A little known fact about the Offer program. The IRS keeps an area in the local office that allows the public to review all accepted Offers . They are kept in a special area that is open to the public along with other public files.
The IRS is a collection agency with more collection power than anyone in the world.
They are not Santa Claus.
They do what is best for the United States government.It is their job to collect the taxes to keep the government running. They do what is best for themselves first and rightly so. If the program was open for everything, it would be a free for all. Every taxpayer would file an offer with every tax return.
The IRS has set up strict boundaries on Offers In Compromise. One of the things the public may not know, all offers are open to public review.
So why are so few offers accepted? It is very hard to qualify for the federal program, it is that simple. It is a federal program.
With all the talk about offers, here are the payment options taken from the irs. gov site. It lays out the clear talk about the program. It is not rewritten, it is straight from the horse’s mouth.
Offer in Compromise Payment Options
OIC Payment Option
Terms 1, 2
$150 Application Fee Required?
Collection Information Statement (Form 433-A and/or Form 433-B) Required?
Calculating Your Offer Amount
Lump Sum Cash
Must pay 20% of the offered amount when Form 656 is submitted, with the balance to be paid in five or fewer installments from the notice of acceptance.
Yes, unless Form 656-A is completed or Doubt as to Liability OIC is submitted.
Yes, with the exception of Doubt as to Liability offers.
If the offer will be paid in 5 or fewer installments in 5 months or less: Use the realizable value of assets + the amount that could be collected over 48 months of payments or the time remaining on the ten-year statutory period for collection, whichever is less.
If the offer will be paid in 5 or fewer installments in more than 5 months and within 24 months :
Use the realizable value of assets + the amount that could be collected over 60 months of payments, or the time remaining on the ten -year statutory period for collection, whichever is less.
If the offer will be paid in 5 or fewer installments in more than 24 months: Use the realizable value of assets + the amount that could be collected over the time remaining on the statute.
Short Term Periodic Payment
Must include an initial payment with the offer and regular payments must continue while the offer is being investigated. Offer must be paid in full within 24 months from the date the IRS receives the offer.
Yes, unless Form 656-A is completed or Doubt as to Liability OIC is submitted.
Yes, with the exception of Doubt as to Liability offers.
Offer must include the realizable value of assets plus any amount that could be collected over 60 months of payments or the remaining number of months on the ten-year statutory period of collection, whichever is less.
Deferred Periodic Payment
Must include initial offer payment and regular payments must continue while the offer is being investigated. Offer must be paid in full in 25 or more months but within the time remaining on the statutory period for collection.
Yes, unless Form 656-A is completed or Doubt as to Liability OIC is submitted.
Yes, with the exception of Doubt as to Liability offers.
Offer must include the realizable value of assets plus the amount that could be collected through monthly payments during the remaining life of the ten-year statutory period for collection.
I am a former IRS agent in teaching instructor with the Internal Revenue Service. I both worked and taught the IRS offer in compromise program. Feel free to call us for free initial tax consultation.
They are as follows and are taken from the IRS site regarding Offers:
Three Types of OICs
The IRS may accept an offer in compromise based on three grounds:
1. Doubt as to Collectibility – Doubt exists that the taxpayer could ever pay the full amount of tax liability owed within the remainder of the statutory period for collection.
Example: A taxpayer owes $20,000 for unpaid tax liabilities and agrees that the tax she owes is correct. The taxpayers monthly income does not meet her necessary living expenses. She does not own any real property and does not have the ability to fully pay the liability now or through monthly installment payments.
2. Doubt as to Liability – A legitimate doubt exists that the assessed tax liability is correct. Possible reasons to submit a doubt as to liability offer include: (1) the examiner made a mistake interpreting the law, (2) the examiner failed to consider the taxpayers evidence or (3) the taxpayer has new evidence.
Example: The taxpayer was vice president of a corporation from 2004-2005. In 2006, the corporation accrued unpaid payroll taxes and the taxpayer was assessed a trust fund recovery penalty as a responsible party of the corporation. The taxpayer was no longer a corporate officer and had resigned from the corporation on 12/31/2005. Since the taxpayer had resigned prior to the payroll taxes accruing and was not contacted prior to the assessment, there is legitimate doubt that the assessed tax liability is correct.
3. Effective Tax Administration – There is no doubt that the tax is correct and there is potential to collect the full amount of the tax owed, but an exceptional circumstance exists that would allow the IRS to consider an OIC. To be eligible for compromise on this basis, a taxpayer must demonstrate that the collection of the tax would create an economic hardship or would be unfair and inequitable.
Experienced experts can help you through this problem.
Care should be given before filing any offer.
It is always best to fill out the pre-qualifier tool to make sure you are a pre-qualified candidate to file for the offer in compromise, tax debt settlement.
Taxpayers who defaulted on an IRS payment agreement usually get IRS tax notice CP 523.
If you do not follow up on this IRS notice CP 523, you can expect a bank or wage garnishment levy sent within 6 to 8 weeks immediately following your notice.
We are former IRS agents and managers who know and understand the system.
Many times people or taxpayers who have an IRS payment agreement could be eligible settle their tax debt via the offer in compromise.
Call us today for a free initial tax consultation.
The CP 523 letter from IRS looks like this. It is sent out to taxpayers who have had a previous installment agreement and have defaulted:
Notice of Intent to Levy!!
You Defaulted On Your Installment Agreement.
This is a formal notice of our intent to terminate your installment agreement 30 days from the date of this notice. You defaulted on your agreement because you didn’t make your payments as agreed. The agreement states that we may terminate your agreement and collect the entire amount of your tax liability if you don’t meet all the conditions. This is your notice, as required by Internal Revenue Code Section 6331(d), of our intent to levy (take) any state tax refunds that you may be entitled.
We can also file a Notice of Federal Tax Lien, if we haven’t already done so. In addition we will begin to search for other assets we may levy. To prevent collection action, you must bring your account up to date by paying your past due amount, as well as any current payments due.
We will charge a reinstatement fee that we will take from your first payment. If don’t agree with this decision, you have a right to request Appeals consideration by calling the number listed below within 30 days from the date the agreement is terminated.
The IRS will without question levy your accounts and they already have the information of levy sources in their computer system.
Did You Default on a IRS Payment Agreement, Get Reinstated = IRS Tax Notice CP 523
Some of those offers in compromise will fail to meet the five-year compliance rule.
If this happens you have no accepted offer in compromise so beware.
Lets say your Offer in Compromise is accepted.
You absolutely must file all tax returns and timely pay all taxes for the next five years or until the offered amount is paid in full, whichever comes first.
Failure to stick to these rules negates the OIC completely, it defaults, and the IRS may collect the amounts originally owed plus penalties and interest.
This is a real bummer.
We are offer in compromise specialist.
I am a former revenue officer who both worked and taught the offer in compromise.