IRS Tax Lawyer Secrets: How Does an Offer in Compromise Work?

OFFER IN COMPROMISETAX SETTLEMENT

An Offer in Compromise is an option that you have with the IRS to settle your back income taxes. If you owe a substantial amount of money in federal taxes ($10,000 or more), you can submit an IRS settlement agreement through the Offer in Compromise program for less than your total outstanding balance and see if the IRS accepts it. Generally considered the “nuclear option” if you have a tax bill you doubt you’ll ever be able to pay off, filing an offer in compromise is a long and daunting process (an Offered settlement can take 12 months) with many confusing and seemingly contradictory requirements.

Even though the Offer in Compromise program was simplified through the Fresh Start Initiative, gathering all the necessary paperwork for an offer in compromise is incredibly time to consume as is staying on top of communications from the IRS regarding your settlement offer. However, if your income tax debt is significant and/or you are in poor shape financially, it may be worth it to take the time to submit an Offer in Compromise.

Offer in Compromise Types

First, you, the financially struggling taxpayer, need to know what type of offer in compromise you should file. There are two chief types of offers: doubt as to collectibility and doubt as to liability. Doubt of collectibility offers are made if it doesn’t look like the IRS will have any chance of collecting all or most of your outstanding balance right now or in the near future because your assets and income are outweighed by your outstanding balance. If you are filing a doubt as to liability offer in compromise, the premise for settling your back taxes is that there have been tax administration errors, and you don’t actually owe as much as the IRS says you do. Your liability isn’t supposed to exist under the current tax law, or ministerial errors were made.

An Offer in Compromise can also be made in the name of effective tax administration, where you are not arguing that tax law was correctly applied (and your balance is collectible to an extent) but that paying your outstanding taxes would cause a significant financial hardship, and the IRS isn’t going to get any money out of you as a result. For example, the value of your home could determine that your tax liability is collectible but losing your home would result in hardship.

THE ONLY TYPE OF OFFER IN COMPROMISE THAT YOU NEED TO BE CONCERNED WITH IS: DOUBT AS TO COLLECTIBILITY

Fees and Low-Income Certification

Generally, there is a $186 nonrefundable application fee when you apply for an offer in compromise. It is totally separate from any tax payments and doesn’t count toward your outstanding balance. The only exception to this is if you are submitting an offer based on doubt as to liability. The fee is also waived if you qualify for the low-income exception. If your monthly income falls at or below 250% of the poverty guidelines set by the Department of Health and Human Services, you can check off the low-income certification section of the offer in compromise form (Form 656).

FLAT FEE TAX SERVICE HAS

A 95% IRS SETTLEMENT AGREEMENT SUCCESS RATE.

Eligibility and Taking Care of Unfiled Tax Returns

The IRS Tax Lawyer at Flat Fee Tax Service, Inc., who is handling your IRS tax problem, will ensure that you’re eligible for an offer in compromise. If you are in open bankruptcy proceedings, you can’t make an offer.

Flat Fee Tax Service, Inc. can determine if you are eligible and qualified to settle with the IRS during our initial consultation.

Next, you need to make sure that you’ve filed all outstanding tax returns. The alternative is to wait for the IRS to file substitute returns on your behalf, but this frequently doesn’t have the best outcome. Substitute returns only account for the bare minimum of tax benefits and rely on data already in the system, such as W-2 and 1099’s on file, opposed to what your actual tax situation could look like. Because of this, your total outstanding tax debt could look a lot larger than it really is and make it harder for your offer to be accepted as a result.

HAVE AN EXPERIENCED IRS TAX LAWYER REPRESENT YOU.

Compiling a Personal Financial Statement

You need to prove that your income and assets are insufficient to pay your entire outstanding tax balance. Form 656 has two different financial statement forms, one for individuals and businesses, with an extra section for self-employed taxpayers. This statement is incredibly exhaustive as you must provide information about your and your spouse’s employment, whether your dependents and other people living in your household contribute to the household income, household expenses, vehicles and other assets, and virtually anything else related to your ability to pay down your tax debt. You must include copies of documents such as pay stubs, car notes, student loan payments, and other proof of your expenses, income, assets, and debts to substantiate what you entered on the financial statement. If you are self-employed, you need to provide an extensive breakdown of assets used in your business as well as where your income comes from and the type of expenses you have.

The purpose of collecting so much financial information is so that the IRS can determine if you can pay your balance in a reasonably short time frame and that it doesn’t merit the other resolution options available to you such as going on a payment plan or making your account temporarily uncollectible.

Making the Offer in Compromise and Choosing a Payment Plan

Once you’ve compiled your financial statement, which should support your Offer in Compromise amount and how much you are able to pay, you then make the actual offer. The offer price should be as close to the original tax liability as possible, within reason.

You also will specify if you will make the offer in five payments or less with a lump-sum payment plan or periodic plan (typically monthly). If you are opting for the lump-sum option, your package must include a payment for 20% of the total offer amount. For periodic plans, including the first period’s payment in your package. You then need to stay current on these payment plans while waiting for the IRS to make a decision.

Waiting for the IRS to Respond

Once you submit the offer and your initial payment, you must honor the payment arrangement proposed in your offer even though it will take time for you to get a response. While the IRS is processing your offer, you need to keep making these payments or else your offer will be voided. The only exception to this rule is if you meet the low-income certification guidelines.

Another important factor to consider is that while you wait for the IRS to accept or reject your offer in compromise, penalties and interest will still mount on your outstanding balance. Collection actions will be suspended, but you may still receive a federal tax lien that won’t be released until the terms of the offer have been satisfied. Because of this, if you have any outstanding installment agreements, then you don’t need to make payments on them.

If you received a notice that your offer was accepted, or two years passed from the date that the IRS received your offer, and they still didn’t respond with a decision, then your offer has been deemed acceptable. You still must keep up with the payments that you were making while waiting for a response, except that now your outstanding balance has been reduced to your offer amount. If you have any federal tax refunds for future tax years, they will also be applied to your outstanding balance.

A Returned Offer in Compromise and Rejections

A common mistake people make when submitting an offer in compromise that comes back to them is confusing it for a rejection. The IRS will sometimes send back an offer in compromise package if the information is missing. Other reasons for returning the offer package include failure to enclose the application fee or make the first payment, didn’t file the required tax returns, or didn’t pay current tax liabilities while the offer was being considered. While being in open bankruptcy proceedings generally deems you ineligible, you can still try to submit an offer in compromise, and it will just get returned instead of outright rejected.

This distinction is important because having an offer package returned to you doesn’t give you a right to an appeal. Your submission date completely resets once you’ve gathered all the missing information and/or payments and can resend your offer, starting the entire process all over again. This means that you will need to update your financial statement as well as provide new and current supporting documents.

If your Offer in Compromise is rejected, however, you will receive a formal rejection notice in the mail with detailed instructions on how to elevate your case to the IRS Office of Appeals. Your request for an appeal has to be made within 30 days from the date on this letter, or else you’ll have to start an entirely new offer from scratch. You will usually be given reasons for rejection and have the opportunity to dispute them as well as make a counteroffer for the amount you will pay over time.

Potential Consequences of Submitting an Offer in Compromise

If the IRS accepts your Offer in Compromise, you will never be able to dispute the amount in court or anywhere else. If you wind up having to file for bankruptcy after the offer has been accepted, the amount of federal taxes you owe now can’t be disputed.

If you suspect that you are going to default on a payment plan once they IRS has accepted an offer in compromise, you should contact the IRS immediately so your offer isn’t voided in the event of an emergency such as job loss, domestic violence, or health problems.

FLAT FEE TAX SERVICE95% OFFER IN COMPROMISE SUCCESS RATE

BBB ACCREDITED – A PLUS RATING – NO CLIENT COMPLAINTS

BBB Accredited IRS Tax Relief
BBB Accredited – A Plus Rating

DON’T GO IT ALONE, HAVE AN

IRS TAX ATTORNEY REPRESENT YOU.

CALL THE FLAT FEE TAX SERVICE

OFFER IN COMPROMISE PHONE NUMBER:

1-866-747-7435

https://www.flatfeetaxservice.net

http://www.flatfeetaxservice.us

https://www.facebook.com/thebestirshelp

File a Successful Offer in Compromise | Flat Fee Tax Service

FLAT FEE TAX SERVICE – OFFER IN COMPROMISE INFO

What is an Offer in Compromise?

It is a legal settlement with the IRS

What You Must Know Before You File an Offer in Compromise
* Do You Qualify for an Offer in Compromise?

The Form 656-B, Offer in Compromise Booklet (PDF) contains information about filing an Offer in Compromise, worksheets, and all forms necessary to file an Offer in Compromise.

When submitting an Offer in Compromise (OIC), taxpayers must use the most current version of Form 656, Offer in Compromise (PDF), or Form 656-L, Offer in Compromise (Doubt as to Liability) (PDF), depending on the basis of the offer in compromise. Taxpayers should file Form 656 when there is a doubt that the liability could be collected in full through a lump sum or an installment agreement and file Form 656-L when it is believed that the tax liability is incorrect. Taxpayers may not file offers concurrently claiming both that the tax liability is incorrect along with an inability to pay the liability.

90% OF FLAT FEE TAX SERVICE, INC. CLIENTS HAVE HAD

A SUCCESSFUL OFFER IN COMPROMISE

In most cases, taxpayers must submit Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, and/or Form 433-B, Collection Information Statement for Businesses. Neither the Form 433-A nor Form 433-B is required when a taxpayer submits an Offer in Compromise (OIC) based solely as to doubt as to liability.

How Many Forms 656 and Application Fees are Required?

The general rule when determining how many settlements offers and application fees are necessary is “one fee and form per entity”. The Form 656-B contains an Offer in Compromise Application Fee and Payments matrix to assist you in determining the number of Forms 656 and application fees required.

Examples:

A married couple owing the same joint income tax liability may file only one Form 656 listing the joint liability. One fee of $150 should be attached to the Form 656. A married couple opting to file separate offers to compromise the same joint liability may do so, but two $150 application fees will be required.

When a married couple owes a joint liability and one spouse also owes an individual (non-joint) liability, two OICs and two application fees are needed.

A divorced, separated or married couple living apart may still file one From 656 listing their joint liability and pay only one $150 fee as long as all the taxes owed are joint liabilities. Taxpayers in these situations that opt to file separate offers must pay a $150 application fee for each offer that is submitted for consideration.

Note: These examples assume that the taxpayers do not meet one of the exceptions for paying the application fee: your Offer in Compromise (OIC) is filed under doubt as to liability or the taxpayer has completed and attached Form 656-A to Form 656.

YOU REALLY SHOULD HAVE AN EXPERIENCED IRS TAX ATTORNEY

PREPARE YOUR IRS SETTLEMENT

Keys to Success in the Offer in Compromise Program:

1. Explore all collection options before submitting an offer in compromise

2. Complete the “Is Your Offer in Compromise Processable?” checklist located in the Form 656-B, Offer in Compromise Booklet. (If you make any ‘kind of mistake” on your paperwork, the IRS will return your Offer in Compromise and tell you its is “un-processable”. The IRS won’t tell you what the mistake is. The IRS will immediately resume enforcement action against you. You will have to start out “all over again”.)

DO IT RIGHT THE 1ST TIME –

HAVE AN IRS TAX ATTORNEY DO IT RIGHT

HAPPY IRS TAX RELIEF CLIENT
Offer in Compromise Success

3. Submit all required documentation

4. Complete all items on Form 656, Offer in Compromise

5. Include all required fees and payments

6. Be current with all filing and paying requirements (estimated taxes and federal tax deposits) and remain current

7. Respond promptly to all requests for additional information

8. Complete all items on Form 433-A or Form 433-B

Where to File Form 656

Residents of: Alaska, Arizona, California, Colorado, Hawaii, Idaho, Kentucky, Louisiana, Mississippi, Montana, Nevada, New Mexico, Oregon, Tennessee, Texas, Utah, Washington, Wisconsin or Wyoming:

If you are a wage earner, retiree, or a self-employed individual without employees; then mail Form 656 and all attachments to:

Memphis Internal Revenue Service
Center COIC Unit
PO Box 30803 AMC
Memphis, TN 38130-0804

If you are other than a wage earner, retiree, or self-employed individual without employees; then mail Form 656 and all attachments to:

Memphis Internal Revenue Service
Center COIC Unit
PO Box 30804, AMC
Memphis, TN 38130-0804

Residents of: Arkansas, Connecticut, Delaware, District of Columbia, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, Puerto Rico, Rhode Island, South Carolina, South Dakota, Vermont, Virginia, West Virginia, or have a foreign address:

If you are a wage earner, retiree, or a self-employed individual without employees; then mail Form 656 and all attachments to:

Brookhaven Internal Revenue Service
Center COIC Unit
PO Box 9007
Holtsville, NY 11742-9007

If you are other than a wage earner, retiree, or a self-employed individual without employees; then mail form 656 and all attachments to:

Brookhaven Internal Revenue Service
Center COIC Unit
PO Box 9008
Holtsville, NY 11742-9008

Where to File Form 656-L (Doubt as to Liability)

Brookhaven Internal Revenue Service
COIC Unit
PO Box 9008
Holtsville, NY 11742-9008

All this information is taken from the IRS website and is vital information to have. For any questions please call our office.

DO YOU WANT TO SETTLE WITH THE IRS?

CALL THE OFFER IN COMPROMISE PHONE-LINE AT FLAT FEE TAX SERVICE

1-866-747-7435

https://www.flatfeetaxservice.net/offer-in-compromise-irs-settlements