Offer
in Compromise
What is an offer in compromise?
An offer in compromise is a settlement procedure.
The IRS can settle or accept an offer in compromise for federal
tax liabilities by accepting less than full payment under certain
circumstances. An offer in compromise is approved by congress
to give taxpayers a "fresh start". The IRS can accept
an offer in compromise on:
1)a taxpayer's inability to pay the tax liability;
2)the fact that the taxpayer does not owe the liability;
3)effective tax administration which takes into account a persons
personal hardship (usually the need for income or assets for illness
or retirement).To be eligible for an offer in compromise on this
basis, the taxpayer must demonstrate that collection of the tax
would create an economic hardship or would be unfair and inequitable.
An offer in compromise can be invoked based on any of the above.
What are the standards for making an acceptable
offer in compromise?
If offer in compromise is based on one's inability
to pay a tax liability, the IRS will take into account the "quick
sale" value of most assets and income, but only in excess
of the amount needed for "necessary living expenses."
To compute an effective offer in compromise, the cost of necessary
housing,
transportation, food, clothing, taxes, child care, health care,
are taken into account.
If the offer is based on no liability, the offer
will be accepted when it can be demonstrated that there is no
tax liability.
If the offer is based on "effective tax administration",
it will be accepted when it can be demonstrated that property
and income (even if there is an ability to pay all of the tax
liability) is needed for a special hardship medical or retirement
needs.
How long does an offer in compromise take to
be accepted?
The IRS gives a speedier determination on tax
liabilities of $50,000 or less. Those over $50,000 take longer
because there is an extra level of review by the IRS District
Counsel. The IRS is very slow in processing offer in compromise
cases and the case processing time will vary with each office.
An average time for processing probably one year.
Can the IRS garnish my wages or seize other
assets while an offer is in process?
The IRS cannot pursue any collection action after
an OIC has been accepted for processing.
If my offer in compromise is not accepted,
do I have other options?
If the IRS rejects an offer, it can be appealed
to an IRS Appeals Office. If the appeal is not successful the
tax liability needs to be paid. Payment options include a request
for an Installment Agreement. In some cases, a taxpayer can be
declared uncollectible and collection actions will stop. A tax
liability can also be discharged through the expiration of the
Statute of Limitations (in most cases, 10 years after the tax
liability is assessed).
Why do I need a tax attorney to file an offer
in compromise?
An OIC, collection actions, and the rest of the
Internal Revenue Code is based on statutes, regulations, revenue
rulings, case law, and the IRS Internal Revenue Manual. Only a
tax attorney is trained to interpret this complex maze of law
and procedures.
Are there related offer in compromise documents
that I can view?
1. Offer
in Compromise Forms Needed - For Filing An Offer In Compromise.
2. IRS
Manual on Offers in Compromise - Complete Manual.
This information is for an "effective submission"
of an offer by a qualified and experienced tax attorney, accompanied
with a seven (7) page legal memorandum on the law dealing with
the issues. Contact us to see if you qualify
for an offer in compromise.
More
details on offer in compromise here
Send us an email at info@irstaxattorney.com
or give us a call at (888)712-7690 to discuss your offer in compromise
options.
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