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

irs OFFER IN COMPROMISE

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 through the Offer in Compromise 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).

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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-2s and 1099s 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 timeframe 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 Actual IRS 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.

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Guide to Employers & Human Resource Managers Who Have an Employee with an IRS Wage Levy – Flat Fee Tax Service

As an employer or human resource manager, you may have received an IRS notice to levy one of your employees. The employee with the IRS income tax problem may be valuable to your operation. You don’t want to lose your employee. What do you need to do?

The IRS has strict and immediate time constraints for complying with the order to seize your employee’s wages. With the proper representation, your employee can have the IRS wage levy stopped, avoided and released in 1 day.

Under Internal Revenue Code section 6331, the IRS may issue a levy for the purpose of seizing a taxpayer’s property to satisfy unpaid and overdue income tax debt. This is done by sending you, the employer, an IRS Form 668-W(c).

Our job at Flat Fee Tax Service, Inc. is to have the IRS stop the wage levy within 24 hours. Our IRS tax relief team will have the IRS issue a release of levy by sending you, the employer, IRS Form 668-D (Release of Levy).

Your employee, who you do not want to lose, may be eligible to settle their IRS income tax debt. At the very minimum, our team of IRS tax resolution experts will negotiate a manageable IRS installment agreement. At best, your employee will have their income tax debt settled for far less than what is owed.

As an employer of someone with an IRS problem, please, do not try and outwit the IRS. If your employee obtains expert tax income relief representation, it isn’t necessary to try and get around the levy. If you do get caught non-complying with a wage levy order and refuse to surrender any property subject to the levy, the employer can become personally liable for your employee’s income tax debt. In addition, a penalty up to 50% may be added to the income tax debt.

The IRS Tax Attorneys at Flat Fee Tax Service, Inc. has never failed to stop, avoid and release an IRS wage levy. Your employee has rights. Our tax relief team will protect your employee from the wage levy. As previously written, your employee may also be eligible to settle with the IRS through the Offer in Compromise program.

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DON’T LOSE YOUR EMPLOYEE

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  3. Experienced IRS Tax Attorneys work directly with you.
  4. IRS Wage Levies Stopped, Avoided and Released in 1 Day.
  5. 90% of our Clients who have submitted an Offer in Compromise has received a successful IRS Settlement.
  6. Low, Flat and Affordable Fees. Fees can be stretched up to 10 or 12 months.
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How Can I Stop an IRS Wage Levy – Stop Wage Garnishment by Flat Fee Tax Service

If you are facing and getting hit with an IRS wage garnishment, it is important to act fast so you can limit the impact the IRS will have on your financial well being. The IRS will continuously take the money from your paycheck with little regard to your other financial needs. The IRS does not care about your rent, your mortgage, your car payment or feeding your family unless they are forced to do so.

There are many methods that can be used to stop an IRS wage levy (garnishment) if you have an experienced IRS tax relief professional handling your income tax problem. The method you use will be determined by your tax, financial, and work situation. The most ideal method to choose would be one that resolves your income tax problem as well as stops the IRS wage levy “in its tracks.”

STOP YOUR IRS LEVY TODAY. CALL: 1-800-589-3078

Ideally, an IRS wage garnishment (levy) will be stopped in one day (often within hours) and your income tax problem will be resolved at the same time or very soon afterward. When the IRS sends their final notice of intent to levy the IRS will state that you need to pay your past due to tax debt in full or come to some other form of arrangement to prevent the levy from happening. Typically you can still do that even after the levy has taken effect. Below are some methods to pay in full or make some other form of arrangement.

Pay your income tax debt in fullIF YOU COULD DO THIS, YOU WOULDN’T BE THE TROUBLE YOUR NOW IN. Once your income tax debt has been paid in full the wage garnishment will immediately stop. Even if you can’t pay in full maybe you can borrow from family or friends (not recommended), have a garage sale and sell some assets, refinance your home, or even try to pay taxes on a credit card (also not recommended).

SO, LET’S FORGET THIS OPTION.

Enter into an Installment Agreement – An installment agreement is a PAYMENT PLAN between you and the IRS that says you will pay off your tax debt in monthly increments until everything has been completely paid off. Once you have an installment agreement accepted by the IRS, the wage garnishment/seizure will be stopped. You will remain in good standing with the IRS as long as you keep up on your monthly payments and do not default on your agreement. The IRS prefers this method to be used if taxes cannot be paid in full.

PLEASE NOTE: MOST PEOPLE DEFAULT ON THEIR IRS PAYMENT PLANS BECAUSE THE AMOUNT AGREED UPON WAS MORE THAN THE STRUGGLING TAXPAYER COULD REALLY AFFORD. WHEN YOU DEFAULT, AND YOU WILL, THE IRS WILL LEVY YOU AGAIN.

GREAT NEWS

YOU CAN SETTLE WITH THE IRS FOR LESS.

File for an Offer in Compromise – An offer in compromise is an IRS settlement program that allows financially struggling taxpayers to settle for less than the total amount of back tax debt that they owe. This is a very hard filing to get accepted if you do not know what you’re doing. Less than 1/2 of the IRS settlement submissions are actually accepted by the IRS. If you are considering this type of filing it is highly suggested that you do some in-depth research to see if you are actually a likely candidate.

You should consult with an experienced IRS tax attorney to get their opinion. When you file for an offer in compromise your wage levy will typically be delayed until your offer has been reviewed. It will not stop it if the IRS thinks you are using the filing as a stalling tactic though. If your offer is accepted you will be considered in good standing with the IRS and no wage levy will exist.

THE IRS TAX RELIEF TEAM AT FLAT FEE TAX SERVICE, INC. CAN TELL YOU DURING OUR INITIAL CONSULTATION IF YOU ARE QUALIFIED AND ELIGIBLE FOR AN IRS OFFER IN COMPROMISE.

Currently not Collectible – The IRS does have some guidelines as to when it is unfair to collect from a taxpayer. The only problem is they will not stop collecting until it is proved to them that it is unfair to collect from the taxpayer. If you can prove to the IRS that the garnishing and seizing of your wages, Social Security, Social Security Disability (SSDI) or Veteran’s Pension causes financial hardship the garnishment (levy) will be stopped. This is only a temporary solution and may or may not resolve income tax problem. If you get placed into Currently Not Collectible status, it is possible to run out the Statute of Limitations on the IRS collection enforcement.

The IRS will check on you every 12 to 18 months to see if your financial condition has improved so that you can make payments. If you cannot, the Currently not Collectible status will continue.

IF YOU QUALIFY FOR CURRENTLY NOT COLLECTIBLE, WE RECOMMEND THAT YOU “GO ALL THE WAY” AND DO AN OFFER IN COMPROMISE.

An IRS garnishment (levy) is very difficult to deal with and it is important that you act fast to limit the effectiveness of this collection method and get your paycheck freed. It is highly suggested that you consult with an experienced IRS tax professional when dealing with an IRS wage garnishment.

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2. Honest, Experienced and Hard Working.
3. Accredited by the Better Business Bureau. A-Rating. Check out our Client Reviews.
4. No Client Complaints.
5. Experienced IRS Tax Attorneys work directly with you.
6. IRS Wage Levies Stopped and Released in One (1) Day.
7. 95% of our Clients who have submitted an Offer in Compromise has received a Successful IRS Settlement.
8. Low, Affordable Fees Stretched out over 10 Months so that you can afford our valuable services.
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Flat Fee IRS Tax Relief – Affordable IRS Levy Help: IRS Final Notice of Intent to Levy – Flat Fee Tax Service – Stop an IRS Wage Levy in One Day

Flat Fee IRS Tax Relief – Affordable IRS Levy Help: IRS Final Notice of Intent to Levy – Flat Fee Tax Service – Stop an IRS Wage Levy in One Day.

Flat Fee IRS Tax Relief – Affordable IRS Levy Help: IRS Offer in Compromise – You Can Get A Fresh Start – Are You Eligible – Flat Fee Tax Service

Flat Fee IRS Tax Relief – Affordable IRS Levy Help: IRS Offer in Compromise – You Can Get A Fresh Start – Are You Eligible – Flat Fee Tax Service.