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).

FLAT FEE TAX SERVICE, INC. HAVE A 95% OFFER IN COMPROMISE 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-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.

FLAT FEE TAX SERVICE, INC.

95% OFFER IN COMPROMISE SUCCESS RATE

BBB ACCREDITED – A PLUS RATING – NO CLIENT COMPLAINTS

DON’T GO IT ALONE, HAVE AN IRS TAX ATTORNEY REPRESENT YOU.

GET THE BEST. AN IRS TAX ATTORNEY AT FLAT FEE TAX SERVICE.

DOES THE OFFER IN COMPROMISE PROGRAM SEEM “COMPLICATED”? WELL, IT IS.

CALL THE FLAT FEE TAX SERVICE, INC. IRS TAX HELP PHONE:

1-800-589-3078

https://www.thebestirshelp.com

http://www.flatfeetaxservice.us

https://www.facebook.com/thebestirshelp

What To Do When You Receive an IRS Notice – Call Flat Fee Tax Service

Receiving a notice from the IRS is not something most people look forward to. You may be confused as to what the notice is saying, and afraid of the possible consequences, such as owing substantial back taxes, interest, and penalties.

IF YOU GET AN IRS NOTICE, CALL THE BEST IRS HELP TEAM AT FLAT FEE TAX SERVICE, INC. AND FIND OUT WHAT YOUR BEST OPTIONS ARE.

However, there are two important things to know about most IRS notices:

1. You may have the right to challenge or appeal the action the IRS is taking, and You usually have a limited time to do so.

2. If you toss the IRS notice aside and forget about it, you may lose out on your chance to appeal an incorrect tax assessment or to stop an IRS collection action. The IRS is also much easier to deal with when you are proactive about solving your tax problems, rather than failing to respond to IRS notices and hoping for the best.

There are many different types of IRS notices, but the Notice of Deficiency and the various collection notices are two common ones that you should be aware of.

The Notice of Deficiency

The Notice of Deficiency, also known as a 90-day letter, is the last best chance to disagree with the IRS determination of additional tax due. Don’t ignore it! If you do, you will be very unhappy later.

Once you receive this notice, you have 90 days to file a petition in Tax Court. If you have any reason to believe that the IRS has made an error in computing the tax, you should contact a tax litigation attorney immediately, so you can argue your case in Tax Court.

After filing your petition, you may not need to go to court at all. Your tax attorney may be able to negotiate a settlement that eliminates some or all of the assessed tax. Even if you and your attorney decide that the IRS is likely to win their case, you can negotiate an installment plan or Offer in Compromise in order to avoid any IRS collection actions.

IRS Collection Notices

There are many different types of notices to inform you that the IRS is about to use its broad collection powers to take your assets. Some of these notices include:

Notice of Intent to Levy
Notice of Federal Tax Lien
Notice of Jeopardy Levy
Notice of Levy on Your State Tax Refund
Post Levy Collection Due Process Notice

If you receive any of these IRS notices, you need an IRS Tax Attorney. When the IRS sends out one of the above notices, it means that the IRS is about to—or already has—seized your property, whether it was the funds in your bank account, a portion of your wages, or something else.

IF YOU HAVE RECEIVED ANY OF THESE IRS NOTICES, YOU NEED AN IRS TAX ATTORNEY TO PROTECT YOUR RIGHTS.

You have a right to challenge these collection actions, whether they have already happened or not. In most cases, you can request a Collection Due Process hearing, but you only have 30 days to make such a request.

You may or may not be able to dispute the INCOME tax assessment at this point, but you can challenge the specific collection action being taken, and either agree to a payment plan or Offer in Compromise, either of which is preferable to having the IRS drain your bank account or garnish your wages.

FLAT FEE TAX SERVICE, INC. HAS THE BEST IRS HELP TEAM AND IS LED BY AN IRS TAX ATTORNEY WHO WORKS DIRECTLY WITH OUR CLIENTS.

CALL OUR IRS TAX HELP PHONE AT 1-800-589-3089 FOR YOUR FREE AND CONFIDENTIAL CONSULTATION.

VISIT OUR WEBSITES AND FOLLOW US ON FACEBOOK.

http://www.flatfeetaxservice.us

https://www.thebestirshelp.com

https://facebook.com/thebestirshelp

FLAT FEE TAX SERVICE IS BBB ACCREDITED – A PLUS RATING –

NO CLIENT COMPLAINTS (EVER)