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
