IRS Offer In Compromise
Applying for an offer in compromise is simple, yet I know of dozens of people who have paid for representation, only to find out that they never qualified for an offer in compromise in the first place. Some people send in a letter of compromise, requesting that penalties and interest be reduced because of "hardship". Please see my section on penalties if you want to request penalty removal. The Offer In Compromise program is unique as to its requirements. And yes, an offer in compromise can entered into after you establish a payment plan.Here's the scoop... There are three reasons for filing offers. Each one allows you to settle your tax liabilities for less than the total amount owed. This tax settlement program may be the tax resolution or relief you are looking for.
Offer In Compromise - Doubt As To Liability
The first reason is doubt as to liability (there is doubt as to whether you owe the taxes and feel that the IRS will have difficulty proving it).Offer In Compromise - Doubt As To Ability To Pay
The second reason is doubt as to your ability to pay the taxes owed given your current circumstances.Offer In Compromise - Effective Tax Administration
There is a new third special case where taking your assets will create an undue hardship. Most cases by far are filed based on doubt as to ability to pay.Offer In Compromise - Guidelines For Allowable Living Standards
The IRS uses a two part formula. Take your income, less allowable expenses (you need the IRS allowable expense chart for this). Your result is the amount they feel you can pay each month after paying your "necessary living expenses". Then multiply this number by fifty. Next add it to the equity (that is how much you pocket for yourself if you sold the item at a bargain sale) in each of your assets. For example... add the equity in your house, car, retirement plan, rental property, stocks, etc. to fifty times the monthly amount. The result is the total amount the IRS expects from you now in a lump sum. Or if you can pay it out over two years (maybe more) with interest added, you can do that instead. This calculation is subject to the IRS's opinion of the value of your assets, and the allowances they will give you when computing how much money you have available to pay monthly. The good news is that a knowledgeable and experienced professional in this area can convince the offer in compromise division to use values more in the taxpayer's favor. I can also get IRS offers accepted after they were turned down more than once before.Hire An Experienced Professional To Settle Your Taxes Using The IRS Offer In Compromise Program
The benefits of paying professional fees will always outweigh the costs, assuming you qualify. This is not an area to price shop. You get what you pay for. It does not take a lot of time to fill out the forms involved. You pay for experienced negotiation time. We have been involved in cases where collection action was taken prior to concluding the offer in compromise. If you are going to file offers for any corporation, please talk to me first. You most likely will overpay if you do not. Oh, if someone tells you that they will settle your offer in compromise for "pennies on the dollar", without having done the above analysis, run the other way! The amount that offers are settled for depends on the income, expenses and assets of the taxpayer, not how good the representative is. Sure a good representative will argue for a lower payment, but showing you a statistic that says "Mr. X owed 1 Million dollars and I settled for $200" doesn't tell you how good the representative was. Maybe the client had no assets and wasn't able to produce income! Again, "DON'T BELIEVE THE HYPE"!
Solution...
Obtain a consultation with a very knowledgeable and experienced professional who personally works on at least a few offers per month. It should only take 5 minutes to 30 minutes to determine if you qualify. Sometimes they are based on a combination of doubt as to liability as well as doubt as to ability to pay. Obtain an evaluation of the current status of your payment plan with the IRS. The majority of people I speak to think they have a "binding" agreement with the IRS, when in fact they do not. They find it difficult to accept the fact that they may have spent a lot of time and money for nothing. Wake up! Your money and property are at risk here.NEW OFFER IN COMPROMISE POLICY - All offers now have to have 20% of the offer amount submitted with the offer in compromise, or make the first monthly installment with the offer. The monthly payments must continue while the offer is being considered. If the offer is turned down, all payments are applied to the outstanding balance. No refunds. There is an exception to this if you qualify to not make these payments ahead of time.
Tax offer to compromise
ReplyDelete