Tuesday, April 19, 2011

Will the IRS Settle for an Amount Less than What is Owed -- Read This -- Find Out

Will the IRS Settle for Less than What is Owed?

YES





An IRS tax settlement is when a taxpayer settles their back tax debt through one of the IRS programs. The IRS offers settlements to taxpayers that are struggling with their back tax debts or have valid reasons to abate their penalties. The IRS offers several different options for taxpayers to settle their taxes owed. The main factor the IRS takes into consideration when determining if you, the taxpayer, will qualify for a tax settlement is your financial situation. The tax settlement that a taxpayer qualifies for is dependent upon their unique financial situation. The IRS prefers individuals to pay their taxes owed in full, but they will make exceptions for certain circumstances.

THE IRS HAS EASED ELIGIBILITY

FOR THE

OFFER in COMPROMISE PROGRAM

“I’ve made a whole set of changes to the Offer in Compromise (OIC) program since I’ve been here to try to increase the participation rate, increase the acceptance rate, because it’s good for the tax system,” Doug Shulman, the IRS Commissioner said.

"There are a variety of things, all aimed at increasing acceptance rates for an Offer in Compromise, making it a user-friendly thing to apply for,” Shulman said.



“These changes to the Offer in Compromise program will help give taxpayers a fresh start,” said Doug Shulman, the IRS commissioner, in a conference call with reporters. These changes “are especially appropriate as the American people and small businesses are climbing out of the worst recession in a generation.”


What is an Offer in Compromise?

An IRS settlement through the Offer in Compromise program (OIC) is an agreement between a taxpayer and the Internal Revenue Service (IRS) that settles the taxpayer’s tax liabilities for less than the full amount owed. Absent special circumstances, an Offer in Compromise will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through an Installment Agreement or payment plan.

In most cases, the IRS will not accept an Offer in Compromise (OIC) unless the amount offered by you, the taxpayer, is equal to or greater than the reasonable collection potential (RCP). The reasonable collection potential (RCP) is how the IRS measures the taxpayer’s ability to pay and includes the value that can be realized from the taxpayer’s assets, such as real property, automobiles, bank accounts, and other property. The RCP will also include anticipated future income, less certain amounts allowed for basic living expenses.

THERE ARE THREE (3) TYPES OF

OFFER in COMPROMISE


The IRS may accept an Offer in Compromise based on one of 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.

IN OTHER WORDS



YOU DON'T HAVE THE $ TO PAY

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 IRS examiner made a mistake interpreting the law, (2) the IRS examiner failed to consider the taxpayer’s evidence or (3) the taxpayer has new evidence.

3. Effective Tax Administration - There is no doubt that the back tax is owed 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 Offer in Compromise (OIC). To be eligible for an Offer in 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.

If you are unable to pay your entire tax liability in a lump sum or through an installment agreement and you have exhausted your search for other payment arrangements, you are eligible and qualified for an Offer in Compromise.

Three Payment Options

In general, a taxpayer must submit a $150 application fee and initial payment along with the Form 656, Offer in Compromise.  You, the taxpayer, may choose to pay their offer in compromise in one of three payment options:

1. Lump Sum Cash Offer - Payable in non-refundable installments, the offer amount must be paid in five or fewer installments upon written notice of acceptance.  A non-refundable payment of 20 percent of the offer amount along with the $150 application fee is due upon filing the Form 656.

If your Offer in Compromise will be paid in 5 or fewer installments in 5 months or less, the OIC amount must include the realizable value of assets plus the amount that could be collected over 48 months of payments or the time remaining on the statute, whichever is less.

If your Offer in Compromise will be paid in 5 or fewer installments in more than 5 months and within 24 months, the OIC amount must include the realizable value of assets plus the amount that could be collected over 60 months of payments, or the time remaining on the statute, whichever is less.


If your OIC will be paid in 5 or fewer installments in more than 24 months, the Offer in Compromise amount must include the realizable value of assets plus the amount that could be collected over the time remaining on the statute.

2. Short Term Periodic Payment Offer - Payable in non-refundable installments; your Offer in Compromise amount must be paid within 24 months of the date the IRS received your OIC. The first payment and the $150 application fee are due upon filing the Form 656. Regular payments must be made during the Offer in Compromise investigation.

Your Offer in Compromise amount must include the realizable value of assets plus the total amount the IRS could collect over 60 months of payments or the remainder of the statutory period for collection, whichever is less.

3. Deferred Periodic Payment Offer - Payable in non-refundable installments; your Offer in Compromise amount must be paid over the remaining statutory period for collecting the tax. The first payment and the $150 application fee are due upon filing the Form 656. Regular payments must be made during the investigation.

Your OIC amount must include the realizable value of assets plus the total amount the IRS could collect through monthly payments during the remaining life of the statutory period for collection.

DO YOUR OFFER in COMPROMISE RIGHT

The IRS is not bound by either your Offer in Compromise amount or the terms proposed by you,the taxpayer.  The OIC investigator may negotiate a different OIC amount and terms, when appropriate.  The OIC investigator may determine that the proposed Offer in Compromise amount is too low or the payment terms are 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.

THE IRS WILL TRY AND KICK YOUR 

OIC

as

UNPROCESSIBLE

WHENEVER POSSIBLE

If you choose to do your own Offer in Compromise (OIC) be aware that the IRS will be looking at every "i" to see if it is dotted and every "t" to see if they are crossed. If you miss any documents or make any sort of error, the IRS will reject your Offer in Compromise. You will have to re-start the process again and the IRS will continue the collection process against you.

DO NOT BE A "PENNY WISE" AND A "POUND FOOLISH" 

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1 comment:

  1. Have an IRS debt that you owe and cannot pay? You may be qualified and eligible for an IRS settlement through the Offer in Compromise program.

    ReplyDelete