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FAQ about An Offer In Compromise

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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An Offer in Compromise may be withdrawn by the taxpayer at any time prior to acceptance of the offer by the IRS. It will be considered withdrawn upon the receipt by the IRS of written notification of the withdrawal.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.

FAQ about the IRS Notice of Deficiency

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What is an IRS Notice of Deficiency?
A Notice of Deficiency is a formal letter from the IRS informing a taxpayer of a tax deficiency and advising them of their appeal rights with the United States Tax Court. It is required by law and is sent by registered or certified mail to the taxpayer’s last known address. Although a Notice of Deficiency can be issued when no tax return has been filed, it is most often sent when the tax amount shown on a submitted return is less than the actual amount owed according to IRS calculations.

What information is provided by an IRS Notice of Deficiency?
A Notice of Deficiency must include an explanation for the deficiency together with a statement of the tax, interest and penalties that have been assessed. The notice should also include the final date on which the taxpayer can file a petition with the United States Tax Court appealing the assessment. However, it should be noted that failure by the IRS to specify the last day on which to file a petition will not invalidate an otherwise valid deficiency notice if the taxpayer was not prejudiced by the omission.

How does a taxpayer respond to a Notice of Deficiency?
Within 90 days after a Notice of Deficiency is mailed (or within 150 days after mailing if the notice is addressed to a person outside the United States) the taxpayer must pay the assessed amount or file a petition with the Tax Court to contest the liability. Payment of the assessed amount after the deficiency notice is mailed does not deprive the Tax Court of jurisdiction over the deficiency. In addition, discussion of the case with the IRS during the 90 day period does not extend the time period during which a petition can be filed.

What are the consequences if a response is not submitted in a timely manner?
If the taxpayer does not file a Tax Court petition within the required time period, the appeal process is closed and IRS has the authority to collect the tax. Since the Tax Court is the only court that will hear the question of whether a tax liability is really owed, the taxpayer’s only option after the 90 day deadline has passed is to pay the assessed amount in full and then apply for a refund. If a response is not received within 90 days after the issuance of a Notice of Deficiency, the IRS is likely to issue a Notice to Levy. The Notice to Levy allows a 30 day response time, after which a taxpayer’s property may be seized to enforce collection if the assessed tax still has not been paid. The requirement to issue the Notice to Levy and wait 30 days does not apply if the IRS finds that the collection of tax is in jeopardy.

What are the advantages of obtaining the services of an experienced tax professional?
The IRS is authorized to collect taxes and issuing a Notice of Deficiency is the first step in the collection process. Receiving such a notice can be both intimidating and confusing and may make enlisting the help of a qualified tax professional a worthwhile investment. Collection of taxes by the IRS is permitted without proof of the debt so the burden rests with the taxpayer to determine whether the tax amount shown on the Notice of Deficiency is actually owed. Because of the complexities of tax law, accurately making this determination may require someone with both expert knowledge and experience. In addition, obtaining the help of a tax professional will ensure that the response to such a notice meets the IRS requirements and is submitted correctly, thus avoiding unpleasant consequences down the road.

If you have received a letter from the IRS such as a Notice of Deficiency or Notice to Levy or are threatened with a tax lien or wage garnishment, we can help stop the immediate collection action and help you work toward resolving your tax debt. Contact us today at (949) 596-4143 or info@protaxres.com to receive a free, no obligation consultation.

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

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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.

In these economic times being considered “Currently Not Collectible” is not complete freedom from tax debt, but it can provide some tax relief.

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It is no secret that Americans have been facing difficult times. At Professional Tax Resolution Inc., we have found that more taxpayers than ever are finding themselves with significant tax debts that are so large they are very difficult or even impossible to pay.

For some people a monthly tax settlement payment can create a hardship by leaving them unable to meet their necessary living expenses. In other words, tax settlement payment is just beyond their financial means. If this is the case, the IRS may classify the tax debt as “currently not collectible”. While more and more people find themselves living on less and less, getting the IRS to classify a taxpayer as “currently not collectible” is often difficult particularly without professional guidance. It should be noted that even if you obtain this classification, this status is that it is NOT a permanent designation and it may only temporarily provide to relief to the taxpayer. The fact is that a “currently not collectible” status continues to accrue penalties and interest on outstanding tax debt liabilities.

When tax debt continues to accumulate, the IRS can become more and more aggressive about collection attempts regardless of your ability to pay. At Professional Tax Resolution Inc., we are often contacted by taxpayers after they have received intent to file a tax levy from the IRS. Usually the tax debt that results in a tax Levy is accumulated from multiple years and includes a significant amount of penalties and interest.

One of the more common ways Tax debt results is from not filing returns. In these situations, the IRS may do a substitute return that only considers income and does not give credit for deductions for which the taxpayer is likely eligible. When the IRS substitutes your returns for you, it can result in an overstatement of the tax debt. How is this related to a tax levy or “currently not collectible” status? When the IRS moves to impose a tax levy, the unfilled returns can be a significant obstacle in halting the collection efforts. So, even if you can demonstrate you have a clear economic hardship caused by the tax levy, in most cases the IRS will not even consider a resolution alternatives until all returns are filed. If you have not filed your tax returns and a tax levy is imposed, you may be caught in a chicken and egg situation. It can be difficult to obtain expense and other records form past years leaving you unable to prepare outstanding tax returns in time to halt the filing of the tax levy.

A court case addressed this how these very issues interact. In Vinatieri v. Commissioner, a taxpayer faced both financial hardship and aggressive collection efforts by the IRS. In this case the Tax Court held that the IRS abused its discretion by proposing a tax levy upon a taxpayer with un-filed returns who had shown that they were in economic hardship. In other words, the taxpayer was in an economic situation that might have qualified them as “currently not collectible”, yet the IRS abused its discretion by imposing a tax levy without regard to their financial ability to pay at the time.

Unfortunately despite the ruling, IRS procedures for placing an account into “currently not collectible” status remain unclear. The net result is that a number of tax levies are being impressed upon people who are in such dire financial situations that they should be at least temporarily be ineligible from such collection actions.

There is some hope that the growing issue will finally be addressed. The national taxpayer advocate service has recently recommended that the IRS provide its employees with clear guidance that employees are able to classify an account as “currently not collectible” independent of any other criteria and even when the taxpayers has unfilled tax returns. The TAS has also recommended that the IRS provide its employees with additional training on how to manage accounts for taxpayers facing an economic hardship.

While the IRS may overtime become more accommodating to those in dire financial circumstance, the best advice for those with tax debt is to take action immediately. The effects of a tax levy, wage garnishment or other collection method can be devastating to a taxpayer that is already struggling financially. Don’t let years of interest and penalties continue to accumulate. Call us now and let us help you to evaluate your tax debt resolution options. яндекс