Understanding the Offer In Compromise process
Through the Offer In Compromise Program established by the Internal Revenue Service (IRS), you may qualify to settle your IRS tax debt at a substantial discount. If your assets are less than your debt, and you cannot afford to make payments,
I can eliminate your tax debt. Once I file your Offer, the IRS is prohibited from collecting from you. This means your client/customer contacts, bank levies and wage garnishments will stop.
Most people do not have the skills or knowledge of the IRS collection process to negotiate an Offer in Compromise that is in their best interest. Government figures show that 75% of Offers in Compromise are returned due to forms being filled out incorrectly; and of the 25% that are processed, approximately 50% of them are rejected. Qualifying for an IRS Offer in Compromise based on doubt as to collectability is based on your monthly income and expenses, assets, and economic hardship conditions. I will personally analyze and prepare the financial statements because a strong presentation and accounting is the key to success in the OIC program. In addition, I personally handle ALL negotiations and communications with the IRS. There are no salesmen or assistants working on your confidential case at any time. I offer unique professional and personal representation to resolve your tax matters. For this reason, I accept a limited number of cases each month.
1. Qualification. Do you owe more than $30,000 to the IRS? Are your assets less than your tax debt? Is your income insufficient to make significant monthly payments on the total existing liability to the IRS? If you answered yes to these questions, you are most likely eligible for an IRS Offer In Compromise.
Specifically, the IRS looks at your net assets and at your income. The IRS wants 80% of all assets. In Offer In Compromise language, an ‘asset’ is the value of a piece of property after the mortgage or title lien is subtracted. Thus, if you owe $100,000 on a home that is Worth $125,000, the IRS will want 80% of $25,000. The payment of the ‘due’ amount can be made over 24 months. Typically the Offer In Compromise works best for people who have low asset values and low income to expense ratios.
2. Access IRS Records. After filing the Power Of Attorney (Form 2848) with the Internal Revenue Service, I often obtain a copy of your transcript of account and determine if the IRS made any errors in the handling of your account. I also research whether there is any basis for Doubt As To Liability, Special Circumstances or expiring Statute of Limitations that would support an even lower IRS Offer in Compromise amount. I will then discuss my findings with you and find a resolution and minimum offer amount that works.
3. Missing Tax Returns Before you are eligible for an Offer in Compromise, you must file ALL missing tax returns. I can prepare and file them based on IRS records and the information you provide. For more information and costs of preparing delinquent tax returns, call me.
4. File the IRS Offer in Compromise. Upon receipt and processing of your Offer in Compromise, the IRS suspends all collection activity while your OIC is being considered. Usually four to eight weeks thereafter, the IRS confirms that the Offer in Compromise is properly submitted and that it will be assigned to a Revenue Officer. Usually within two to five months of being assigned, a Revenue Officer will contact me. You will not need to speak with or have any contact with the IRS.
5. LAW CHANGE: On July 16, 2006, the “Tax Increase Prevention and Reconciliation Act of 2005” went into effect. Section 509 requires that a 20% nonrefundable deposit accompany all Offers in Compromise. Thus if your offer is for $5,000, you would be expected to send $1,000 with your offer. Whichever way the case goes, this amount is applied to your tax liability so you’re only paying down your $5,000 offer anyway.
6. Corresponding with IRS and Providing Supporting Documentation. The IRS Revenue Officer will typically request certain documentation to support the Offer in Compromise, which I will request from you. Much of this will be documentation that together we will create, such as comparative-year P&Ls. Prior to submitting any documentation to the Revenue Officer, I carefully screen it to make sure it is consistent with what was previously reported. Sometimes the Revenue Officer will determine that the offered amount must be higher but with further negotiation and presentation of additional information, it is common to get the Revenue Officer to agree with my original Offer in Compromise amount.
7. Acceptance of Offer in Compromise. Once your Offer is accepted, you have 24 months to pay the agreed amount. After receiving payment, the IRS writes off the balance of the liability and releases all tax liens (yes, they keep a lien in place during the payment period, but the lien is inactive, not pursued).
8. Costs: I charge a flat fee to file and process an OIC through the IRS collectors and appeals. If you have decided you wish to proceed, you may fill out the attached credit card authorization and fax to me at the number below. Once received, I will send you another IRS form I need you fill out.
9. Power of Attorney. A form 2848 is also attached. It gives me Power of Attorney to deal with the IRS on your behalf. In your case I will call the IRS collection arm and get an agreement for additional time in which to file the OIC. Please fill out part 1 and you and your spouse (if any) sign in part 9 and fax back to me.
10. Documents to begin obtaining:
- a. Proof of self-employment income for the prior three months (include November, December, January), with an eye toward filing by March 1, 2009.
- b. Proof of gross earnings and deductions for the prior 3 months (include November, December, January).
- c. Current bank statements for savings and checking, money market, brokerage, for prior three months.
- d. Life insurance loan value statement.
- e. Real estate: current statement from lender with monthly payment amount and current balance owed.
- f. 2007-2008 tax returns
- g. Proof of all current expenses for last 3 months (look for charge card receipts, debit card payments, checks, auto-deducts from banking, etc.)
- h. Copies of court-ordered payments