Use These Four Tips to Maximize the Chance of Getting Your Offer in Compromise Accepted

The IRS Offer in Compromise program is the most popular and approved way to resolve delinquent tax liabilities. Unfortunately, the IRS made the qualification requirements so difficult that only fewer people offer gets accepted or they were made to pay out too much money to the federal government. In this post, we have provided an overview of a few tips that will help put an end to your long-standing IRS tax issue.

OIC Tip #1: Standard or the Actual Expense?
Irrespective of your actual expenses, the IRS have got guidelines on exactly how much you can designate as living expenses. You need to know when the IRS will approve expenses above their maximum limit and when they won’t. While arguing for an expense which is more than the national standards, you have to provide relevant documentation and also have to prove why they are necessary. Know what the IRS considers ordinary and necessary. The outcome can be that you weren't qualified for an offer, or it had no chance of approval simply because you didn’t understand the procedures. Also, you have to determine whether to makes use of the IRS Standards deduction or the actual expense deduction to receive maximum tax benefit.

OIC Tip #2: Reduce Equity Positions
Figure out ways to lower equity in your assets. Don't be tempted to overvalue your assets. Take full advantage of allowed tax deductions and know how to maximize your deductible business expenses. Make use of all possible deductions for vehicle expenses that include fuel, repair and maintenance. While claiming write-offs for automobile operating expenses, weigh up which of the IRS method - standard mileage expense or the actual car expenses gives you a bigger tax deduction. The Internal Revenue Service will view the money in your retirement savings account as an asset and will be valued during the OIC evaluation. Check out the limits of liquidating or borrowing money from retirement account and learn how converting the equity into a future stream of income could benefit you directly.

OIC Tip #3: Use the IRS Statute of Limitations to Your Advantage
Knowing how much time is leftover on statute of limitations (CSED) is extremely important, as this could have a huge influence on the entire process. If the Collection Statute Expiration Date (CSED) is near, rather than gambling on to retrieve the pending taxes, the IRS would really consider accepting your Offer in Compromise.

OIC Tip #4: Don’t Hesitate to Appeal if Your Offer is rejected
Obtain the copies of collection's Income/Expense Table and also the Assets/Equity Table from the IRS in case your offer was rejected. If you find any mistakes or if the Offer examiner did not follow the IRS guidelines exactly, you may appeal for a review of the determination. If you believe the assets value is not correct, dispute them with the latest appraisals. In case the income/expense is not correct, give additional supportive documentation at this stage. If the Offer in compromise isn't accepted, there are other alternative solutions available that you can make use of through appeal.

The Realities of OIC program
The Offer in Compromise program could be your excellent way to address the taxes owed, leading to a fresh start with the Internal Revenue Service. But, the process is very comprehensive and complicated that require great attention to detail, knowledge of numerous IRS rules, procedures and tax laws. Submitting an OIC or handling your own case might end up costing you even more than the original tax debt owed. All these tips are just basic outlines and there are actually a lot of tricks of the trade. Furthermore, Offer in Compromise is not for everyone. Plus there exist negative consequences to filing an offer when there is no realistic chance of its success. By utilizing the services of a trusted tax resolution firm, the tax attorney will stand up to the IRS on your behalf and help you put your tax debt problems behind you right away.

Tax Debt Relief: Know Your IRS Tax Settlement Options

The IRS offers numerous settlement options to taxpayers who are struggling to settle their tax owed. In this post, we will discuss about the advantages and disadvantages of some of the most common IRS tax settlement options.

1. Audit Reconsideration

Advantages: There are many situations in which a taxpayer may qualify for this option. Even in cases where the time limit to appeal is expired, the taxpayer can still request audit reconsideration.

Drawbacks: Your tax return should be audited originally and you should have valid reasons with evidence for not attending the audit. The process can take very long and sometimes, you may be required to appeal.

2. Full Payment Installment Agreement

Advantages: An easiest settlement plan to obtain, a full payment installment agreement can help avoid levies and garnishments. Liens will be withdrawn once full payment of taxes is made.

Drawbacks: A collection information statement is required, if the tax amount owed is over $25,000. One biggest drawback is that the interest and penalties will continue to accrue while you still owe. You may get limited time to repay and the IRS can also file a tax lien, when needed.

3. Partial Pay Installment Agreement (PPIA)

Advantages: Partial Payment Installment Agreement allows taxpayers to pay an affordable monthly payment, based on their financial situation. It is easier to obtain than an offer in compromise and you settle the debt for less than the total amount owed.

Drawbacks: It requires full financial disclosure and you will be even required to pay down your debt with any liquid assets. The IRS will reassess your financial situation every so often. Furthermore, the federal tax lien and its impact remain in place right until the expiration of the collection period.

4. Penalty Abatement

Advantages: Tax penalties that start out as a small amount can quickly spiral out of control, so in certain cases, a penalty abatement can stop the accrual, or even remove them completely.

Drawbacks: For many, penalty abatement isn't an appropriate solution because of their bad history of non-compliance. Even if you qualify, you still need to pay the base amount of owed tax in full.

5. IRS Offer in Compromise

Advantages: An offer in compromise allows the taxpayer to pay a reduced amount of the original tax liability. During the negotiation process, the IRS will suspend collection activity and when accepted, any tax liens on the taxpayer’s property will be lifted.

Drawbacks: This offer in compromise program is not for everyone and it can be difficult to get approved. The OIC will be kept in the public records for a year or more. The IRS has the right to intercept your tax refund and any payments you make. For a period of 5 years from the time the IRS accepts your offer, you must stay current with tax filings and payments.  If not, the IRS has the power to revoke the Offer.

6. Currently-Non-Collectible (CNC)

Advantages: This plan will prevent all "enforced collection" activity from the IRS (like levies and garnishments) and you don't have to pay any monthly payments till your financial condition improves.

Drawbacks: The drawback of “Non-collectible" status is that all outstanding liabilities will continue to accrue interest and penalties. This option will provide some temporary relief but does not solve all of your tax problems.

7. Bankruptcy

Advantages: Chapter 7 bankruptcy allows full discharge of older tax debts. The process is really quick; a taxpayer can receive a bankruptcy discharge within 4 months of filing.

Drawbacks: Trust fund taxes are not dischargeable in Chapter 7 bankruptcy. It will damage your credit rating drastically. Even in bankruptcy, the tax lien will not go away.

Offer in Compromise: Answers to Most Common Questions

Listed below are some of the frequently asked questions that we receive about the IRS Offer in Compromise program.

OIC program: scam or genuine?
Offer in Compromise is a real program. But, some tax firms misuse this program by reeling in individuals with fake guarantees and market themselves as having the ability to settle their tax debts for “pennies on the dollar”. The advertisers want people to believe that they've some government influence or power and guarantee to help with paying off their tax debt for 90% less than they owe. These rip-off companies utilize this program as bait for getting citizens to hire them. However the IRS did nothing as of yet to get rid of these tax frauds.

Many Offers in Compromises failed to benefit people due to either: a) they hired an inexperienced tax company (who'll do nothing except cashing on huge fees) to represent them or b) they aren't qualified to apply for an OIC. By having a professional representation, some might have got eligible for a much better deal with the Internal Revenue Service.

Will the IRS keep my tax refunds if my offer in compromise gets approved?
Yes, the IRS will keep any refunds while your OIC is being processed, and also can keep any tax refunds in the year your offer is approved.

What will happen to the federal tax lien?
As soon as an Offer in Compromise is paid completely, the IRS tax lien that was filed against you will automatically be released. It normally takes about two months for this to take place.

Can I prepare and submit an OIC myself?
This is the point. Filling out an Offer in Compromise will never be like preparing a 1040 form. The IRS will invariably look for all possibilities to decline an Offer in Compromise before they accept it. Anything you declare in the form will be questioned. It's much more like an audit and the government is just interested in two things to settle your case: 1. your earnings and 2. your assets.

Exactly how much should I offer in an Offer in Compromise?
Naturally, taxpayers want to pay as low as possible to settle the money they owe. But the amount will be based on your Reasonable Collection Potential (RCP). Calculating the RCP is the most important aspect in determining the outcome of your application. Now your question is, “What number I should put down in the OIC form 656?” This is difficult to answer since there are various aspects that’s need to be taken into consideration. It is advisable to leave this task in the hands of an experienced professional because they're the best person to figure out the minimum amount that will make the IRS to accept it.

Can payroll taxes be paid out with an OIC program?
Yes, a business owner could settle payroll taxes and penalties through an OIC program. However the procedure is far more challenging and in order to strike a deal, they need to get professional guidance from a tax specialist.

Can trust fund recover penalties be settled with an Offer in Compromise?
Yes, you can file an Offer in Compromise to settle your back trust fund taxes that you have to pay to the IRS.

Any IRS Offer in Compromise tips?
Right after acceptance of your Offer, one should comply with tax filing and payment requirements for five years. Fail to do this will lead to your offer getting declared as default and your entire tax debts will come back.

How it is Easier to Pay-off the IRS Tax Debts When Compared to Other Type of Debts?

It is true that the Internal Revenue Service gives a great deal of suffering to the lives of people who have unsettled tax dues, but when we compare with student loan debt industry, the IRS is far more reasonable with regards to tax settlements. In fact, the number of options you get to solve your tax issues is lot more than what you get in a student loan sector. You'll find three big things that separate the IRS from the more evil student loan industry.

The first big bonus to the IRS is that they have a limited time to collect pending tax dues. They have only ten years to collect the debt and this can be a huge help to someone who is settling debts. There are some constraints, such as if you leave the country, the ten year clock will pause. The IRS can take the debt issues to the court, if they think that you cause problems to them. But in the case of student loans, you've got no other choice rather than to repay them. There is absolutely no escape out of this and even if you file bankruptcy, student loans are not dischargeable.  

The next thing is, based on your income, expenses and your present financial situation, the IRS will prepare a reasonable plan to pay back the debts you owe to them. Even when all hopes are lost, the Offer in Compromise (OIC) program helps you to see some light by the end of the tunnel. This method helps the struggling taxpayers to resolve all payment concerns without adding any unnecessary burden on them. However with student loan debts, the only real option you've is by asking for partial or full deferment on payment of federal loan.

Tax debts are dis-chargeable in Chapter 7 bankruptcy provided you have filed income tax returns for the previous two years. This can be a blessing in disguise considering the fact that you will get full discharge of allowable debts under Chapter 7. To qualify for this, the taxpayer should not been found guilty for any deliberate act of evading the tax laws and also his/her tax return shouldn’t be identified as fraudulent or frivolous. You can put student loan payments in Chapter 13 plan and you will have to pay off in 5 years. But still you've got to repay the complete amount.

The IRS is one of most powerful debt collector in the United States which means they do whatever things possible to get back pending taxes. But when compared with student loan debts, you will get many options like the ones mentioned above to pay off your IRS tax debts. Student loans don't have any statute of limitations and under most circumstances, you need to pay back the loans entirely as there is no way of escaping it. Though the IRS has horrible reputation, you have various solutions to get out of any tax problem.