An Offer in Compromise is aimed at collecting as much taxes as a taxpayer is reasonably able to pay immediately rather than waste more time and money in attempting to retrieve the full tax amount and potentially be unsuccessful at it. This program allows anyone who owes back taxes to the IRS to offer a compromise, or an amount that they can pay right now that will wipe the slate clean and get you back on the road to financial solvency. The Offer in Compromise is granted on an individual merit basis. Therefore, someone else's successful application may not be typical of your application.

Your eligibility for an Offer in Compromise depends on your RCP or Reasonable Collection Potential which basically refers to how much the IRS can reasonably expect to collect from you. The IRS will examine your entire financial position and make a ruling that says what is reasonable to collect from you at this time. The IRS will not accept any offer that is less than the RCP they assess.

There are 3 types of Offers in Compromise. The first is known as a Doubt as to Collectability. This type means that it is highly unlikely that you will be able to fully settle your tax debt before your due date. For example, if you need to pay $10,000 of taxes within the next 2 months but your monthly salary is only $4,000 per month, obviously, you would not be able to meet your obligations in the time remaining.

The second type of Offer in Compromise is called Doubt of Liability. This means that there is a doubt, no matter how small, that the amount of money you owe is not correct. The doubt may be about whether you actually owe the tax that is attributed to you (or does someone else owe it). Alternatively, it may be a doubt over the accuracy of the quantum of tax. Regardless of the reason, if you can show that you are not legally responsible for the money you owe or that its calculation is erroneous, you can offer a compromise that correctly reflects what you actually owe.

The final compromise is the Hardship category that many people fall into. This means that the complete collection of your total debt would create an economic hardship that you and your family may not recover from, in which case you can make an Offer in Compromise and the IRS is likely to approve of it.

To find out more about the Offer in Compromise, you should consult a tax attorney. He or she will explain in greater detail and will give you a URL so you can print out the forms you need to fill out to apply for the compromise.

Darrin T. Mish is a veteran, nationally recognized tax attorney who has focused on providing IRS help to taxpayers for over a decade. He regularly travels the country training other attorneys, CPAs and enrolled agents on how to handle their toughest cases with the IRS. He is highly ranked among the top attorneys in the country, with an AV rating from Martindale-Hubbell and a perfect 10 on Avvo.com. Martindale-Hubbell has also honored him with a listing in their Bar Register of Preeminent Lawyers. He is a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute. With clients on every continent but Antarctica, he has what it takes to solve your IRS problems no matter where you live in the world. If you would like more information about his practice and how he can help you, please call his office at (813) 229-7100 or toll free at 1-888-GET-MISH.

What is an Offer In Compromise is a post from: IRS Tax Problem Solver Blog - IRS Help

Very often when you make an application for an Offer in Compromise, you will be confronted with various problems. Face it, the IRS does not like to accept less taxes than what they are due. But for you, knowing the potential Offer in Compromise problems will help you to avoid them. In fact, knowing these problems will also help you determine whether you qualify for an Offer in Compromise in the first place.

The first problem that will pose a problem in your Offer in Compromise is that you earn too much money per year. In such a case, the IRS will take it that you are able to pay off your tax burden eventually, even if it is in the millions. Some people have even considered quitting their jobs to prove they cannot pay their taxes, but that is not allowed. Quitting won’t help but if you are laid off, then you might have a case.

The second problem is that of having too many assets that can be sold to pay off the tax that you owe. When you have significant assets you are not considered poor. So do not expect the IRS to look favorably on your application for an Offer in Compromise. In fact, they will scrutinize your asset portfolio and find anything that can be sold so don’t waste your time making an application for an Offer in Compromise if you are laden with a lot of hidden assets. Your application is bound to fail.

Another problem is making errors in calculating the amount of taxes owed. If the amount calculated is higher than it should be, obviously you might not be able to pay. Another source of error may be typographical. You can try to show the IRS the error in hopes of removing your tax burden, but bad math or an incorrect calculation can have your Offer in Compromise application rejected so be sure you thoroughly check your work to eliminate Offer in Compromise problems.

The final problem I want to highlight is the problem of doing things yourself and getting it wrong. The application for Offer in Compromise is rather technical and it is easy to get the procedure wrong. That is why you need to have the advice of a tax attorney to help you out in discussing an Offer in Compromise with the IRS. The IRS is generally an organization that does not like to compromise so you will do well to hire an attorney to see what can be done to stand the best chance of a successful application.

Darrin T. Mish is a veteran, nationally recognized tax attorney who has focused on providing IRS help to taxpayers for over a decade. He regularly travels the country training other attorneys, CPAs and enrolled agents on how to handle their toughest cases with the IRS. He is highly ranked among the top attorneys in the country, with an AV rating from Martindale-Hubbell and a perfect 10 on Avvo.com. Martindale-Hubbell has also honored him with a listing in their Bar Register of Preeminent Lawyers. He is a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute. With clients on every continent but Antarctica, he has what it takes to solve your IRS problems no matter where you live in the world. If you would like more information about his practice and how he can help you, please call his office at (813) 229-7100 or toll free at 1-888-GET-MISH.

Offer in Compromise Problems You should Know about is a post from: IRS Tax Problem Solver Blog - IRS Help

If a taxpayer is unable to pay his or her tax liability, and collection activity would create an economic hardship the IRS will consider placing the account in a “hardship” or currently not collectible status. In considering a taxpayer’s account for “hardship” status the IRS will compare the taxpayer’s monthly gross income against what they call “allowable” expenses. IRS monthly allowable expenses are national averages for food, clothing, miscellaneous expenses, housing, transportation, medical expenses and insurance, as well as proper tax withholding and payments. These “allowable” amounts vary depending on household size and local standards as well.

“Hardship” is a subjective term and even though a taxpayer’s monthly expenses may exceed IRS allowable amounts it doesn’t mean that such status is not warranted or achievable. In some cases a taxpayer may have excessive medical expenses in caring for themselves or a loved one, and “hardship” status may still be granted. In all cases in order to be consider currently not collectible, the taxpayer must provide the IRS with financial information on Form 433A, and supply supporting documentation. If a taxpayer is over IRS allowable expenses in a situation such as the above example, supporting documentation is even more critical. Understand that the IRS is going to look at your circumstances with a critical eye, and frivolous or fraudulent claims in an attempt to gain “hardship” status carry severe penalties, including criminal charges.
Being placed in “hardship” status is not a permanent solution to a tax problem. A taxpayer that is currently not collectible will have his or her status reviewed every 18 to 24 months by the IRS to determine if “hardship” status is still warranted. However, being considered currently not collectible has strategic planning merit if other viable solutions to a tax problem exist. For example if a taxpayer is close to the collection statute expiration date on a given tax assessment, being put in “hardship” status for the remainder of that statutory period would result in the relief of those liabilities once that date has passed. Additionally, a taxpayer may be considering bankruptcy and a temporary placement in “hardship” status may allow a taxpayer to wait out any remaining statutory time necessary before those liabilities become dischargeable in a bankruptcy proceeding. These strategies and techniques require professional analysis in most cases, it’s important to consider such advice before making any decisions in handling your tax problem.

I have prepared a video for you to watch to learn even more about IRS Currently Not Collectible Status.

IRS Currently Not Collectible/Hardship Status/Status 53 is a post from: IRS Tax Problem Solver Blog - IRS Help

Some of the bigger "national" Offer in Compromise companies try to sell everyone an Offer in Compromise. The truth is that not everyone qualifies. There are strict requirements that come into play to determine whether a taxpayer qualifies to "settle for less" than what the IRS says they currently owe.

In a nutshell there is an algebraic formula that comes into play to determine whether or not a taxpayer can get such a "deal." (You knew algebra would finally come in handy right?) The exact nature of the algebra problem changes depending on the type of Offer payout you choose. In short there are three types of Offer in Compromise that are based upon Doubt as to Collectibility. Doubt as to Collectibility means that "it is more likely than not that the IRS will not be able to collect the tax debt within the time frame that they are lawfully able to do so. Normally this time frame is ten years but the ten years can be extended for a variety of reasons including prior rejected Offers in Compromise, filing of Bankruptcies, various administrative IRS appeals and so on. The three types of Offers in Compromise are as follows:

1. Cash Offer – payable within 5 months of acceptance of the Offer in Compromise
2. Short Term Deferred Offer – payable in 24 equal monthly installments
3. Long Term Deferred Offer – payable over the number of months left on the IRS Collection Statute in equal monthly installments.

Watch the video to learn more about Offers in Compromise including the exact algebra problem for each type of Offer in Compromise. I think you learn a lot about filing your own Offer in Compromise!

Offer in Compromise is the answer for your IRS Problem is a post from: IRS Tax Problem Solver Blog - IRS Help

In this final post on the July 23rd article in the Wall Street Journal online edition we're going to talk about taxpayer misconceptions in negotiating a resolution to tax debt with the IRS. A few years ago the IRS hired an advertising firm to reshape its image with the American public. In large part this effort was a success. The IRS with the aid of Madison Avenue was able to convince a portion of the American taxpaying public that it was "friendlier" and "easy" to do business with. In some ways this is true. The IRS has one of most consistently lauded websites on the internet, most returns can be filed and taxes paid electronically, and refunds can be direct deposited. There is no doubt that the "business" of the IRS has become easier and more efficient. If you find yourself in the unenviable position of having a tax problem, however, it only takes one phone call to the number on your computer generated notice to discover that the "friendlier" IRS is a thing of the past (if not a straight up urban legend).

The plain truth (and a fact of life) is that tax problems are not "do it yourself" friendly. Taxpayers that have outstanding liabilities with the IRS are bombarded with advertisements that tell them they can settle their tax debt for "pennies on the dollar," and the simple truth is many times they can. Unfortunately, lost in the advertisements and in communications between tax resolution firms and their clients, is the establishment of reasonable expectations. It's important for a taxpayer with an IRS problem to have a good grip on the understanding that their tax problem is at a very minimum their responsibility, and more often than not, of their own making. Even if the taxpayer is entirely "innocent" (which is rare), the IRS is not just going to carte blanche accept their claim of innocence without due diligence. There's nothing "quick" about solving a tax problem (unless of course you pay the debt in full and even then "quick" is a relative term). Competent tax professionals communicate realistic expectations to their clients and patient persistence is paramount in that communication.

If a taxpayer owes the IRS $500,000 and they file an Offer In Compromise for $1500 they cannot reasonably expect it to be accepted on the first look. It's unreasonable to expect the government not to fight for more money, and it's certainly unreasonable to expect the IRS not to look into the matter thoroughly – which takes time – a lot of time. Is it possible that the IRS will eventually accept an Offer In Compromise under those conditions – absolutely, and it has happened – more often than the IRS would like to admit. It just doesn't happen quickly, and it doesn't happen unless the taxpayer's circumstances warrant such a compromise. A competent professional will communicate these facts to his or her client and set reasonable expectations. Firms that advertise or promise an Offer In Compromise in every client's circumstance are doing a disservice not only to their clients but do their own credibility and the credibility of their industry. In searching for a professional to assist them in resolving their tax problem, a taxpayer should keep in mind two cardinal rules. First there are absolutely no guarantees, and secondly, it takes time to resolve a tax problem and time means money, so don't expect a miracle when you hire the lowest priced professional you can find. You get what you pay for, and you want a professional that's motivated to solve your problem when you're up against it with the IRS.

CAN A TAX RESOLUTION FIRM REALLY HELP YOU SOLVE YOUR TAX PROBLEM? (PART 3 OF A 3 PART SERIES) is a post from: IRS Tax Problem Solver Blog - IRS Help

On July 23rd the Wall Street Journal online edition published an article about a settlement between a well known nationwide tax problem resolution firm and 18 states in reference to misleading advertisements. The article pays particular attention to what the IRS refers to as unrealistic results promised by tax resolution firms with the “Offer In Compromise” as an alternative to other forms of collection. As well, peppered throughout the article, are stories of dissatisfied taxpayers who payed “thousands” of dollars to the tax resolution firm but didn’t receive the results they expected. The article doesn’t go so far as to negate the OIC as a solution to a taxpayer’s problem, but it certainly places it squarely in the “not likely to happen” category. It is unfortunate that the WSJ chose to paint this picture as there are glaring omissions regarding the OIC that make it a very realistic solution to many taxpayers. Additionally, there are several settlement options for a taxpayer outside the OIC, but the article only mentions installment agreements.

Typically, the IRS is quoted as blaming “frivolous” Offer Filings by tax professionals in efforts to “stall” collection activity as it’s primary reasoning for the rejection of more and more Offers. It shouldn’t surprise you that this position is a “red herring.” Although the filing of an OIC suspends the ability of the IRS to levy a taxpayer’s wages and bank accounts while the OIC is pending, it also “tolls” the collection statute. The IRS generally has 10 years from the date of assessment to collect taxes owed by a taxpayer. However, this period is “tolled” (stopped from running) and thereby extended when an OIC is pending. The IRS doesn’t lose any of its legally permitted time to collect an outstanding tax liability when an OIC is filed. In fact one could argue that the IRS gains an exact “roadmap” to the location of a taxpayer’s assets when an OIC is filed. This is largely because in order for an OIC to be considered “processable” the taxpayer must submit a financial statement (Form 433 A and/or B) along with three months of supporting documentation, including bank account numbers.

When the OIC is rejected this “roadmap” gives the IRS a jump on filing a levy or seizing a taxpayer’s assets. This reasoning exposes the flip-side of the debate, which is that the IRS routinely rejects Offers in Compromise, in order to gain the upper hand in more aggressive collection activity. This viewpoint is supported by the large number of properly filed offers that are initially rejected but later accepted on appeal. It’s no wonder that there is a growing perception that the IRS breeds a “culture of frustration” designed to get taxpayers to give up and pay rather than pursue a collection alternative they might otherwise qualify for.

It is certainly true that an Offer In Compromise is not the solution for every tax problem, maybe not even most. However, a closer look at the facts involving the OIC would draw the critical thinker to a much different conclusion than the position taken by the WSJ. First, most taxpayers give up and pay out of frustration when they would otherwise prevail with a little persistence. Second, some taxpayers that file an OIC really possess the ability to pay their tax liability and don’t meet the OIC qualification standards. Their “dissatisfaction” with results is a matter of personal greed in an effort to avoid paying tax they legitimately owe. Lastly, the OIC is most assuredly still a viable solution in many cases to settle a tax problem. A taxpayer should seek competent, professional assistance when considering an OIC. A competent professional will analyze the taxpayer’s situation before recommending any solution. If an OIC is appropriate the competent professional will inform the taxpayer that it is likely to be rejected initially and an appeal will be necessary, and therefore patience is essential.

CAN A TAX RESOLUTION FIRM REALLY HELP YOU SOLVE YOUR TAX PROBLEM? (PART 1 OF A 3 PART SERIES) is a post from: IRS Tax Problem Solver Blog - IRS Help

By it's own reporting the Internal Revenue Service acceptance rate of Offers In Compromise has declined by a whopping 70% since 2001! Some critics voice the complaint that the IRS is not realistic in their assessment of taxpayer circumstances and accuse the service of routinely rejecting reasonable offers that are a good deal, not only for the taxpayer but for the IRS. The criticism is furthered by those that say the Offer In Compromise program helps the IRS collect monies it would otherwise not be able to collect and promotes the future compliance of the taxpayer making the "offer" by requiring that the taxpayer to file timely returns and pay taxes for the five years following offer acceptance at the risk of having the full liability reinstated.

Are these criticisms and complaints really valid though? There may be some merit to the argument that new policies and procedures put in place by the IRS have discouraged taxpayers from submitting acceptable offers. However, there is equal merit to the argument that before these policies and procedures were in place the IRS was inundated with frivolous "offers" by taxpayers and professionals representing those taxpayers. These frivolous offers were consuming time and resources the IRS could better apply elsewhere. Further these offers were considered frivolous because they were being made by taxpayers that could really afford to pay their tax bill but were trying to get by "on the cheap" and settle for "pennies on the dollar." Is it really fair for a taxpayer that owes the government $250,000 in back taxes, and owns a home with $500,000 in equity, to be offering the government $1000 to settle his tax bill?

Granted the previous example is a bit of hyperbole but you get the point. Taxpayers that enrich themselves by not paying their taxes should not be let off the hook for "pennies on the dollar" if they have resources to pay the bill. The operative word in the above qualification though is "if." The plain fact is the IRS continues to accept "properly" structured Offers In Compromise when it receives them. Even if an OIC is rejected upon initial submission it will more often than not be accepted on appeal if it is "properly" structured and justified by the taxpayer's circumstances. Our firm had a consultation recently with a taxpayer that was firmly set on the cockamamie idea of filing an "offer" with the IRS to settle his $100,000 plus tax liability by "allowing" them to keep his 2007 tax refund of some $700 and change. We tried to gently inform the gentleman that the IRS was going to keep his refund and apply it directly to his outstanding liability regardless of his "offer". We are still not certain this guy actually got the picture.

Can you still successfully make an Offer In Compromise to the IRS and settle your tax bill for "pennies on the dollar"? Yes, absolutely, unequivocally, we help taxpayers accomplish that task many many times each year. Will the IRS accept your OIC? The plain truth is an OIC is not appropriate for every taxpayer's situation. There are other options available to you for settling your tax debt for less than you owe. Some of those options are quicker and more effective than an OIC and can even save you more money. It's true! Believe it or not there is more than one viable solution to any given tax problem. An experienced tax professional can help you properly structure a solution that will minimize your headaches and get the tax man off your back.

Is the IRS Pre-Disposed to Rejecting Your Offer In Compromise? is a post from: IRS Tax Problem Solver Blog - IRS Help

According to the 2007 Taxpayer Advocate Service Annual Report to Congress the IRS is expanding its FPLP collection initiatives. The Federal Payment Levy Program (FPLP) is an automated system that matches IRS records against those of the government's Financial Management Service (FMS) and allows continuous levies to be issued for up to 15 percent of federal payments due to taxpayers who have unpaid federal tax liabilities. FPLP levies can attach to a variety of sources of federal income, ranging from salaries of federal employees to retirement income to federal contractor (or vendor) payments. However until recently the bulk of all FPLP levy payments received have from Social Security recipients.

Wage levies in general can create economic harm to taxpayers that find themselves unable to resist IRS efforts to garnish their wages. However, an FPLP levy has the potential for a more intense economic impact. The regular levy process allows the taxpayer the opportunity to request a hearing and have someone to personally review the facts of the case. While this hearing is pending the levy action is stopped. With the Federal Payment Levy Program on the other hand, there is no human component. It is completely automated. In simplest terms, if you get a check from the federal government as an employee, for retirement benefits, or otherwise and you owe back taxes and the required notices have been sent, the FPLP will issue a levy, garnishing your federal payments.

As a recipient of federal payments you are in effect assumed guilty and have to prove your innocence. You are denied due process of law afforded to privately compensated taxpayers. The first groups of federally compensated taxpayers to be added to the FPLP system are civilian employees of the Department of Energy, the EPA, the Department of Health and Human Services and the VA. The IRS projects the inclusion of these federal employees to boost their collections by 960,000 taxpayers pushing the total number of FPLP levies close to 3 million by 2009. That doesn't include anticipated collections from Department of Defense civilian employees and Military Retirement Annuity recipients who are also on the list of additions.

This means an increased amount of frustration in dealing with IRS problems for an increased number of taxpayers. Under the FPLP program it is commonplace for the IRS to receive multiple payments from taxpayers who otherwise would be entitled to reprieve before a levy is released. Coping with an IRS wage levy can cause an immense amount of stress for the average taxpayer. As a taxpayer you do have rights. Learning those rights and the correct steps to take in managing your case with the IRS can be challenging and time consuming, adding to your stress and frustration. Hiring a professional with quality experience in handling IRS matters can help you sleep at night and put your hard-earned money back in your pocket more quickly.

By 2009 the IRS Expects to Levy 3 Million is a post from: IRS Tax Problem Solver Blog - IRS Help

There are a lot of companies online and offline that want your IRS Problem Resolution business. They will go to just about any lengths to get too. My understanding of most of the "national" companies is that whomever calls their tollfree number is greeted by a salesperson who guarantees that their tax problem can be settled for mere "pennies on the dollar" as long as a credit card number is immediately forthcoming. Well….that's not how we do business. Things are different at my firm. We aim to help real people with real problems. To be totally frank with you, an Offer in Compromise is not right for everyone…in fact it's not right for most taxpayers. But in certain situations, it's a terrific choice and the best route to take. Is it best for you? Take a look at the video that I put together to explain the process and to help you decide if an Offer in Compromise is the best option for solving your IRS Problem for good. What we do is a comprehensive analysis on every client that is as unique as each individual IRS Problem. Only after that analysis is complete do I advise you as to the best possible solution to your problem. In some cases, it's an Offer in Compromise and in some cases it's not what you want to hear. But in every case, it's the God's honest truth.

Offer in Compromise – Will It Really Work For Me? is a post from: IRS Tax Problem Solver Blog - IRS Help

While an Offer in Compromise (OIC) may be the solution to your IRS Problems, failing to follow a few tips could make the offer unacceptable.

• Make sure you fill out Form 656 (Offer in Compromise) fully and tell the truth. Another form that may be necessary is Form 433-A (Collection Information Statement).

• Don't ask for help from the IRS. Although an IRS officer can assist you with filling out the forms, they work for the government, not you. Do not let him determine the amount of your offer though as they will want you to offer more than you should.

• Be informed. Make sure you read the terms and conditions of the OIC. Even if your offer is not accepted, you will be obligated to certain conditions. Do not sign the form until you are aware of these conditions.

• Submit a deposit. For a Cash Offer a 20% percent down payment is required. For periodic payment Offers, not deposit is required, but you will need to start and keep making the proposed payments. These payments are not refundable should your Offer be rejected.

• Be patient. It may take up to one year for the IRS to review your offer. It will complete a very thorough investigation before accepting your offer.

You do need to file your tax returns on or before the due date or ask for an extension.

• If the IRS asks for more information, get it to them promptly. If there will be a delay in the process, inform the IRS of the reason why.

• Provide all documentation requested. The IRS needs all possible information to help prove your need for an OIC.

• Avoid possible misconceptions of comments. Provide as much as possible in writing and work through the channels necessary to avoid misunderstandings.

• Inform those who could possibly be contacted by the IRS regarding your financial circumstances of that possibility. This will help alleviate any of their suspicions regarding your IRS Problems.

• If your financial situation changes before acceptance of the OIC, you may want to reconsider your offer. This is especially important if your financial situation deteriorates. You may want to either amend your offer or withdraw it altogether.

• Be prepared for hassles. The IRS never makes the process easy.

If you have questions regarding any part of the OIC process, contact us. Our knowledgeable staff can assist you with an OIC or any other IRS Problem you may be experiencing. Call us today.

Offer in Compromise Tips is a post from: IRS Tax Problem Solver Blog - IRS Help