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
