• Skip to content
  • Skip to primary sidebar
  • Skip to footer

Long Island Tax Resolution Services

  • Home
  • About
  • Blog
  • Free Consultation
  • Testimonials
  • En Español
  • Representation
  • Notices
  • Wage Garnishment
  • Back Taxes Help
  • Unfiled Returns
  • Levy
  • .
  • .
  • Call us at: 631-244-1650
You are here: Home / Archives for IRS TAX RELIEF / Offer In Compromise

Offer In Compromise

April 4, 2016 by James Grennen Leave a Comment

Offer In Compromise (OIC): Tips To Getting Yours Accepted

People shaking hands over a successful deal

Settling an entire tax debt for an amount that is less than full value should interest any taxpayer.

In a program known as Offer in Compromise (OIC), the IRS will accept less than the amount a taxpayer owes on a tax bill.

The taxpayer does not have a right to have a tax due amount reduced; the IRS has full discretion. However, the IRS must consider a properly presented OIC.

For many years the acceptance levels of OIC offer amounts were low. Acceptance levels in recent years have risen as high as 40{bf3da7fb6a4d0e0e3790d09a79b980fc065e33e2f3a2d49280f7e95b82f4982b}.

Long Island New York Offer In Compromise

As our name implies, most Long Island Tax Resolution Services clients live in either Long Island or the New York City metropolitan area. Therefore, the Offer In Compromise cases which we handle are either IRS or New York State Department of Taxation oriented. We are experts in the forms, procedures, requirements and calculations of both.

Long Island Tax Resolution Services manages IRS and New York State Offer In Compromise cases extensively. This distinguishes us from the tax resolution firms who have a national business model. These national firms simply do not have the same experience in New York State specific Offer In Compromise as Long Island Tax Resolution Services does. An important part of this experience is knowing how a New York State case integrates with an IRS case.

The Three Offer in Compromise (OIC) Programs

Clearly any taxpayer would like to have their tax bill reduced. A taxpayer can present an OIC under one of the following programs:

  •  If doubt exists as to the taxpayer’s ablility to pay back the tax debt. The IRS calls this “doubt as to IRS to collectability”.
  • “Doubt as to liability” exists when the IRS has assessed the tax wrongly. This is the least common alternative and hard to prove.
  • Because of exceptional circumstances, payment of the tax bill would cause an “economic hardship” or would be “unfair” or “inequitable.” This is the effective tax administration (ETA) exception to the OIC guidelines. Here, the OIC offer amount is greater than the taxpayer’s ability to pay. The taxpayer should still consider presenting an OIC. Some examples of special circumstances are:
    • People with psychological difficulties or disabilities.
    • People with a bleak financial future and older. People close to and over the 60 years old is an influence.
    • People with HIV or drug and/or alcohol related problems.
    • People whose financial outlook is impacted by a family member’s problem.

The taxpayer should explain any special circumstances to the IRS in a summary letter. The taxpayer should present supporting doctors’ statements and medical records as well. Often the taxpayer needs to further explain the presented medical information in their letter.

The Offer in Compromise (OIC) Submission Process

Many taxpayers believe that they can call the IRS and say “Let’s make a deal”. The process is much more formal. Here are some of the steps involved:

  • Provide detailed financial information on the Collection Information Statement.
    Form 433-A Offer In Compromise (OIC) is for individuals and Form 433-B Offer In Compromise (OIC) is for businesses.
  • Married taxpayers, who have tax debt in their name alone, must still include at least some of the spouse’s financial data.
    The IRS closely examines the financial disclosures made when considering an OIC.
  • Complete IRS Offer in Compromise Form 656.
  • There is a $186,- application fee for filing an OIC, which the taxpayer must attach to Form 656. The taxpayer might be free from the fee if their monthly income is below the poverty guidelines.
  • The taxpayer also needs to present significant amounts of financial documentation. These include pay stubs, bank records, real estate appraisals, mortgage statements, auto leases and many other items.

Final Offer in Compromise (OIC) Offer Amount Formula

A formula calculation of the information provided on the 433 form determines the minimum offer amount. The IRS tries to assess the taxpayer’s “reasonable collection potential”.

The three necessary steps to arrive at the final offer amount are:

  1. Decide “net realizable value” of all eligible assets
  2. Decide net monthly income by subtracting monthly expenses from gross monthly income.
  3. Decide the total offer amount by first adding together the two amounts in steps 1 and 2. Then multiply this result by either 12 or 24. The 12 or 24 number is selected based on whether the taxpayer intends to pay the offer amount in 5 months or 24 months.

Some Reasons for Offer In Compromise (OIC) Rejection

The IRS requires the following for an OIC to be accepted:

  • All requested data be submitted
  • All prior year tax returns be filed
  • All current year taxes be paid. Self-employed people must pay all current year estimated tax payments.

When the IRS rejects an OIC, they issue a letter explaining why the offer was denied.

Some common reasons for rejection are:

  • Taxpayer’s offer amount was too low. The IRS letter will state an acceptable payment.
  • Taxpayer failed to prove financial hardship.
  • Taxpayer is guilty of a crime.

The IRS code allows the taxpayer to ask for the working papers or full report showing the list of reasons the IRS did not accept the offer.

The taxpayer can ask for the information under the Freedom of Information Act if the IRS refuses to comply.

What to Do If The IRS Rejects an Offer In Compromise (OIC)

If the IRS has rejected a taxpayer’s OIC, two alternative courses of action are still available:

  1. Many times the IRS OIC case officer will be open to reconsidering the offer and open to further negotiation. The case officer might offer guidance on how to make the offer acceptable. The taxpayer may not need to start from scratch if their financial circumstances have not changed much. The case officer may ask the taxpayer to state a new offer amount in the form of a letter. Often the taxpayer will need to file a new offer and present new paperwork.
  2. The taxpayer can formally appeal a rejected OIC. The taxpayer presents IRS Form 13711, Request for Appeal of Offer in Compromise. The taxpayer should file this form within 30 days of the date of the rejection letter.

The Dark Side of Offer In Compromise (OIC)

If the IRS rejects an OIC, they still have a set of financial documents and disclosures.

The IRS has all the information it needs to take aggressive and immediate collection action against the taxpayer. A taxpayer should submit an OIC only when it seems likely that the offer will be accepted.

Another con is that interest continues to accrue throughout the OIC negotiation. The OIC can take a year or longer. Interest amassing over a 12-month period could be great.

Filed Under: Offer In Compromise

April 29, 2014 by James Grennen Leave a Comment

IRS Offer in Compromise Services

An offer in compromise is a provision in the federal tax code that allows you to settle your tax debts for less than what you owe (to a reasonable extent), provided you meet some conditions. It’s a great option to consider if you aren’t able to pay off your entire tax debt due to financial constraints. The main factors considered are:

  • Income
  • Ability to pay
  • Asset equity
  • Expenses

The IRS will accept an offer in compromise if the amount being paid is the most they can expect to collect within a specified period of time. To participate in the offer in compromise process, tax filings must be current and you cannot file for bankruptcy.

IRS offer in compromise

There are two types of offer in compromise payment plans:

  1. The Lump Sum Cash plan is where 5 or fewer payments are made in addition to 20% of the offer amount paid upfront
  2. The Periodic Payment plan is where after making an initial payment monthly installments are paid until the offer amount is settled.

In terms of how an offer in compromise is negotiated, there are two types:

  • Doubt as to Collectability (DATC): This occurs when the offer in compromise is negotiated on the basis on a taxpayer’s inability to pay tax debts due to financial hardship.
  • Doubt as to Liability (DATL): This occurs when the offer in compromise is negotiated if the taxpayer thinks that his or her tax liability is incorrect. It is to reconsider a taxpayer’s tax liability in case of miscalculation or misinformation.

The offer in compromise is a delicate and subtle process that may provide tax relief. The IRS only accepts about 20% of offer in compromise pleas, so it’s important to present the best case for the IRS. The help of highly qualified experts will analyze your specific situation to determine whether you are in fact eligible for an offer in compromise – contact us today.

Filed Under: Offer In Compromise

February 27, 2013 by James Grennen

The 3 Types Of IRS Offer In Compromise

The IRS offers several safeguard programs for delinquent taxpayers. The IRS designed these programs for taxpayers in financial distress and for taxpayers who would suffer by strict interpretation of the tax law. One program is Offer-in-Compromise or OIC. Qualified delinquent taxpayers negotiate settlement with the IRS for less than the owed amount. There are three separate ways that a taxpayer can qualify for a reduced settlement under the OIC program:

  1. Doubt as to Collectibility.  The taxpayer has tax debt and an inability to pay.
  2. Doubt as to Liability.  The taxpayer has tax debt and a legitimate reason for not paying.
  3. Effective Tax Administration.  The taxpayer has tax debt and possible ability to pay. But to do so would cause extreme financial distress.Achieving Success

Doubt As To Collectibility

The first type of Offer-In-Compromise (OIC) is known as Doubt As To Collectibility.  The delinquent taxpayer proves convincingly the taxes owed are greater than the taxpayer can ever afford to pay. If the IRS accepts this Offer-In-Compromise, then they agree to settle all of your delinquent tax debt for a single reduced amount. IRS has calculated what they think they can collect from you. The IRS calls this amount the Reasonable Collection Potential. Your settlement offer must equal or exceed the Reasonable Collection Potential amount. The IRS will reject an offer of less than the Reasonable Collection Potential amount.

Doubt As To Liability

The second type of Offer-In-Compromise (OIC) is Doubt as to Liability. The delinquent taxpayer proves convincingly to the IRS there is a legitimate reason the assessed tax debt is wrong. A common example would be the taxpayer presents evidence not previously considered. A seemingly legitimate reason cannot compel the IRS to agree to review a case. The IRS does not have to accept an Offer-In-Compromise application or to decide in favor of the taxpayer.

Effective Tax Administration

The third type of Offer-In-Compromise (OIC) is Effective Tax Administration. You agree the assessed tax debt is correct and that you could potentially pay it. However, you prove to the IRS that to collect the total tax debt would create a significant economic hardship for you and your family. The IRS calls economic hardships ‘special circumstances.’ Inconvenience does not qualify as a hardship. The IRS refers to economic hardship as Effective Tax Administration. You must collect, analyze and present extensive supporting documentation to satisfy the IRS hardship guidelines.

Watch our Video:

Filed Under: Offer In Compromise Tagged With: IRS Offer

February 27, 2013 by James Grennen

Seven Suggestions For Achieving Success With Your IRS Offer in Compromise

In recent years The IRS has increased its collection effort for back taxes owed. But at the same time they provide the Offer in Compromise program to aid taxpayers who are experiencing genuine financial hardship. Statistics suggest that it is difficult to Achieving Successqualify for the Offer in Compromise program. The IRS has historically accepted somewhere between one quarter and one third of presented offers. The taxpayer can increase their chances of success with the following seven helpful suggestions:

1: Hire A Tax Resolution Specialist

Submission the OIC without the help of a tax resolution specialist decrease the chances for success. An experienced tax resolution specialist can help the taxpayer you qualify for an Offer in Compromise in many ways. Special OIC computer software analysis of the taxpayer’s finances can strengthen the package. An experienced tax relief specialist also guides the taxpayer through the OIC process.

2: File Tax Returns On Time

The Offer in Compromise is a one-time event. The IRS does not routinely provide relief for taxes owed. Part of the goal of the OIC program is to teach the taxpayer compliancy. The taxpayer should file all unfiled tax returns. This includes tax returns due during the OIC review period. Once the IRS accepts an offer, they oversee the taxpayer for 5 years after the date of acceptance of the offer. The taxpayer must remain compliant or the IRS will withdraw the offer.

3: Pay All New Taxes When Due

The IRS also wants the taxpayer to remain compliant by paying new taxes on time for the same time period mentioned in Step #2. The IRS oversees the taxpayer for 5 years from the date of offer acceptance.

4: Treat IRS Employees With Respect

Success of an offer could depend on how you or your tax resolution representative treat the IRS employees. The taxpayer or their representative cannot choose who handles their OIC case. Treating the IRS employees connected with your case with respect will help everything stay on even keel. Our experience has been the IRS hires good people. These employees are usually eager to help the taxpayer resolve their tax problem in a positive and friendly manner.

5: Present Your Finances Honestly

The taxpayer should never mislead the IRS. Taxpayer statements or documents that intend to mislead or deceive the IRS will eventually sabotage the case. Factual omissions will undermine the OIC process. This includes verbal, written or electronic communications of any form. Dishonesty can lead to charges of perjury. The IRS is expert at uncovering fraud.

6: Meet All Deadlines

The IRS treats all its deadlines seriously and therefore the taxpayer should as well. The taxpayer should meet any deadline that IRS gives to them directly or through the tax resolution representative. The taxpayer should allow themselves plenty of time to meet all deadlines.

7: Comply With All Follow-up Questions

The communication flow throughout the Offer in Compromise process is extensive. The person best equipped to manage this flow is the tax resolution specialist. The experienced tax resolution specialist is familiar with exactly how and when to provide questioned information. The specialist can guide the taxpayer toward presenting the information correctly the first time by lessening further need for information.  The specialist can guide the taxpayer toward meeting further questions in a timely and correct manner. A specialist is the taxpayer’s best method for communicating with the IRS.

Filed Under: Offer In Compromise Tagged With: IRS Offer

Primary Sidebar

Search Form

DOWNLOAD A FREE COPY OF THE ESSENTIAL TAX RESOLUTION GUIDE

Cover of the Guide

Your information is safe with us.

Attorney Plus Program

Long Island Tax Resolution Services is Not a Law Firm of Attorney Practice


Please click here to see why our Attorney Plus Program is the smartest way to resolve your IRS or State tax problems.

Be Smart Check List

IRS On Enrolled Agents :

"The Enrolled Agent is the most expansive license that the IRS grants a tax professional.

An Enrolled Agent has earned the privilege of representing taxpayers before the IRS.

Enrolled Agents are generally unrestricted as to which taxpayers they can represent, what types of tax matters they can handle and the IRS offices before which they can practice."


IRS Publication 4693A
(A Guide to the Enrolled Agent Program)

Man trapped by tax

NYS Tax Warrants: What Every Taxpayer Needs to Know

Man thinking. New York State Tax Problems FAQ

10 Frequently Asked Questions about New York State Tax Problems

Top 4 NY State Department of Taxation Collection Actions

Top 4 NY State Department of Taxation Collection Actions and What to Do About Them

Offer In Compromise (OIC): Tips To Getting Yours Accepted

The Penalties for Failing to File a Return or Pay Taxes

Footer

LITRS Company Profile

Long Island Tax Resolution Services specializes in providing affordable solutions to both individuals and small businesses experiencing back tax problems. These are either IRS tax problems or State tax problems.

Resources

Our Process

Privacy Policy

Recent Posts

  • NYS Tax Warrants: What Every Taxpayer Needs to Know
  • 10 Frequently Asked Questions about New York State Tax Problems
  • Top 4 NY State Department of Taxation Collection Actions and What to Do About Them
  • Offer In Compromise (OIC): Tips To Getting Yours Accepted
  • The Penalties for Failing to File a Return or Pay Taxes

Tags

Innocent Spouse Relief IRS Back Taxes IRS Bank Levy IRS Hardship irs notices IRS Offer IRS Penalties IRS Plans IRS Tax Relief IRS Tax Services IRS Wage Garnishment Tax Debts Tax Returns

Locations

Head Office (map above)
    80 Orville Drive, Suite 100Bohemia, NY 11716
    Phone: (631) 244-1650
    Fax: (720) 294-1650
Manhattan Location
    5 Penn Plaza, 23rd FloorNew York, NY 10001
2nd Long Island Location
    626 Rexcorp PlazaWest Tower, 6th FloorUniondale, NY 11556
Westchester Location
    50 Main St, 10th FloorWhite Plains, NY 10606

© Copyright 2014 - 2017 Long Island Tax Resolution Services · All Logos & Trademark Belongs To Their Respective Owners·