compromise
1. IRS accepts 38% of all offers in compromise.
2. The average settlement for an awful compromise is $.14 on the dollar.
3. There are 58,000 offers in compromise filed in the United States each and every year.
4. There are currently, there are 7500 cases in the offer compromise Queue.
5. The average offer in compromise takes 6 to 9 months to work.
6. All accepted offers in compromise are open the public inspection in the regional offices for one year after accepted.
What is a IRS Offer in Compromise
An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service that settles the taxpayer’s tax liabilities for less than the full amount owed.
If the tax liabilities can be fully paid through an installment agreement or other means, the taxpayer will in most cases not be eligible for an OIC.
Eligibility for the OIC
In order to be eligible for an OIC, the taxpayer must have:
- filed all tax returns,
- made all required estimated tax payments for the current year, and
- made all required federal tax deposits for the current quarter if the taxpayer is a business owner with employees.
The IRS will not accept an OIC unless the amount offered by the taxpayer is equal to or greater than the reasonable collection potential (the RCP). The Internal Revenue Service goes in great depth to analyze and IRS offer in compromise. Since IRS is 10 years to collect the money they will make sure that it is the most amount of money they can collect over the ten-year period which is a statute of limitation.
The RCP is how the IRS measures the taxpayer’s ability to pay.
The RCP includes the value that can be realized from the taxpayer’s assets, such as real property, automobiles, bank accounts, and other property. Remember this figure includes pensions, IRA’s could apply if you are a beneficiary of some sort.
In addition to property, the RCP also includes anticipated future income, less certain amounts allowed for basic living expenses.
The IRS may accept an OIC based on three grounds.
1. Acceptance is permitted if there is doubt as to liability. This ground is only met when genuine doubt exists under applicable law that the IRS has correctly determined the amount owed.
2. Acceptance is permitted if there is doubt that the amount owed is fully collectible. This means that doubt as to collectibility exists in any case where the taxpayer’s assets and income are less than the full amount of the tax liability.
3. Acceptance is permitted based on effective tax administration. An offer may be accepted based on effective tax administration when there is no doubt that the tax is legally owed and that the full amount owed can be collected, but requiring payment in full would either create an economic hardship or would be unfair and inequitable because of exceptional circumstances.
Forms to Use for a IRS Offer in Compromise
When submitting an OIC based on doubt as to collectibility or based on effective tax administration taxpayers must use the most current version of:
- Form 656 (PDF), Offer in Compromise, and
- also submit Form 433-A (OIC) (PDF), Collection Information Statement for Wage Earners and Self-Employed Individuals, and/or
- Form 433-B (OIC) (PDF), Collection Information Statement for Businesses.
- A taxpayer submitting an OIC based on doubt as to liability must file a Form 656-L (PDF), Offer in Compromise (Doubt as to Liability), instead of Form 656 and Form 433-A (OIC) and/or Form 433-B (OIC).
Application fee for a IRS Offer in Compromise
A taxpayer must submit a $150 application fee with the Form 656.
There are, however, two exceptions to this requirement.
1. No application fee is required if the OIC is based on doubt as to liability.
2. The fee is not required if the taxpayer is an individual (not a corporation, partnership, or other entity) who qualifies for the low-income exception.
Exception Applies
This exception applies if the taxpayer’s total monthly income falls at or below 250 percent of the poverty guidelines published by the Department of Health and Human Services. Section 4 of Form 656 contains the Low Income Certification guidelines to assist taxpayers in determining whether they qualify for the low-income exception.
A taxpayer who claims the low-income exception must complete section 4 of Form 656.
How to Pay a IRS Offer in Compromise
Taxpayers may choose to pay the offer amount in a lump sum or in installment payments.
A lump sum offer
A “lump sum offer” is defined as an offer payable in 5 or fewer installments and within 24 months after the offer is accepted. If a taxpayer submits a lump sum offer, the taxpayer must include with the Form 656 a nonrefundable payment equal to 20 percent of the offer amount.
This payment is required in addition to the $150 application fee. The 20 percent amount is called “nonrefundable” because it cannot be returned to the taxpayer even if the offer is rejected or returned to the taxpayer without acceptance. The 20 percent amount will be applied to the taxpayer’s tax liability.
The taxpayer has a right to specify the particular tax liability to which the IRS will apply the 20 percent amount.
Periodic payment offer
The offer is called a “periodic payment offer” under the tax law if it is payable in 6 or more monthly installments and within 24 months after the offer is accepted. When submitting a periodic payment offer, the taxpayer must include the first proposed installment payment along with the Form 656.
This payment is required in addition to the $150 application fee.
This amount is nonrefundable, just like the 20 percent payment required for a lump sum offer. Also, while the IRS is evaluating a periodic payment offer, the taxpayer must continue to make the installment payments provided for under the terms of the offer. These amounts are also nonrefundable.
These amounts are applied to the tax liabilities and the taxpayer has a right to specify the particular tax liabilities to which the periodic payments will be applied.
The statutory time within which the IRS may engage in collection activities is suspended during the period that the OIC is under consideration and is further suspended if the OIC is rejected by the IRS and where the taxpayer appeals the rejection to the IRS Office of Appeals within 30 days from the date of the notice of rejection.
If the IRS accepts the taxpayer’s offer, the IRS expects that the taxpayer will have no further delinquencies and will fully comply with the tax laws.
If the taxpayer does not abide by all the terms and conditions of the OIC, the IRS may determine that the OIC is in default.
Doubt as to Collectibility and Effective Tax Administration, Offers in Compromise
For doubt as to collectibility and effective tax administration OICs, the terms and conditions include a requirement that the taxpayer timely file all tax returns and timely pay all taxes for 5 years from the date of acceptance of the OIC.
When an OIC is declared to be in default, the agreement is no longer in effect and the IRS may then collect the amounts originally owed, plus interest and penalties. Additionally, any refunds due within the calendar year in which the offer is accepted will be applied to the tax debt.
If IRS rejects the OIC
If the IRS rejects an OIC, then the taxpayer will be notified by mail. The letter will explain the reason that the IRS rejected the offer and will provide detailed instructions on how the taxpayer may appeal the decision to the IRS Office of Appeals.
IRS Appeals for the Offer in Compromise
The appeal must be made within 30 days from the date of the letter. In some cases, an OIC is returned to the taxpayer, rather than rejected, because the taxpayer has not submitted necessary information, has filed for bankruptcy, has failed to include a required application fee or nonrefundable payment with the offer, or has failed to file tax returns or pay current tax liabilities while the offer is under consideration.
A return is different from a rejection because there is no right to appeal the IRS’s decision to return the offer. You can submit as many offers in compromises as you wish. There is no restriction.
Before you submit any IRS offer in compromise is important that you understand the system to terms and the different types of offers in compromise.
Call us today for free initial tax consultation and we will walk you through the IRS offer in compromise program.
Do not be fooled by imitators that are on Internet sites who claim to be able to settle your tax debt for pennies on the dollar.
There is a high degree of professional skill needed and necessary to get your IRS offer in compromise accepted. I should know I am a former IRS agent who worked the offer in compromise program at the Internal Revenue Service.
IRS Offer in Compromise – Former IRS Settlement Agent – How to Settle with IRS – Miami, Ft.Lauderdale
