by Fresh Start Tax | Oct 31, 2013 | Offer in Compromise, Tax Settlements
If you want to settle your tax debt through the process of and all for compromise it only makes sense to use a former IRS settlement officer who knows the system, the protocols, and the settlement formulas and theories to get your case accepted by the Internal Revenue Service if you are a qualified candidate.
We are a Florida tax firm that has 206 years of professional tax experience and over 60 years of working directly for the Internal Revenue Service right here in the state of Florida. We are A+ rated by the Better Business Bureau.
I Michael Sullivan am a former IRS revenue officer in teaching instructor with the Internal Revenue Service.
I have worked the offer in compromise program at IRS, I also taught the program and accepted cases for settlement.
A couple years ago, the Internal Revenue Service decided to change it thinking about the settlement program and decided to change its strategy.
The old system produce no results for the IRS or the taxpayer. It was useless.
In the past, it was almost impossible to get offers in compromise through the system but the new IRS fresh start program or IRS fresh start initiative has now made it possible for taxpayers to settle old tax debt.
There are strict qualifications to meet the standards of the Internal Revenue Service.
To make sure taxpayers are not submitting offers in compromise and paying firms thousands of dollars to settle their case with the Internal Revenue Service, the IRS have a pre-qualifier tool to make sure that you are a qualified candidate to settle your tax debt.
You can find that IRS pre-qualifier tool right on our website. Simply go to the homepage and click on IRS forms. You’ll see it listed on a page of forms.
One of the advantages of the IRS settling your case is that the federal tax lien is released, your case closed and will be left alone by the IRS.
The Offer in Compromise Program
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 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.
To be eligible for an OIC
In order to be eligible for an OIC, the taxpayer must:
1. have filed all tax returns,
2. made all required estimated tax payments for the current year, and
3. 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 only three grounds.
1. Acceptance is permitted if there is doubt as to liability.
This ground for acceptance 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.These are rare but possible.
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. Such hardships are usually for medical health reasons.
Forms to Use for an Offer in Compromise(OIC)
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 the OIC
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.
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.
Type of Payment Options to Settle Your Tax Debt through an 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.
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.
Failure to met the terms of the accepted OIC/Tax Debt Settlement
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.
Very Important Note
When an Offer in Compromise 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.
Any refunds due within the calendar year in which the offer is accepted will be applied to the tax debt.
Appeal a Rejected OIC/Tax Debt Settlement
One of the advantages of using Fresh Start Tax LLC is that we have a former IRS appellate agent on staff who can help through this process.
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.
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.
Keep in mind you can always file another offer in compromise.
You can file as many offers in compromise is you want.
Many times once you understand the process it is much easier to refile an offer in compromise correcting previous mistakes.
Call us today and we will walk you through the process of settling your tax debt through the offering compromise.
We are IRS and State specialty firm that deals with IRS problems, concerns and matters.
We are the affordable tax firm.
by Fresh Start Tax | Oct 31, 2013 | Offer in Compromise, Tax Settlements
Offer in Compromise to Settle Your Tax Debt
I am a former IRS revenue officer in teaching instructor with the Internal Revenue Service. I have worked the offer in compromise program at IRS, I also taught the program and accepted cases for settlement.
If you are looking to settle your tax debt with the Internal Revenue Service the process of doing so is through the offer in compromise.
About two years ago, the Internal Revenue Service decided to change it thinking about the settlement program and decided to change its strategy.
In the past, it was almost impossible to get offers in compromise through the system but the new IRS fresh start program or IRS fresh start initiative has now made it possible for taxpayers to settle old tax debt.
The offer in compromise is not for everybody.
There are strict qualifications to meet the standards of the Internal Revenue Service.
To make sure taxpayers are not submitting offers in compromise and paying firms thousands of dollars to settle their case with the Internal Revenue Service, they have a pre-qualifier tool to make sure that you are a qualified candidate to settle your tax debt through an offer in compromise.
You can find that IRS pre-qualifier tool right on our website.
You can call us today and we will walk you through the process and the program to see if you are an eligible candidate. One of the advantages of the IRS settling your case is that the federal tax lien is released, your case closed and will be left alone by the IRS.
The 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 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.
To be Eligible for an 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.
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 for acceptance 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 an 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
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.
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.
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.
Type of Payment Options to Settle Your Tax Debt
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
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.
Failure to met the terms
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.
Important Note
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.
Any refunds due within the calendar year in which the offer is accepted will be applied to the tax debt.
IRS Rejection of an OIC, you can appeal!
One of the advantages of using fresh start tax is that we have a former IRS appellate agent on staff who can help through this process.
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.
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.
Keep in mind you can always file another offer in compromise.
Call us today to receive a free tax consultation or assessment on any potential IRS tax settlement. You can speak directly what tax attorney, CPA, or former IRS agent, manager tax instructor.
Remember, the offer in compromises are not for everybody.
Call us today or walk through the pre-qualifier tool yourself to find out if you are ineligible candidate.
Offer in Compromise to Settle Your Tax Debt with Former IRS Settlement Agents
by Fresh Start Tax | Sep 16, 2013 | Offer in Compromise, Tax Settlements
I am a former IRS agent, teaching instructor and have both worked and taught the IRS offer in compromise/tax settlement program at the Internal Revenue Service.
I have reviewed hundreds and hundreds of offer in compromises. I have accepted them at the Internal Revenue Service is a working agent and I have taught the IRS tax settlement program called the offer in compromise is a former IRS agent teaching instructor.
I am a tax expert when it comes to the IRS settlement program called the offer in compromise.
Last year Stats on OIC/IRS Settlement
Last year the Internal Revenue Service received 58,000 offers in compromise and accepted 38% of all offers filed. This is an upward trend from the last five years. This was the highest percentage from any previous year.
In speaking to an agent who works the offer in compromise program they stated that 90% of all those offers that were accepted were prepared and represented by a professional tax firm. Repetition is the father of success.
I highly recommend that a professional firm prepare and submit your offer in compromise because true professionals understand the criteria and the special nuances of the offer program.
The offer in compromise program is not for everybody. Many persons feel they can settle with the IRS for pennies on the dollar but there is very exacting criteria to get your case settled with the IRS.
The IRS now has a pre-qualifier tool that you can find on our website that will aid taxpayers as to whether they are a qualified and true candidate for the IRS tax settlement program.
Why to Hire a True Tax Professional
You hire a true professional tax firm because you want to win.
If you try this program by yourself the chances are your fall flat on your face. I can tell you this because I have seen the results as a former IRS agent.
There are many programs and initiatives the average taxpayer can do by themselves to avoid professional fees and costs unfortunately the IRS tax settlement program is not one of these.
A true tax professional will save you thousands of dollars and settle your case the first time around. The Internal Revenue Service has very specific formulas for the tax settlement program. It is important to know that you must give IRS to total value of your liquid assets as a base settlement. IRS will also review the value of your money on a monthly basis to determine the criteria of the settlement.
The other reason you do not want to self prepare is the simple reason that you don’t want expose yourself to the Internal Revenue Service when it is unmerited. If the Internal Revenue Service rejects your offer in compromise it gives them a complete roadmap to your assets and ability to pay.
The Internal Revenue Service will do an exhaustive asset search to find out if you are hiding assets are not revealing everything on your financial statement. The IRS will do a LEXIS-NEXIS – Accuraint search as well as a Google search on your name.
Beside that, the Internal Revenue Service will check Department of motor vehicle records, credit reports, and asked to see copies of various financial statements that you have given to third parties where you’ve applied for credit.
IRS does a very thorough job and working in the IRS tax settlement program called the offer in compromise.
In the last three years the Internal Revenue Service is making great strides to help taxpayers deal with their back IRS debt.
To the new Fresh Start program or Fresh Start initiative offered by the IRS shows that the IRS is reaching out to taxpayers and wanting them to settle their tax debt if they qualify through the offer in compromise program.
Before taxpayers go trying to settle their debts through the offer in compromise, taxpayer should be asking a lot of questions to the representatives they hire or screen to make sure that they are a qualified candidate for the offer in compromise program.
Once again, not all taxpayers qualify for the program.
I would suggest any taxpayer contemplating the tax settlement of an offer in compromise with the Internal Revenue Service to walk through the program with a professional firm before they give their money to anyone.
Taxpayers should also be aware that the Internet is full of splash page advertising promising tax settlements for the offer and compromise program, they claim they can settle for pennies on the dollar.
Most of these firms offering such claim are companies in business today and gone tomorrow.
Taxpayers need to ask a lot of questions and more specifically they need to speak to the person that may be working their case to settle their tax debt for pennies on the dollar.
Do not be tricked into talking into a fast talking salesperson about settling your case because it sounds real good.
I would highly recommend that all taxpayers check for the Better Business Bureau ratings, check for the company’s credentials, ask the company about similar cases that were worked what settlement was reached and ask to speak to the person directly that will be working their case within the firm. If you cannot speak to the tax professional who will be handling your case do not hire the tax firm.
As far as pricing goes, most offer in compromises from true tax professional companies will range anywhere from $4-$7500 based on the complexity of the case. This fee is very well justified because of the experience and professionalism of tax firm.
There are very few easy offers in compromise cases and most needs require a high degree of expertise to settle the case.
How to Settle with the IRS with a Offer in Compromise/IRS Tax Settlement
To find out how to settle with the Internal Revenue Service read the following and find out the tax protocols in dealing with the offer in compromise/tax settlement.
What is a 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 liabilities can be fully paid through an installment agreement or other means, the taxpayer will in most cases not be eligible for an 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.
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 reason for this is quite simple, the IRS can just sees the asset and collect the full value.
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.
Most offers in compromises take any where between 20 hours to work by an IRS agent. Also if an the offer and compromise is accepted it becomes a matter of public record and is available for public inspection.
The offer in compromise or tax settlement stays on record for one year at the regional tax offices for public inspection. That’s right, you can walk right into a regional office and asked them to see their accepted offers in compromise.
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 in compromise 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.
Exceptional circumstances IRS tax settlements
You should know that the IRS receive very few offers based on exceptional circumstances. These are extremely hard offers to get IRS to accept. These offers are very subjective and must be documented as to the exceptional circumstance.
A good example of an exceptional circumstance OIC would be somebody that is undergoing cancer and may not have a long time to live.
When submitting an OIC based on doubt as to collectibility or based on effective tax administration taxpayers must use the most current version of:
1. Form 656 (PDF), Offer in Compromise,
2. also submit Form 433-A (OIC) (PDF), Collection Information Statement for Wage Earners and Self-Employed Individuals, and/or
3. 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).
In general, 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.
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.
Offer Options / IRS Tax Settlements
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 you default on a accepted OIC or Tax Settlement
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.
Should the offer in compromise the fault the taxpayer account will return immediately to the field workforce collections actions will take place.
It is though no offer was ever accepted by the Internal Revenue Service and the taxpayer must start all over again.
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.
If a Offer in Compromise Defaults
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 your offer in not accepted, Appeal
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.
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.
It requires a lot of skill to deal with an offer in compromise. I would highly recommend any taxpayer contemplating the filing of an offer in compromise contacted true tax professional.
by Fresh Start Tax | Sep 16, 2013 | Offer in Compromise
I am a former IRS agent, teaching instructor and have both worked and taught the IRS offer in compromise/tax settlement program at the Internal Revenue Service.
Last year the Internal Revenue Service received 58,000 offers in compromise and accepted 38% of all offers filed.
In speaking to an agent who works the offer in compromise program they stated that 90% of all those offers that were accepted were prepared and represented by a professional tax firm.
I highly recommend that a professional firm prepare and submit your offer in compromise because true professionals understand the criteria and the special nuances of the offer program. The offer in compromise program is not for everybody.
A true tax professional will save you thousands of dollars and settle your case the first time around. The other reason you do not want to self prepare is the simple reason that you don’t want expose yourself to the Internal Revenue Service when it is unmerited. If the Internal Revenue Service rejects your offer in compromise it gives them a complete roadmap to your assets and ability to pay.
I am a former IRS agent who was a teaching instructor for over 10 years at the Internal Revenue Service. I actually taught the offer in compromise tax settlement program in the local and regional tax offices of the IRS. My advice to you spend the money and hire a true professional tax firm one and is credentialed and has a high Better Business Bureau rating.
In the last three years the Internal Revenue Service is making great strides to help taxpayers deal with their back IRS debt.
To the new Fresh Start program or Fresh Start initiative offered by the IRS shows that the IRS is reaching out to taxpayers and wanting them to settle their tax debt if they qualify through the offer in compromise program.
Before taxpayers go trying to settle their debts through the offer in compromise, taxpayer should be asked a lot of questions to the representatives they hire or screen to make sure that they are a qualified candidate for the offer in compromise program.
Once again, not all taxpayers qualify for the program.
To make sure taxpayers understand the qualifications of the offer and compromise program, the Internal Revenue Service has made available to everyone a pre-qualifier tool.
You can find that pre-qualifier tool on our website.
I would suggest any taxpayer contemplating the settlement of an offer in compromise with the Internal Revenue Service to walk through the program before they give their money to any tax firm to do so.
Taxpayer should also be aware that the Internet is full of splash page advertising promising tax settlements for the offer and compromise program, they claim they can settle for pennies on the dollar.
Most of these firms offering such claim are companies in business today and gone tomorrow.
Taxpayers need to ask a lot of questions and more specifically they need to speak to the person that may be working their case to settle their tax debt for pennies on the dollar. Do not be tricked into talking into a fast talking salesperson about settling your case because it sounds real good.
I would recommend that all taxpayers check for the Better Business Bureau ratings, check for the company’s credentials, ask the company about similar cases that were worked what settlement was reached and ask to speak to the person directly that will be working their case within the firm.
As far as pricing goes, most offer in compromises from true tax professional companies will range anywhere from $4-$7500 based on the complexity of the case.
There are very few easy offers in compromise cases and most needs require a high degree of expertise to settle the case.
How to Settle with the IRS with a Offer in Compromise
To find out how to settle with the Internal Revenue Service read the following and find out the tax protocols in dealing with the offer in compromise.
What is a 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 liabilities can be fully paid through an installment agreement or other means, the taxpayer will in most cases not be eligible for an 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.
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 reason for this is quite simple, the IRS can just sees the asset and collect the full value.
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.
Most offers in compromises take any where between 20 hours to work by an IRS agent. Also if an the offer and compromise is accepted it becomes a matter of public record and is available for public inspection.
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 in compromise 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.
You should know that the IRS receive very few offers based on exceptional circumstances. These are extremely hard offers to get IRS to accept.
A good example of an exceptional circumstance OIC would be somebody that is undergoing cancer and may not have a long time to live.
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).
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.
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.
Ordinarily, 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. Should the offer in compromise the fault the taxpayer account will return immediately to the field workforce collections actions will take place. It is though no offer was ever accepted by the Internal Revenue Service and the taxpayer must start all over again.
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.
If a Offer in Compromise Defaults
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. Remember you must keep current with the Internal Revenue Service for the preceding five years or IRS will default your offer in compromise.
If your offer in not accepted, Appeal
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.
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.
It requires a lot of skill to deal with an offer in compromise. I would highly recommend any taxpayer contemplating the filing of an offer in compromise contacted true tax professional.
Remember 38% of all offers in compromise are accepted by Internal Revenue Service.
How to Settle with IRS with through a Offer in Compromise – Former IRS Offer Specialist
by Fresh Start Tax | Sep 13, 2013 | Offer in Compromise, Tax Help
We are true tax experts for the IRS offer in Compromise. As a Former Agent, I worked the offer program for the IRS.
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.
The fact of the matter that’s true however I would make sure you fill out the IRS qualifier or tool before filing an offer in compromise.
Take my word on this I am a former IRS agent in teaching instructor who taught the offer in compromise program while at the Internal Revenue Service. I am a tax expert in the offer in compromise.
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.
Most of those offers and compromises that are accepted are filed by professional firms that have on staff tax attorneys, tax lawyers, certified public accountants, enrolled agents or former IRS agents.
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
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
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
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.
You can also go to the IRS website@IRS.gov to fill out the pre-qualifier.
Remember if you are in a higher tax firm make sure you check on their Better Business Bureau rating, their fees and costs, and asked to speak to the person directly that will be handling your case.
by Fresh Start Tax | Sep 13, 2013 | Offer in Compromise
The Internal Revenue Service receives about 60,000 offers in compromise each year and accepts about 38% of those filed.
Most of those offers and compromises that are accepted are filed by professional firms that have on staff tax attorneys, tax lawyers, certified public accountants, enrolled agents or former IRS agents.
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.
I should know I am a former IRS revenue officer, teaching instructor and an expert in the IRS tax debt settlement program called the offer in compromise.
Pre-qualifier tool
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.
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 IRS Pre Qualifier Tool
The pre- qualifier tool is used by Internal Revenue Service to make sure taxpayers understand the offer in compromise program.
Due to the Internet being loaded with companies and individuals stating they can settle their case for pennies on a dollar the Internal Revenue Service is trying to make the public aware that they can find out for themselves whether they qualify for this program. If you call our office we can walk through the program with you in about five minutes and let you know whether you are qualified
Below you will find out the questions that are asked on the pre-qualifier tool.
So be apprised, these are the questions you were 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.
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 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.
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
As a former IRS agent I can tell you it’s a lot easier to find reasons to reject the 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
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
Vehicle 1 equity
Vehicle 2 equity
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.
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
Select a payment option
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
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.
Another drawback.
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.
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.
Offer in Compromise = Everything you need to Know = Former IRS Debt Settlement Officer
