IRS Offer in Compromise
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Offer in Compromise – Living Standards Guidelines
When an individual taxpayer files an Offer in Compromise with the Internal Revenue Service (IRS) they are required to complete a Collection Information Statement for Wage Earners and Self-Employed Individuals, Form 433-A. Section 9 of this form is the “Monthly Income and Expense Analysis.” Taxpayers are required to complete this section in order for the IRS to determine their reasonable collection potential (RCP). Taxpayers are expected to state their income and their “claimed” expenses.
Offer in Compromise – Processable
When an Offer in Compromise is filed with the Internal Revenue Service (IRS) it must be deemed “processable” before the IRS will review it. If the Offer in Compromise is unprocessable, the IRS will return or reject it. The Offer needs to be complete and submitted on the appropriate forms along with the appropriate filing fee. Moreover, it is important that the taxpayer file the Offer at the appropriate Offer in Compromise Service Center. If an Offer is deemed unprocessable and returned to the taxpayer this will not prevent the taxpayer from re-filing the Offer, but may cause significant delay.
Offer in Compromise Process
The IRS offers several programs to taxpayers with past-due federal income tax liabilities. The purpose of these various programs is to offer different ways for taxpayers to resolve their tax liabilities based on their unique financial situation. Perhaps the best known of these programs is the Offer in Compromise. The Offer in Compromise is one of the most popular tax resolution programs offered by the IRS. Because of the large number of Offers in Compromise received annually, the IRS has taken actions to streamline the OIC process as much as possible.
Offer in Compromise - Non-liable Parties
When a taxpayer files an Offer in Compromise with the Internal Revenue Service (IRS), they will evaluate the taxpayer’s ability to pay the taxes owed. As part of this evaluation the IRS will look at the taxpayer’s income and expenses. The taxpayer must disclose to the IRS the taxpayer’s income and how much the taxpayer is paying for certain allowable living expenses. In addition, it is common practice for the IRS to require the income information from all members of the household regardless of whether they are liable for the taxes owed. Household individuals, who do not owe the tax, are considered “non-liable parties.” A non-liable party may be a husband, wife, significant other, parent, roommate, friend or anyone else living with the taxpayer.
Offer in Compromise - Retired Debt
When a taxpayer files an Offer in Compromise with the Internal Revenue Service (IRS), they will evaluate the taxpayer’s ability to pay the taxes owed. As part of this evaluation, the IRS will look at the taxpayer’s income and expenses. For purposes of the Offer in Compromise, it is common practice for the IRS to determine if all claimed expenses are “allowable” and if the expense will be “retiring” in the near future. A debt is retired when it has been paid in full or satisfied by some other means.
Legitimacy of an OIC
Many people ask is there really a program available with the Internal Revenue Service (IRS) for taxpayers to settle their back taxes for “pennies on the dollar?” Yes, there is a program available with the IRS called the Offer in Compromise program, but not every taxpayer qualifies for it. Settlement amounts are not always for “pennies on the dollar” and depend on the facts of each taxpayer.
Effective Tax Administration
The majority of Offer in Compromises filed by taxpayers are filed on the basis of “Doubt as to Collectability” claiming that based on their financial information they do not have the ability to pay. Generally, when a taxpayer files an Offer in Compromise on this basis, the IRS does not look into the taxpayer’s specific facts such as their age, health or exceptional circumstances as part of their review process.
Congress Makes Changes to the Offer in Compromise Program Effective July 15, 2006
On July 15, 2006, the Internal Revenue Service (IRS) will change its requirements for the filing of Offers in Compromise. Taxpayers that file an Offer in Compromise will now be required to enclose a partial payment of their Offer amount at the time of filing their Offer in Compromise. For a “cash” Offer (i.e. Offer amount paid in less than five (5) installments) the IRS now requires a taxpayer to enclose twenty percent (20%) of the proposed Offer amount at the time of filing the Offer in Compromise. For example, a taxpayer filing a “cash” Offer of $100.00 would be required to submit an initial payment of $20.00 at the time of filing.
Offer in Compromise - Dissipated Assets
Dissipated assets are those that “(liquid or non-liquid) have been sold, gifted, transferred, or spent on non-priority items and/or debts and are no longer available to pay the tax liability.”
Offer in Compromise – Requirements after Acceptance
An Offer in Compromise is a great opportunity for a taxpayer to settle his or her back tax liabilities with the Internal Revenue Service (IRS). The government offers tax settlement programs with the purpose of providing a taxpayer with a fresh start, and the expectation that the taxpayer will pay his or her taxes on time from here on out.
Offer In Compromise – Payment Methods
Many taxpayers are searching for Internal Revenue Service (IRS) tax relief in the form of a tax resolution. The IRS has a tax settlement program, called an Offer in Compromise, for taxpayers who qualify. An Offer in Compromise allows taxpayers to settle their outstanding tax debts for an amount that is less than the taxpayer’s tax debts. In other words, when the IRS accepts an Offer in Compromise, they agree to take a certain dollar amount in exchange for wiping out the back taxes owed. An Offer in Compromise is a good program for many taxpayers with tax problems.
Offer in Compromise: Different Types of Offers
The IRS offers three (3) different payment options when it comes to the Offer in Compromise
