Settling an tax bill by Means of Offer in Compromise Consideration, Carrolton Texas

It is sometimes possible to clear your tax form at a huge discount. If you qualify for something known as a commitment offer, known as an “offer” or “OIC“, the IRS will accept less than the amount a taxpayer owes in a tax account and calls you.

There is no legal right to have a valid tax account reduced by the IRS – it is entirely a matter of government discretion. In all but a few examples, however, the IRS must at least give a fair consideration to the properly presented OIC. In recent years, up to 40% of the CIUs submitted have been accepted by the IRS, a relatively high percentage compared to previous years.

Do You Qualify For OIC Consideration?

Just wanting to make a deal with the IRS is not enough – everyone would want to have their tax bill reduced. To qualify for OIC consideration, you must show the IRS that one of the following conditions exists:

·  There is some doubt about whether the IRS can collect tax from you – now or in the foreseeable future. The IRS calls this “billing doubt”.

·  Due to exceptional circumstances, paying your full tax bill would cause an “economic hardship” or be “unfair”.



There is another field that is rarely used: “doubt about responsibility”. Taxpayers who wish to do so must submit Form 656-L. This offer is based on an allegation that there is doubt as to whether the assessed tax liability is correct. This is an unlikely and more difficult path to pursue.

The IRS recommends that you use your online pre qualification tool to determine if you are qualified to make an appointment offer.

OIC Process

Submitting an offer to the IRS is a formal process – you can’t just call the IRS and say “Let’s make a deal”. You begin by filling out IRS Form 656, Offer in Compromise. There is a $186 application fee to complete an OIC, which you must attach to Form 656. You may be exempt from the fee if your monthly income is below the poverty guidelines. If you claim exemption from the poverty directive, you must submit an Application Fee Worksheet in the Form 656 booklet.

As part of the OIC, you must provide detailed financial information to the IRS using Form 433-A (individuals) or Form 433-B (companies), Collection Information Statement. If you are married and live in a community-owned state, the IRS may request that your Collection Information Statement include data about your spouse – even if you are the sole debtor to the IRS. Take special care when filling out this form correctly if you are serious about your OIC. The IRS examines the disclosures you make in this way much more closely when considering an OIC than when you ask to pay your taxes with an installment agreement.

Downside to Sending A UCI

Completing the forms is just the beginning. The IRS will request rafts of financial documentation – payment receipts, bank records, vehicle records and a myriad of other items. This is a time-consuming process. Some taxpayers end up sending loads of documents to the IRS to support their ICO request.

Another disadvantage to sending an OIC is that if your ICO is rejected, the disclosures you have made about your assets will supply the IRS with all information to speed up its collection efforts against you. For this reason, it makes sense not to send an offer unless it is likely to be accepted.

Also, keep in mind that interest accrues during the offer in the commitment negotiation process, which implies that you will end up more than ever if you don’t make a deal.

How Much Should You Offer?

You will need to follow the instructions on Form 433 to get to your minimum bid sum. The IRS is interested in your reasonable collection potential based on the financial disclosures you make on Form 433.

Special Circumstances

What if you determine the required offering value by calculating the net realizable value of your assets and your future disposable income, and the result is well beyond your ability to pay? Consider making an offer anyway (assuming you are not worried about the IRS taking over any assets you did not disclose). IRS personnel have some scope to accept less money than required by the effective tax administration (ETA) exception to OIC rules.

The IRS gives special consideration to people with physical or psychological illnesses. In particular, the IRS has always favored offers from people with a bleak financial outlook due to old age – over 60 in particular. And the IRS will consider HIV or drug or alcohol-related problems, also a family member’s problem if it has a negative financial effect on you.

The best way to bring special circumstances to the attention of the IRS is through a letter attached to your Collection Information Statement (Form 433-A). It doesn’t have to be formal, just a page or two telling your affliction story. You will also need to attach medical statements and medical records showing your condition. If medical data does not show how the condition prevents you from earning much of your life now or in the foreseeable future, explain it in your own way.

 

If Your Offer Gets Rejected – Keep Trying

The IRS must provide a written explanation if your offer is rejected. The IRS generally rejects offers of compromise for one of two reasons:

The offer is very low:

You are a “notorious” character – for example, you have been arrested of a serious crime.

If the offer is low, the IRS letter will indicate the acceptable value. You are also entitled to a copy of the report that lists the factors that caused the rejection. Request a copy from the IRS. If the IRS declines, make a request under the Freedom of Information Act.

Once you find out why your offer was declined, please resubmit your offer. The revenue or special procedures officer can help you create a way to make your offer acceptable.

You do not have to submit a new Form 656 if you submit a new offer within a month, if your financial situation has not changed significantly and if the new offer is not radically different from the old one. Instead, write a letter. State that you want to change your offer by increasing the cash amount.

To submit a significantly different offer, you need to complete another Form 656.

Appealing To a Rejected Offer In Compromise

You can formally appeal a declined offer, or you can call the person who signed the letter and try to change their mind. Often, instead of forwarding appeals to the Appeals Office, the IRS will reconsider your offer and engage in further negotiations.

To initiate a formal appeal, submit Form 13711 from the IRS, Request for Appeal in Compromise Offer within 30 days of the date of the letter of refusal. Your appeal for a rejected commitment offer will not be seriously considered unless all of the following are true:

·  You provided all the data requested by the IRS during the processing of your offer

·  You have filled in all past tax returns and

·  You’re up to date on your tax payments o for the present year.

Self-employed workers must have made all estimated tax payments on a quarterly basis; employers must have made all deposits and payroll tax deposits and a Offer in Compromise (OIC) will help you with many of your taxes