Offers in Compromise

You have received an IRS notice and you owe a lot of money. You don’t have enough money to pay it. Possibly you are losing sleep over it. You would like to take care of this. An Offer in Compromise can greatly assist.
The objectives of an Offer in Compromise are as follows:

  • To resolve accounts receivable that cannot be collected in full or on which there is a legitimate dispute as to what is owed
  • To effect collection of what could reasonably be collected at the earliest time possible at the least cost to the government
  • To give taxpayers a fresh start and thus enable them to voluntarily comply with the tax laws
  • To collect funds not collectible through any other means

The IRS Restructuring Act of 1998 established three Offers in Compromise categories:

Doubt as to Liability – This category is used when there is doubt as to whether you actually owe the taxes assessed by the IRS.

Doubt as to Collectability – This is used when there is doubt as to whether you can actually pay the full amount of the tax owed within the time period the IRS is allowed to collect on the debt.

Effective tax Administration – In this case, your financial information shows that you have the ability to pay but you can demonstrate that paying the full tax liability will place you in an economic hardship or be unfair.

Furthermore, you must meet certain qualifications, namely: You must not currently be in any bankruptcy proceeding. All due tax returns must be filed. If you are a business owner, all required federal tax deposits must be made on-time for the two quarters prior to filing the Offer in Compromise.

When you submit your offer, the offer must be greater than the total value of your assets and future income. This is the reasonable collection potential of the IRS.

The new TIPRA section 509 7122(c) requires that taxpayers filing offers (excluding doubt as to liability offers) will have to specify whether they are filing a lump sum or “periodic payment” offer.

The new IRC 7122(c)(1)(A) subsection requires that a taxpayer filing a lump sum offer must pay 20 percent of the offer amount with the application. A lump sum offer means any offer of payments made in five or fewer installments.

The new IRC 7122(c)(1)(B) subsection requires that a taxpayer filing a periodic payment offer pay the first proposed installment payment with the offer application and pay additional installments while the IRS is evaluating the offer. A periodic payment offer means any offer of payments made in six or more installments.

IRC 7122(f), as amended by the TIPRA legislation, will cause the IRS to deem an offer “accepted” if it is not withdrawn, returned or rejected within 24 months after the IRS receipt date, subject to judicial proceedings.

Taxpayers qualifying as low-income or filing a doubt as to liability offer are not required to pay the $150 application fee, the 20 percent payment on a lump sum offer, or the initial partial payments on a periodic short term or deferred payment offer.

If you don’t qualify, we will determine if you can be brought into qualifying status. We may need to file any unfiled income tax returns or some other action. There is a lot of paperwork to be filed.

The #1 reason that offers are rejected is that there is a problem with the paperwork. We guarantee a correct submission. We can walk you through this tough process.

Call us for a free consultation.

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