Offer In Compromise Archives - Page 3 of 4 - Professional Tax Resolution

Category Archives: Offer In Compromise

Payment Installment Options for an IRS Offer in Compromise

Posted on by

The IRS Offer in Compromise tax settlement option allows a taxpayer with an outstanding tax liability to settle the debt for less than the full amount owed. Although the Offer in Compromise has very specific acceptance criteria and may be difficult to obtain, it is a very attractive tax debt settlement option for those taxpayers who do qualify.

The IRS has made the Offer in Compromise a particularly attractive and popular tax settlement choice by offering three different payment plans. The flexibility makes this tax settlement choice attractive to taxpayers who have varying financial situations. Each of the payment options (outlined below) includes an initial payment to be followed by scheduled installment payments.

• The Lump Sum Cash Payment Plan requires an initial payment which must be equal to 20% of the Offer in Compromise tax settlement amount. The balance of the negotiated tax relief amount must be paid in five or fewer installments scheduled regularly from the date the compromise offer is accepted. (sapns2.com)

• The Short Term Periodic Payment Plan requires an initial payment to be followed by regularly scheduled installments that begin while the offer is being negotiated. The balance must be paid off within 24 months from the time the IRS receives the Offer in Compromise application.

• The Deferred Periodic Payment Plan requires an initial payment to be followed by regularly scheduled installments that begin while the offer is being negotiated. The balance must be paid off in more 24 months from the time the IRS receives the Offer in Compromise application but before the ten year statutory period for collection is up.

Hence, the IRS Offer in Compromise is not a one stop shop. The versatility of the available payment plan options accounts for some of its popularity and make it an attractive tax debt settlement choice for a wide range of taxpayers.

At Professional Tax Resolution we make sure that you take advantage of the best tax resolution option available. We carefully analyze the tax debt and financial situation of each of our clients and only recommend filing an Offer in Compromise when we believe it will be accepted. If we determine that you meet the candidacy requirements for an Offer in Compromise, we will work with you to prepare the offer and to submit all of the required documentation. We will also represent you before the IRS or State Tax Agency until the process is complete.

Click the “Learn More Link” or Call Toll-Free (877) 889-6527 to have one of our CPA’s provide a free, no obligation consultation regarding your eligibility for an Offer in Compromise.

A Successful Offer In Compromise – $74,000 IRS Problem Settled at a 95% Discount.

Posted on by

In February of 2011, Professional Tax Resolution finalized an Offer in Compromise agreement for a client who had initially contacted the firm in May of 2010. The taxpayer in question had an outstanding tax liability of over $74,000 which she was unable to pay. In this particular case, the debt was a combination of unpaid taxes, interest and penalties which had accumulated over a period of ten years. After verifying that the client met the IRS Offer in Compromise eligibility requirements, our firm initiated the settlement process by filing returns for tax years 2005 through 2009 which had never been filed. Once these returns had been finalized, we had an accurate assessment of the client’s total tax debt and were able to use this amount, together with her current financial information, to calculate a reasonable settlement offer. The completed Offer in Compromise application, including supporting documentation, was submitted to the IRS in July. Because the taxpayer’s eligibility had been well documented and established IRS filing guidelines had been adhered to throughout the application process, the initial settlement offer was accepted by the IRS without argument. The end result was the successful resolution of a $74,579 tax liability for $3785, just over 5% of the original debt!

The taxpayer whose settlement case is described in the preceding paragraph is a single mother who has struggled with chronic health problems for many years. From 1999 through 2009, a series of health-related setbacks resulted in periods of unemployment and accumulating tax liabilities. The client was hospitalized in January of 2010 in response some life threatening complications resulting from her health condition. She now receives state disability and is having trouble meeting her basic financial needs. Since it was very unlikely that this taxpayer would have been able to pay the full amount of her tax debt within a reasonable period of time, she was an ideal candidate for an IRS Offer in Compromise. Outlined below are the primary components necessary to obtain a successful Offer in Compromise settlement as they pertain to this specific set of circumstances.

• The taxpayer meets one of the three eligibility criteria (doubt as to liability, doubt as to collectability, tax settlement would promote effective tax resolution) specified by the IRS.

Professional Tax resolution determined that this client would be unable to pay the balance of her outstanding tax liability and therefore met the doubt as to liability standard for eligibility.

• The taxpayer’s eligibility can be adequately documented.

Professional Tax resolution submitted documentation for the client’s medications, outpatient medical treatment, hospitalization and disability claims.

• The total amount of the tax debt is accurate based on tax returns that have been checked, submitted and refilled when necessary.

Professional Tax Resolution filed a tax return for any year where a return had not been previously submitted and checked all other past tax returns for accuracy.

• The Offer in Compromise application and the necessary supporting documentation are submitted according to IRS guidelines.

Professional Tax Resolution has experience in submitting Offer in Compromise applications and adheres strictly to the established IRS policies and procedures.
While the offer in Compromise is an effective tax settlement option for a very specific group of taxpayers such as the candidate whose case is described above, it definitely does not represent a blanket solution for anyone with an outstanding tax liability. The acceptance criteria are very explicit and, since many applications are submitted that do not meet the published IRS guidelines, the rejection rate is high. The Offer in Compromise is an excellent tax settlement option only under certain very specific conditions and when submitted using the very strict guidelines set forth by the IRS.

Visit www.profesionaltaxresolution.com for more for more information about customized tax relief assistance. With over 16 years of experience, we have the can help you select the tax relief option that will best meet the specific needs of your tax debt situation. Contact us today at (949) 596-4143 or info@protaxres.com to receive a free, no obligation consultation.

FAQ about An Offer In Compromise

Posted on by

What is an Offer in Compromise?
An Offer in Compromise is an agreement between a taxpayer and the Internal Revenue Service that settles a tax debt for less than the amount owed.

What do you do first?
A taxpayer submits an Offer in Compromise by completing two standardized forms and collecting all of the required supporting documentation. A check list identifying the necessary documentation is provided with the application.

Why should you take care to fill everything out correctly?
If an Offer in Compromise is not submitted according to the published IRS requirements and procedures, it can result in the delay or denial of the offer even if the taxpayer might otherwise qualify. The Offer in Compromise application must be submitted in writing, signed by the taxpayer (under penalty of perjury), and must contain all of the information required by the IRS. When the offer is submitted solely on the basis of doubt as to the taxpayer’s liability, there is no requirement to provide financial statements.

What happens after the offer has been submitted?
An Offer in Compromise attains a status of pending when it is accepted for processing by the IRS. As might be expected, the IRS generally will not accept an offer for processing if there is a related criminal case with the Department of Justice. Once submitted, if an offer does not contain all of the required information and documentation, the IRS will request that the taxpayer provide whatever is missing. If the requested information is not provided in a timely manner, the application may be returned. The IRS will deny an Offer in Compromise if it determines that the offer was submitted solely for the purpose of delaying collection of the tax debt.

What if you decide to withdraw your offer?
An Offer in Compromise may be withdrawn by the taxpayer at any time prior to acceptance of the offer by the IRS. It will be considered withdrawn upon the receipt by the IRS of written notification of the withdrawal. An official withdrawal of an Offer in Compromise may be made by personal delivery, certified mail, or upon issuance of a letter from the IRS confirming the taxpayer’s intent to withdraw the offer.

How will you know that your offer for tax settlement has been accepted?
An Offer in Compromise is considered accepted when the taxpayer or the taxpayer’s representative receives a written Notice of Acceptance from the IRS. As a condition of acceptance, the IRS may request that the taxpayer enter into a collateral agreement if it is deemed necessary for the protection of the interests of the United States. For instance, if the final payment on an accepted Offer in Compromise is contingent upon the simultaneous release of a tax lien, that payment must be made in accordance with the forms, instructions and procedures prescribed by the Secretary of the Treasury.

What is the end result?
Acceptance of an Offer in Compromise will settle the tax debt of the taxpayer (or taxpayers) designated on the application for the dollar amount specified in the offer. The acceptance of an Offer in Compromise for one taxpayer does settle the tax liability of any person not named in the offer.

Why should you consider hiring a tax professional?

The process of obtaining an Offer in Compromise can be difficult and time consuming. When it involves tax debts related to multiple years and/or multiple taxpayers and tax liens or tax levies, the process can be increasingly difficult. A qualified tax resolution specialist can be helpful, first, in determining if a taxpayer meets the acceptance criteria for an Offer in Compromise and, following that, in completing the application according to IRS specifications. A tax specialist will also have the knowledge to accurately calculate and document a taxpayer’s inability to pay the full amount of the tax debt so that the offer will have a reasonable chance of being accepted by the IRS.

IRS Warning About Companies That Promise To Reduce Tax Debt – For a Large Fee

Posted on by

The IRS Wants You to Check Carefully Before Applying for an Offer in Compromise

The Internal Revenue Service has issued a consumer alert advising taxpayers to beware of tax settlement agencies that claim they can settle an outstanding tax debt for a small fraction of the amount owed through the through filing an application for an offer in compromise. While it is true that the IRS has the authority to settle federal tax liabilities for less than the full amount of the tax debt, the offer in compromise serves an important purpose for only a very select group of taxpayers. Commissioner Mark W. Everson recently warned consumers that the IRS is “increasingly concerned about unscrupulous promoters charging excessive fees to taxpayers who have no chance of meeting the program’s requirements.” He urged taxpayers with unresolved tax debt issues not to be fooled by high priced promises.

The bottom line is that if a tax settlement promise seems too easy and too good to be true, then it probably is. There are a few large marketing companies in the United States that are trying to take advantage of taxpayers who are faced with the very real, and very scary prospects of tax liens and wage garnishments. By preying upon those taxpayers in need through advertisements that promise enormous tax relief, they are not only misleading the public, but they end up costing those very vulnerable individuals time and money without ever really addressing the specifics of their tax debt. This is not to say that all tax settlement companies are unscrupulous, but the issue has become rampant enough that the IRS felt they needed to warn the public about this alarming practice.

The truth is that an offer in compromise will usually be considered only after other payment options have been exhausted. If a taxpayer is unable to pay their tax debt in full, there are other settlement options, such as monthly installment agreements, that must be explored before an offer in compromise can even be submitted. In actuality, tax settlements for very low proportions of tax debt are far more infrequent than the advertisements lead the consumer to believe and 100% tax relief is even less common.

Complete information on the tax collection process and various tax settlement and payment options is available on the IRS website (www.irs.gov). By reading through the agreement request qualifications provided on the site, the taxpayer may be able to determine if they qualify for a particular tax settlement option or payment plan. The website itself provides detailed instructions for submitting an offer in compromise and also includes all of the necessary financial forms. Of course, the many laws and regulations regarding the offer in compromise as well as other tax settlement options can be overwhelming so obtaining the help of a knowledgeable and qualified professional is often a worthwhile investment.

A qualified certified public accountant is probably the most desirable choice when seeking professional help with a tax debt issue. A CPA is the most likely professional to have a current knowledge of tax law and a thorough understanding of the policies and procedures of the IRS. An individual with this certification will also have the expertise and the experience to determine the true tax debt and to select the best method of tax relief for a specific set of circumstances. In order to locate a CPA in a specific geographical area, a taxpayer should contact the local or state tax professional association. Before actually hiring a CPA, it might also be a good idea to run a background check on the individual and also to verify their current licensure with the state certification agency and the Better Business Bureau. If references or referrals are available, it is a good idea to review these as well.

At Professional Tax Resolution, we welcome your inquiries and questions. We encourage you to read reviews from our clients as well as click our direct link to our rating with the BBB and the state licensure division. To learn more about how we can help you to remove tax liens, stop a wage garnishment, or find tax debt relief, call us today at (949) 596-4143 for your free no obligation consultation.

Understanding The Three Settlement Types for an Offer in Compromise

Posted on by

The Offer in Compromise is a specific tax relief option made available by the IRS through which a taxpayer offers the IRS a certain amount of money in exchange for which the IRS agrees to cancel the taxpayer’s outstanding tax debt. While it is an effective tax settlement option for a very specific group of taxpayers, the Offer in Compromise definitely does not represent a blanket solution for anyone with an outstanding tax liability. The acceptance criteria are very explicit and, since many applications are submitted that do not meet the published IRS guidelines, the rejection rate is high. When considering filing an application for an IRS Offer in Compromise it is important, not only to understand the specific qualifying criteria, but also to be familiar with the available settlement alternatives.

There are three payment options available for an IRS Offer in Compromise. An application requesting any one of the three payment plans requires a $150 application fee (unless the taxpayer submitting the application qualifies for a low income waiver or is submitting the application for the reason that he or she doubts they actually owe the outstanding tax debt). All three tax settlement options require an initial payment (unless the taxpayer qualifies for a low income waiver) followed by a lump sum or a specific set of scheduled installments. The plans vary as to the calculation of the settlement amount, the amount of the initial payment, the number of periodic payments and the time period over which those payments will be made.

The three settlement alternatives for an Offer in Compromise are summarized below:

1) Lump Sum Cash Payment
• Generally requires a 20% payment upon the filing of the application with the balance paid within five months of acceptance. Low income taxpayers may be exempt from the initial payment requirement.

2) Short Term Periodic Payment
• Payments are made in monthly installments with the balance being paid in full within 24 months of the IRS receiving the Offer in Compromise. Taxpayers must generally make the proposed monthly payments while the IRS considers the offer unless they qualify for the low income waiver.

3) Deferred Periodic Payment
• Payments are made in monthly installments with the balance being paid in full in 25 months or more but within the statutory collection period. Taxpayers must generally make the proposed monthly payments while the IRS considers the offer unless they qualify for the low income waiver.

The flexibility of the settlement alternatives available for an Offer in Compromise makes it a viable and effective tax relief alternative for taxpayers with varying financial situations. However, since the Offer in Compromise involves a settlement for an amount less than what the taxpayer actually owes, it can be difficult to obtain. The IRS will carefully review the available assets and income of the taxpayer and the taxpayer’s ability to pay the original tax debt. During the review of a submitted Offer in Compromise by the IRS, all other collection activity will stop. The job of a qualified tax resolution firm is to assist in demonstrating a taxpayer’s inability to pay the full amount of his or her tax debt and to prove that it is in the best interest of the IRS to accept an offer for less than the full amount.

When selecting this tax relief option and the accompanying payment plan, the taxpayer should be well aware that it is an official contract with the IRS and comes with a specific set of financial responsibilities. If an individual entering into an Offer in Compromise fails to comply with any of the contractual provisions set forth in the agreement, the IRS will probably revoke the contract and reinstate the full amount of the original tax debt.

The Offer in Compromise is one of numerous tax relief options open to a taxpayer who may be facing an impending tax lien, tax levy or wage garnishment due to a large outstanding tax debt. For help in determining whether your tax debt situation meets the acceptance criteria for an Offer in Compromise and whether it is the best tax settlement option for your specific needs, contact an experienced tax professional at www.professionaltaxresolution.com.