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Forms Needed: TP Advocacy Initial Interview ~ Engagement letter OIC ~ Engagement Letter PRELIMINARY ~ OIC Booklet cover letter ~ OIC Booklet (OR, OIC Booklet in htm format) ~ Retainer Request ~ Offer In Compromise IRS 99-105 - knowledge of tax liens
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Description/Scope
Skill Level Time Estimate Materials Equipment-Tools Library Resources Pre-requisite Knowledge Professional IRS Forms, Tax code, Tax Regs, Tax Law, How to compute net worth, how to compute present values, IRS std expenses allowed, knowledge of tax liens, knowledge of collection standards,
Purpose
To settle a tax liability owed to the IRS for less than full "face" value. IRS Code §7122 (a second link to §7122 is here) provides the IRS authority to accept and process the petition for possible relief fro financially strapped taxpayers.
Who This Applies to
Taxpayers that have past due taxes. The taxpayers' taxes unpaid along with the interest and penalties charged must be more than the taxpayers' net worth and the sum of the amount that can be paid by the taxpayers' for the next 5 - 7 years.
When to Perform
When
Special Circumstances
Warnings & Special Circumstances
Why This Is Important
Usefulness
General Benefits 7 Objectives
Text
This entire site is for educational or informational purposes only. You are not to use the forms, concepts, strategies, or knowledge without assistance from a professional. The author, the corporation, the ISP, Bob Parrish CPA, Bob Parrish CPA, P.C. or other parties related to those or this site do not guarantee or warrantee in any manner the suitability, usefulness, accuracy, timeliness, or results of any portions of this site, nor the links contained in this site which link to other areas. At times, information is taken from other sources and is believed to be accurate, but no verification or confirmation is performed. Furthermore, if any federal or state law invalidates a portion of this disclaimer, the other portions still apply. In addition, any allegations or actions are restricted to arbitration only and must be arbitrated by the Better Business Bureau in Sarasota Florida. Reading of these pages constitutes complete acceptance and agreement with all disclaimer provisions on all pages of this site. .......
Thursday, February 22, 2007 02:34 AM
The IRS will process your request only when all the qualifications are met. The IRS will compromise an amount that is equal to an amount that you do not owe based upon the law or an amount that exceeds your entire net worth PLUS a sum of the future income the IRS believes exceeds standard expenses based upon your family size and location. Other reason include to a limited extent a claim for hardship (usually this provision will not compromise any of the tax, it will only delay IRS enforcement actions such as seizures, levies and auctions until you make more money or increase your net worth)
If you cannot pay your tax debt in full or you dispute what is owed, you may propose to resolve the matter with an Offer in Compromise. The purpose of an Offer in Compromise is to settle a taxpayer's liability for less than the full amount owed. The ultimate goal is a resolution that is in both the government's and the taxpayer's best interest.
To submit an offer complete Form 656, Offer in Compromise. Detailed instructions are provided with the form.
If the basis of your offer is inability to pay, also complete Form 433-A, Collection Information Statement for Individuals and/or Form 433-B, Collection Information Statement for Businesses. Submit one Business Financial Statement for each non-incorporated business you own. IRS cannot consider an offer on this basis if you are involved in an open bankruptcy proceeding or if you have not filed all federal tax returns. In-business taxpayers must have also timely filed employment tax returns for the two prior quarters and have timely deposited all employment taxes for the two prior quarters and the current quarter. The amount of your offer should equal or exceed your equity in all your assets, your ability to make installment payments from future income (for the next 5 years to 7 years in total), amounts IRS can collect from third parties on your behalf (such as accounts receivable, notes receivable, etc.) and funds that are available to you but not subject to the Service's collection actions. If you expect to receive an inheritance in this time period or a settlement or judgment you must add those amounts to your offer. You may choose to pay the offer amount in a lump sum, in monthly payments over the remainder of the statutory time allowed for collection or a combination of a lump sum and monthly payments. Generally, it is to your advantage to pay the amount in the shortest time possible because longer payment terms will require a larger offer amount.
If the basis of the offer is a dispute as to what is owed, provide a written statement of supporting evidence. IRS cannot accept a compromise on this basis if a court has decided the liability.
An examiner will evaluate your offer and may request additional documentation from you to verify financial or other information you provide. If we decide a larger offer amount is necessary to justify acceptance you will be given an opportunity to amend your offer.
In exceptional circumstances, some taxpayers may qualify for a special type of Offer in Compromise even though the amount owed is correct and it can be paid in full. To be eligible for a compromise on this basis you must demonstrate that paying the debt would create an economic hardship or would be unfair and inequitable.
If the IRS grants you a fresh start by accepting your offer it is expected there will be no further delinquencies. If you do not abide by all the terms of IRS agreement, including filing all future returns and making all payments when required, your offer may be declared in default. We will reinstate the entire liability including accrued penalty and interest. All payments made toward the offer will be applied to the original liability.
If we reject your offer you will be notified by mail. In IRS letter, we will explain the reason for the rejection and provide detailed instructions on how to appeal IRS decision.
Additional information about the Offer in Compromise can be found on Form 656, and in Publication 594, Understanding the Collection Process. Publications and forms may be downloaded from the IRS site or ordered by calling 1-800-829-3676.
The
IRS can summary reject your submission!
The following are reasons the IRS has summary rejected taxpayer requests:
The offer was frivolous
It was filed to delay collection
The basis for the compromise was not clear
The federal tax lien includes equity in assets that are more than the offer (The IRS has 10 years to make the collection and interest is added daily)
The total liability is large when compared to the amount of the offer (a reasonable offer must be submitted)
There is one (or more) tax returns not filed
There are other taxes owing and those taxes are not included in the offer
The taxpayer refused to submit a complete financial statement (NOTE: you are not required to submit financial information when the submittal is based upon "Doubt as to Liability"
Acceptance of the offer would adversly affect the image if the IRS or the government
The taxpayer filed a subsequent offer that is substantially identical to an offer that was denied
For cases involving the 100% penalty and the submittal is based upon Doubt as to Liability, and the taxpayer has offered no new evidence to cast doubt on the validity of the penalty.
Law (commentary and citation)
Regs (commentary and citation)
Cases (commentary and citation)
§§§ Law §§§
§274(d)
§§§ Regs §§§
§§§ Cases §§§
This is about Activity Based Taxplanning - maximizing deductions, minimizing cash outlay and maximizing the amount of cash retained and the net worth.
Tax is a subject that many view in order to cut costs. Taxes are a cost just as any other cost. It happens this cost is somewhat intangible and is defined by legislation without a tangible item to view and control. The money is spent and the control of the expenditure is more appropriately administered by someone trained in the law.
This is about Activity Based Costing - methods to cut costs, management accounting, management information systems, decision support systems - in general about being a manager.
Forms Needed: TP Advocacy Initial Interview ~ Engagement letter OIC ~ Engagement Letter PRELIMINARY ~ OIC Booklet cover letter ~ OIC Booklet ~ Retainer Request ~ Offer In Compromise IRS 99-105
Entrance Interview ~ TP Advocacy Initial Interview ~
Exit Interview: Engagement understanding - close case
From Banking Records
From Customer Records
From Signed Documents
From Your Other Business, or Financial Records
From Corporation or Organization Records (meetings, etc.)
What to do:
IRS Collections and Offers-in-Compromise
Dateline: 12/30/99
As with any collection process the IRS begins by sending you a bill. If you believe the bill is not correct, you should contact the IRS by mail or phone within the time limit shown on the bill. Be sure to make copies of any documents you need to prove your case. Do not mail your original documents. Do include in your correspondence a copy of the bill itself.
If you feel the IRS has incorrectly assessed you tax and you cannot convince them otherwise, you have the right to appeal the decision. Information regarding your appeal rights should be included in the information sent with your notice. You should also read Publication 1, Your Rights as a Taxpayer, which you can browse online or call the IRS at 1-800-829-3676 to order a copy.
If you file your taxes without paying in full, you will receive a bill for the tax plus interest and late payment penalty from the original due date to the present. This bill is generally due within 21 days. At this point, you can still try to arrange an installment plan as long as you are not already making payments on another year's tax liability.
If you fail to make arrangements up front to pay your tax
liability, or fail to meet the arrangement you make, the IRS may take the
following actions:
1. Offset any future refunds. Keep all future refunds you may be due until your
liability plus penalties and interest are paid in full.
2. File a Notice of Federal Tax Lien. A lien is public notice that the
Government has a claim against any and all of your property, until such time as
the lien is released. This is not good for your credit.
3. Issue a levy. A levy gives the Government the right to take and sell property
owned by you to pay your taxes. A levy may also be issued against your property
held by third parties, such as your wages and money in your bank account.
If there is doubt as to whether you owe the tax, or doubt as to whether the IRS will be able to collect the tax from you due to your financial situation, you may want to submit an offer-in-compromise (Form 656). You may be able to reduce the penalties,interest, and even the tax itself. If your offer is based on the premise that you cannot pay the liability in full, you will also need to complete financial statements, Form 433A(individual) or 433B(business). These statements will show the IRS your income, expenses, assets, and liabilities.
Using the financial statements you provide to them, the IRS will determine whether it is in the Government's best interest to accept your offer. It is not likely your offer will be accepted if you have enough equity in your house or other assets, or other access to funds or credit which would allow you to pay the tax, including earnings potential that would allow you to pay the tax in the next ten years. The IRS will also consider sources of income that they cannot collect directly against, such as workers' compensation and veterans' benefits.
Less than one quarter of all offers are accepted. Your offer will not be considered unless it is at least more than your total equity in your assets. So if you have a house worth more than your tax liability with no mortgage, you don't have much hope of lowering your bill. If you have no equity to speak of but you earn a very good salary, you don't have much hope of lowering your bill.
This is a good tool for someone who really has little hope of ever being able to pay their tax liability. Acceptance of your offer creates a "fresh start" for you with the IRS, but one stipulation is that you keep your taxes paid up to date for the next 5 years. If you get into trouble with your taxes again within 5 years, the IRS may reinstate the entire liability.
Assistance - What to do
Forms - Checklists - Etc.
Financial Statement Presentation
Notes to Financial Statements
How to Make Entries
What Kind of Records to Keep
Bookkeeping Methods - Cash, Accrual and Other
How the Business Entity Affects the Recording
Sole Proprietor
Corporation - C & S
Partnerships - General, Limited, Limited Liability Company, Registered Limited Liability Partnership or Company
Trusts
Tax Exempt
Compliance Checklist
Action Checklist
Alerts & Dangers - Risks
Asset Protection
Your Defense
offersin.htm
