An IRS Offer in Compromise it is an excellent way to resolve back taxes and to get a fresh start with the IRS or other tax agency. The IRS sets guidelines for accepting an Offer in Compromise. The IRS looks at a taxpayer’s past, current and future financial situation when evaluating whether an Offer in Compromise should be accepted. It is important to know what aspects of a taxpayer’s situation the IRS is looking at when filing an Offer in Compromise. Not everyone qualifies for an IRS Offer in Compromise, as each person’s financial situation is different. Additionally, the length of time varies but the average generally is 8 to 12 months. Therefore, pre-qualifying for an Offer in Compromise is an important first step to take prior to attempting an Offer in Compromise with the IRS.
The IRS Offer in Compromise process includes having the necessary records on hand and being compliant with the IRS tax regulations. Unfortunately, many taxpayers who attempt to file an IRS Offer in Compromise themselves get it returned due to procedural deficiencies and never make it to a point of final review. Thus, satisfying the many procedural requirements is necessary if an Offer in Compromise is to be reviewed by the IRS and is one of the benefits in hiring an experienced tax professional for filing an IRS tax settlement.
The most common offer in compromise is the Doubt as to Collectability Offer in Compromise, i.e., even over time the taxpayer cannot pay their tax debt in full. This type of Offer in Compromise is an agreement that we negotiate on your behalf to settle your IRS tax debt for an amount equal to your reasonable collection potential. Preparing your IRS Collection Information Statements and negotiating with the IRS for the lowest possible Offer in Compromise is our role. Beware of companies promising a “pennies on the dollar” settlement. The Offer in Compromise is not for everyone and many requirements must be met before the IRS accepts an Offer In Compromise tax debt settlement.
No, an Offer in Compromise will not appear on your credit report. The Offer in Compromise has none of the negative ramifications of filing bankruptcy. Although the Offer in Compromise does not appear on your credit report, the IRS Tax Lien may already be filed which will definitely damage your credit score. Once the Offer in Compromise negotiation is complete and the tax settlement is paid in full the IRS tax lien will be released and listed as paid in full.
Besides the Offer in Compromise, there is another, very effective program for reduction of an outstanding tax debt called Penalty Abatement. If there were circumstances beyond your control that prevented you from paying your tax debt and led to delinquency, the office can challenge the penalties and interest that have built up and negotiate them down.
Because tax relief from accrued penalties and interest is based more on stated representations rather than financial hardship, terms for a successful penalty relief are very specific. More so than any other, this program involves a great deal of skill to successfully navigate the IRS protocol and bring resolution. If applied for correctly and effectively, results are substantial; savings are usually thousands of dollars for the average taxpayer. This office has years of experience with this program.
An Installment Agreement with the IRS allows taxpayers that cannot afford to fully pay their back tax liability the option to pay their back taxes through monthly payments. There are guidelines regarding how the IRS determines the payment amount and time frame for the agreement. Additionally, a taxpayer must be compliant with all past tax filings before establishing the agreement. Depending on the circumstances and the amount of time that the IRS has left to collect the tax debt, the Installment Agreement may pay all or part of the back tax liability.
Often, when a taxpayer attempts to establish an Installment Agreement with the IRS, they encounter competing interests. The IRS wants to collect the entire amount of the taxes as quickly as possible, while the taxpayer wants a payment that is manageable and affordable for their financial situation. Unfortunately for many taxpayers, they end up with monthly payments greater than they can reasonably afford causing them a financial hardship. In many situations like this, the taxpayers end up defaulting on their Installment Agreement causing the IRS to begin collection activity all over again. Therefore, it is important to have an affordable Installment Agreement established properly the first time.
Once an Installment Agreement has been established the IRS suspends their collection efforts and refrains from issuing wage garnishments, bank levies, sending notices and making harassing phone calls. Consideration for being on an Installment Agreement is that penalties and interest continue to accrue on the unpaid portion of back tax liability throughout the duration of an Installment Agreement. Additionally, depending on the circumstances, the IRS may file a Notice of Federal Tax Lien to protect their interest until the liability is paid in full.
If your spouse or ex-spouse understated the tax on a jointly filed return, you are eligible to be released from the obligation for the tax liability and the related interest and penalties. Your only obligations to be released from the liabilities are to show that the understatement of tax is attributable to your spouse and that you had no reason to know of the understatement. When you hire our services, we assume limited tax power of attorney, thus enabling this office to negotiate directly with the IRS on your behalf. All necessary forms and procedures will be filed accordingly, leveraging your rights as an innocent spouse to be exonerated of this liability.
If a taxpayer fails to file a return, the IRS submits what is termed an SFR (Substitute for Return). This is submitted by the IRS for the taxpayer using bank deposits as the taxpayer's gross income. This is the worst form of taxation as it allows for zero deductions and grossly exaggerates a taxpayer's liability. Example: If you are in business and have gross receipts of $300,000 you will be taxed on the $300.000 with no allowance for expenses even if your business made no money that year. You would owe over $100,000 in taxes plus interest and penalties. Additionally, the Statute of Limitations does not begin to run when the SFR is computed by the IRS. Instead, we take control of your tax return filing for the business reflecting proper expenses and other deductions. The IRS processes this return, cancels the SFR and reduces the owner's tax debt.
Note: The statute of limitations does not begin to run until the return is actually filed. Returns that are filed on time are generally subject to a three year statute, wherein the IRS has 3 years to audit, assess additional taxes and bring a court proceeding against the taxpayer.
Many people who owe the IRS debt, in turn, end up owing state tax as well. While not as broad in scope as the IRS, State collection authorities (even local authorities) nevertheless have tremendous reach and are generally more forceful in their collection efforts. While their tactics may be more stringent, they are nonetheless bound by tax law to offer relief to those who qualify. Most state and local agencies offer similar versions of the Offer in Compromise program, and will offer Payment Plan and amnesty from penalties and interest if successfully approached. Rest assured. This professional office is prepared to challenge any and all State collection efforts and procedures.
An IRS audit can be a very frightening and stressful situation. Knowing the IRS wants to take a second, closer look at your tax return, whether it is the entire return or just a portion of it, such as expenses claimed for meals, entertainment or travel, can be a very nerve-racking experience.
This office never advises any taxpayer to represent themselves in an IRS audit, no matter how simple it may seem. Even if you honestly believe you filled your entire tax return out correctly, meeting with the IRS can be a very intimidating experience. This is especially true if you have to experience a face-to-face audit. Traditionally, however, the majority of IRS audits are done via correspondence. In other words, most IRS audits are in the form of letters asking for explanations of various tax items on a tax return or requesting supporting documentation. The fact of the matter is that on average only about one-third of all IRS audits are done on a face-to-face basis with a revenue agent, tax compliance officer, or tax examiner. In fact, according to the IRS’ 2007 Data Book, during fiscal year 2007 (Oct. 1, 2006 through Sept. 30, 2007), only 22.49 percent of all tax return audits were conducted in person, while 77.51 percent were what are called correspondence audits.
More often than not, an IRS audit of a tax return will result in changes to the return. Whether these changes are good or bad for the taxpayer depends on the situation. The no-change rate, or the number of returns accepted as filed after examination for fiscal year 2007 was 16 percent for correspondence audits and 12 percent for those returns audited by revenue agents, tax compliance officers or tax examiners.
This office advises that you hire a professional to represent you. When you hire this office, you can be comforted by knowing that this office has experienced CPAs and access to the most experienced tax attorneys dealing with IRS audits. You can face an audit with confidence when you know you have our team on your side.