Monday, May 9, 2011

Stop the IRS -- Top Tips -- Offer in Compromise -- To Settle with the IRS

OFFER in COMPROMISE
Top Tips
Settle with the IRS for Less

What is an Offer in Compromise

An Offer in Compromise (OIC) is an agreement between you, a taxpayer, and the Internal Revenue Service that settles your tax liabilities for less than the full amount owed. If your tax liability can be fully paid through an installment agreement before the Statute of Limitations runs out or other means, the taxpayer will in most cases not be eligible for an Offer in Compromise (OIC).






Top Tips - One 

Before you agree to any Installment Agreement or payment plan with the IRS, consult with a tax professional who has had success with the Offer in Compromise program.

Why

The IRS, as the world's most powerful collection agency, will attempt to have you agree to an Installment Agreement that most likely will be much larger than it should be.

The IRS Formula for an Offer in Compromise

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 (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 your 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.

Top Tips - Two

If you are on Social Security, Social Security Disability (SSDI) or have an income that isn't going to increase dramatically, you should seriously consider filing an Offer in Compromise.

You are allowed to spend your money on what are called "allowable expenses" before you pay the IRS. If you do not know what your "allowable expenses" or what the "reasonable collection potential" for your tax debt is, the IRS has you at a disadvantage.

The Three Different Reasons for an Offer in Compromise

  • First, acceptance is permitted if there is doubt as to liability. This ground is only met when genuine doubt exists that the IRS has correctly determined the amount owed.
  • Second, 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 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.
  • Third, acceptance is permitted if there is doubt that the amount owed is collectible. This means that doubt exists in any case where the taxpayer's assets and income are less than the full amount of the tax liability. This is called DOUBT as to COLLECTIBILITY.
Top Tips -Three

Doubt as to Collectibility is the reason to have your tax liability settled through the Offer in Compromise program. When you lack the assets to cash out and your income is limited, you would be foolish to not file an Offer in Compromise.

Offer in Compromise Documents

When submitting an Offer in Compromise (OIC), taxpayers must use the most current version of Form 656, Offer in Compromise. Except when an Offer in Compromise (OIC) is submitted based on doubt as to liability, you, the taxpayer must also submit  Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, and/or Form 433-B, Collection Information Statement for Businesses. A taxpayer filing an Offer in Compromise (OIC) based on doubt as to liability must file a Form 656-L, Offer in Compromise (Doubt as to Liability), instead of Form 656 and Form 433-A and/or Form 433-B.

Top Tips - Four

The "i's" need to be dotted and the "t's" need to be crossed.

The IRS will continually look for reasons to reject your Offer in Compromise. The IRS has a job to do and that is to collect money. The IRS does not have the job of helping you. 

Your Offer in Compromise will go to either the IRS facility in Tennessee or the one in Long Island, NY. Initially, the IRS will look to reject your Offer in Compromise as "Un-processable." Should the IRS find 1 error, the IRS will reject your Offer and return it to you. No explanation. 

If your Offer in Compromise gets through the initial scrutinity, then your Offer is forwarded to an Examiner in the field. Once again, the Examiner is looking for clerical errors. The Examiner is also looking at the financials that you submitted. Once again, the IRS will be looking to reject your Offer in Compromise as "Un-processable."

Get the Numbers Right

An Offer in Compromise is not a negotiation like it is for a credit card. There is no haggling. There is no "back & forth." An Offer in Compromise is based on a formula. If you "low-ball" your Offer, the Examiner will reject your settlement Offer. 

If you do not know the formula, do not do an Offer in Compromise on your own.

You Can Pay Your Offer in Installments

Your Offer is called a "periodic payment offer" under the tax law if it is payable in 6 or more installments. 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.

TOP TIPS - FIVE

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YOU HAVE NO REASON

TO NOT

FILE

AN

OFFER in COMPROMISE

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YOUR EXCUSES ARE OVER

IRS INCREASES ACCEPTANCE

“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.



“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.”

If you qualify for an IRS Settlement through the IRS Offer in Compromise (OIC) program, you can "get your life back", you can save thousands of dollars in taxes, penalties and interest. Taxpayers can have IRS Tax Debt on all types of taxes, including most payroll taxes, penalties, and interest. It is the closest thing to amnesty that the federal government offers in connection with back tax debt.

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IRS SETTLEMENT HELP-LINE

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1 comment:

  1. Find out the Top tips on an IRS Offer in Compromise. Find out what it takes to settle with the IRS.

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