What is a Enrolled Agents (EA)?  

 Mary Ann, EA from
Colorado
 

Talks about Settleing IRS Debts for "Pennies on the Dollar"

I frequency get asked questions about settleing IRS Debts for "Pennies on the Dollar."   The program the advertising is about in called Offer in Compromise.  IRS has issused a consumer alert advising taxpayer to beware of promoters' claims that tax debits can be settled for "pennies on the dollar.:  The IRS cautions that the Offer in Compromise  program is not designated to be a program for everyone with financial problems, and it should not be viewed as an invitation to avoid paying taxes.

There are very definite rules about Offer in Compromise.  Please reveiw the rules, it see if you qualify.  If you do, contact me, and we will start the process.

Q.  What is the IRS Offer in Compromise Program?

A.  An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service (IRS) that resolves the taxpayer's tax liability.

The IRS has the authority to settle, or compromise, federal tax liabilities by accepting less than full payment under certain circumstances.

The IRS may legally compromise for one of the following reasons:

1.  Doubt as to Liability: Doubt exists that the assessed tax is correct.

2.  Doubt as to Collectibility: Doubt exists that the taxpayer could ever pay the full amount of tax owed.

The minimum offer amount must generally be equal to (or greater than) the taxpayer's Reasonable Collection Potential (RCP).

Reasonable Collection Potential RCP is defined as the total of the taxpayer's realizable value in real and personal assets, plus his/her future income.

Realizable value is the asset's quick sale value (amount which could be reasonably expected through the sale of the asset) minus what the taxpayer owes to a secured creditor.

3.  Effective Tax Administration: There is no doubt that the tax is correct and no doubt that the amount owed could be collected in full, but exceptional circumstances exist such that collection of the full amount would create economic hardship or where compelling public policy or equity considerations provide sufficient basis for compromise. 

The taxpayer bears the burden of proof to show their OIC qualifies for public policy or equity considerations.  They must show that their circumstances are compelling enough to justify acceptance of their OIC compared to other taxpayers in similar circumstances.
 
Q.  What are the requirements for an OIC?


A.  In order to be considered for an OIC, a taxpayer must meet all of the following requirements:

1.  Submitted the $150 application fee, and necessary IRS forms

2.  Filed all required federal tax returns;

Filed and paid any required employment tax returns on time for the two quarters prior to filing the OIC, and is current with deposits for the quarter in which the offer in compromise was submitted.

3,  Is not a debtor in a bankruptcy case.
  

4.  Taxpayers must comply with all federal tax filing and paying requirements for a period of five years following acceptance of their OIC, or until the OIC is paid in full, whichever is longer. This also includes making required estimated tax payments and federal tax deposits.

If a taxpayer requests consideration on the basis of effective tax administration, the IRS must first establish that no doubt as to liability and no doubt as to collectibility conditions exist. Hence, an OIC filed under effective tax administration can only be considered once the IRS determines that the tax liability is correct and collectible in full.

Once the IRS begins the process of processing the OIC under the effective tax administration guidelines, it will consider such issues as the taxpayer's overall history of filing and paying taxes, as well as the overall impact on voluntary compliance.

Q.  I qualify for an installment agreement, can I still submit an OIC?


A.  If a tax liability can be paid in a lump sum or through an installment agreement, taxpayers will not be considered for an OIC.  If an OIC is received, it will be rejected with appeal rights. The only exception is if a taxpayer can demonstrate special circumstances that would show that full payment of the liability would result in economic hardship or be detrimental to voluntary compliance.

Q.  The IRS recently levied my bank account.  Will the levy proceeds be returned if I file an offer in compromise?


A.  The IRS will keep all payments and credits made, received or applied to the total original tax liability before the OIC was submitted.  The IRS may also keep any proceeds from a levy that was served prior to the submission of an OIC, but which were not received at the time the OIC was submitted.


Q.  Can I stop sending payments as part of my approved installment agreement once I file an offer in compromise?


A.  No. Installment agreement payments must be continued while the OIC is being considered.  Installment agreement payments will not be applied against the amount you offered.


Q.  Can taxes be settled by offering pennies on the dollar?


A.  OICs must include an amount equal to or greater than the total value of all assets, plus future income. That total is generally the reasonable collection potential amount, and not simply an offer of ten cents on the dollar, or a percentage of the debt.


A consumer alert has been issued advising taxpayers to beware of promoters' claims that tax debts can be settled for "pennies on the dollar."  The IRS cautions that the OIC program is not designated to be a program for everyone with financial problems, and it should not be viewed as an invitation to avoid paying taxes.

Q.  Can I file an offer in compromise to delay collection action?


A.  Once it is determined an OIC was filed solely to hinder and/or delay collection actions, the IRS will return the OIC without any further consideration. Taxpayers will not be afforded the right to appeal this decision.

Q.  What does the IRS review when I submit my OIC?

A.  The IRS first reviews an OIC to see if it is "processable." Processable is the term the IRS applies to those OICs that have met certain criteria. An OIC is processable if the taxpayer:

1.  Filed all required federal tax returns

2.  Filed and paid any required employment tax returns on time for the two quarters prior to filing the OIC, and is current with deposits for the quarter in which the offer in compromise was submitted.

3.  Is not a debtor in a bankruptcy case.
 
Q.  Does the poverty guideline exception apply to businesses?


A.  No. The exception for taxpayers with total monthly incomes falling at or below income levels based on DHSS poverty guidelines only applies to individuals. It does not apply to other entities, such as corporations or partnerships.

On the pages of this web site you will find other information concerning Offer in Compromise that has been collected from many independent sources.  

Each article or news item offers a different point of view and resources and not necessay mine.  

This information is for general information only. 

   If you desire to ask a specific question about social security , feel free to contact me

 

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What is a EA Mom?

EA Moms is trade name given to Accounting and Tax Professionals who chose to work in an “relaxed” environment. 

Some work from home, other work from personal offices.   Not all are moms, there are some Dads, of which Marell is one.  Each EA is independent and has been tested by IRS.


Being in a relaxed environment has many advantages.  Lower overhead, faster response time, more availability etc.
 
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Tax Net Inc, the parent company of the Moms, has developed marketing and on line systems to help qualified Tax Professionals work from their relaxed environment and offer better service at a lower price to the consumer. 

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