You may have heard on the radio, TV, and online that you can settle your tax bill for less than what you owe. But are these claims valid? And can you settle your tax debt without hurting yourself in the long run?

Some of these national tax resolution firms you hear advertising offer minimal service; look at their Google and Yelp Reviews. So, knowing whom to trust and getting educated on your options to resolve your tax problem is essential.

As a local expert tax attorney-CPA-EA with Harmon Tax Resolution, LLC – a tax law firm serving the areas of Port Saint Lucie, Stuart & Fort Pierce, Florida, I encourage all readers facing a tax problem to contact us for a free consultation.

The truth is that though it’s often more complicated than they claim to settle for less than you owe the IRS, it is possible, and you must first learn if you qualify for the program. The IRS program is called an Offer-in-Compromise, but settling is not necessarily bad.

What is an Offer In Compromise?

An Offer-in-Compromise is a negotiated agreement between the IRS and the taxpayer intended to help taxpayers who do not have the resources to pay the tax debt. If you qualify, you may be able to settle your entire tax bill for significantly less than what you owe. You must establish that you genuinely can’t afford to pay back taxes or that doing so would cause extreme financial hardship. This can apply, for example, if you have become disabled.

You must be current on all legally required income tax returns and current on any estimated tax payments if you are self-employed and cannot file for bankruptcy.

The IRS would instead take an Offer-in-Compromise than send you to collections and potentially get less money. Taking an offer in compromise will not affect/impact your credit score. Accepting your Offer-in-Compromise could be a far better financial decision in the long run.

Is an Offer In Compromise Easy to Apply For?

Working out what offer to make on your own and learning the whole process can be challenging. That’s like representing yourself in a court of law without a lawyer. Not ideal. A better answer is to find a tax resolution specialist that can help you with the process to see if you qualify and determine what you will have to pay. For a tax resolution specialist to represent you, they must be a licensed CPA, an Enrolled Agent, or a licensed Attorney. Will Harmon happens to be all three, which ensures you complete coverage of your tax issue.

One of the great things about working with a qualified and local tax resolution firm is getting protection from the overbearing IRS, letting you sleep better at night knowing you’re on your way towards permanent tax resolution. They can head off any impending paycheck garnishments or levies on your bank account.

Settling with the IRS is a good thing and is often the best answer to dealing with your back tax bill and moving on with your life.

For additional information, please read other blogs regarding Offer-In-Compromise:

• “IRS Offer In Compromise May Benefit You”
• “Who Would Be the Best Source of Advice for You to Follow Regarding Filing an Offer in Compromise”

If you want an expert tax resolution professional who knows how to navigate the IRS maze, reach out to our firm, and we’ll schedule a no-obligation confidential consultation to explain your options to resolve your tax problem permanently. Call 772-418-0949 or complete our contact form Free Consultation. Call Today so that you can sleep well tonight.

This IRS Tax Resolution Plan May Afford You the Ability to Pay Off Your Tax Debt for Less Than the Balance Due

With all the current economic turmoil, some cannot afford to pay their tax debt. Unfortunately, the IRS collection arm will continue regardless; however, some IRS programs are available to these individuals to manage their tax debt.

One such program called an Offer-In-Compromise (OIC) provides an option to qualifying taxpayers with the ability to settle their tax debt for less than the balance owed.

The overall taxpayer approval rate for OICs is slightly above 30%. The IRS accepted only 15,154 offers out of 49,285 in 2021. Some of the reasons for such a low overall approval rate include the following:

• applications are not correctly completed,
• the proper application of the rules of the program is not being utilized to the taxpayer’s advantage,
• taxpayers’ positions are not adequately advocated for,
• and the IRS finds that the taxpayer can pay the total Liability.

Often individual taxpayers attempt the application without seeking professional tax help or relying on the IRS to help them. The IRS’s goal is to collect as much tax as possible, so there will be limitations with the help of the IRS.

Will Harmon, Tax Attorney-CPA-IRS EA of Harmon Tax Resolution, LLC, can help determine whether an OIC is right for you. Use of Will’s multifaceted skillsets will ensure your case is appropriately gone over, thereby enabling a correct eligibility determination and for him to negotiate the most favorable deal on your behalf with the IRS. If OIC is unavailable, he will find the best tax resolution option for your situation. Please read further for an overview of the OIC requirements and timeframes to better assist you.

What Is an Offer in Compromise (OIC)?

An OIC agreement between a taxpayer and the IRS settles a taxpayer’s tax liabilities for less than the full amount owed. Typically, a payoff sum is determined, and then an election is to choose a five-month or a twenty-four-month repayment plan.

A comprehensive financial analysis of your situation is completed, which the IRS uses to determine acceptance or rejection of your plan. Ideally, one should have a tax professional to assist with the financial analysis to ensure correctness. The IRS will consider the following when whether you qualify:

• Your Assets, primarily how much equity you have in them
• Your Liabilities (debts)
• Your Income
• Your Expenses (applicable national and local standards)
• Your Ability to Pay Your Taxes in Full

In some circumstances, the issue is not whether you can afford the tax liability but whether you should be liable for the tax debt. There is a type of offer for that situation as well. There are three types of OIC, which will be covered next. It’s important to thoroughly discuss the surrounding factors and circumstances to determine if a particular OIC fits your situation. Employing a tax attorney will help ensure your situation is assessed correctly and ensure the best chances of approval of your OIC type.

What Are the Types of IRS Offers in Compromise, and What Are the Requirements?

The IRS provides three types of Offers In Compromise (OIC). Ideally, you should contact a tax attorney-CPA; they can let you know which compromise offers suits your situation. For a free consultation with Tax Attorney CPA Will Harmon, please call 772-418-0949 or submit a consultation request.

OIC – Doubt as to Collectability

Of the three plans, this is the most used. This plan provides a way to pay off your tax liability for less than the amount you owe. To qualify, you must demonstrate that you cannot pay your current living expenses and tax debt tax without experiencing severe hardship. You must complete a comprehensive financial position listing form -433A-OIC. For business income, you will use form 433B OIC. Getting tax professional help to complete this form will help ensure the IRS accepts it.

The IRS uses what they call a Reasonable Collectible Potential (RCP), which is the amount of money the IRS would be able to collect on your IRS tax bill. An RCP calculation is based on the liquidation value of your assets plus your monthly disposable income. Since the IRS uses specific standards to cap allowable expenses in the income component calculation, you must be in a low-income range to qualify.

There are two types of payment plans under this form of OIC:

1. Lump Sum OIC Payment

Lump-sum offers must be paid within five payments or less. All payments must be submitted to the IRS within five months of the offer being accepted. When you submit the application, you must also include 20% of your offer plus the application fee. There is no guarantee of acceptance; if rejected, the IRS will apply the payment toward the tax debt.

1. Period OIC Payment

Under this plan, you have up to 24 months to pay the offer amount in full. You are not required to make a 20% down payment under this plan.

OIC-Doubt as to Liability

Doubt as to Liability exists where there is a genuine dispute as to the existence or amount of the correct tax debt under the law rather than focusing on whether you can pay based on your living expenses and tax liability. Form 656-L is used for this OIC type.

You must include a written statement explaining why the tax debt or portion of the tax debt is incorrect. For documentation, you must provide supporting documentation or evidence that will help the IRS identify the reason(s) you doubt the accuracy of the tax debt.

There are various situations in which this resolution may be ideal. Examples of IRS mistakes:

• IRS made a mistake on an IRS tax audit resulting incorrect tax balance owed,
• a third party incorrectly reported the basis of an asset resulting in additional tax owed, or
• you have been incorrectly assigned a Payroll Trust Fund Penalty when you do qualify as such.

Sometimes, you may have to reconstruct your data to prove your position. Having a multi-faced tax attorney like Will Harmon, a tax Attorney-CPA-IRS EA-MBA will ensure that all facets of your case are covered.

Since this is an offer type, an offer must be presented. Your offer amount should be based on what you believe the correct amount of the tax debt should be, not what you owe.

In many situations, there may be another way to cure the problem with the IRS. Tax law requires you to apply for another tax resolution program first. For instance, if the additional tax liability stems from an incorrect tax audit finding, you may need to apply for an Audit Reconsideration. Then, if you’re unsuccessful, you can move on to this option.

Effective Tax Administration

Effective administration is when the IRS agrees to lower your tax bill to be equitable. You don’t have to be low-income, and you don’t have to doubt that you owe the tax.

This resolution aims to produce equity and fairness in the IRS tax collection system. It is designed for situations where it would be unfair or unreasonable to enforce the tax law and make you pay your federal tax bill. It would be best if you had exceptional circumstances to qualify for this option. Most people who settle taxes this way are very advanced in age or have a severe illness. They might be able to afford to pay the tax or an offer, by doing so would cause extreme economic hardship. For example, consider someone who could sell their assets to pay taxes. However, due to a chronic illness, they may need to liquidate the assets to cover their medical expenses.

Please call to schedule a free consultation to find out if this option may suit you.

Do I Qualify for an IRS Offer In Compromise?

The IRS OIC contains many eligibility requirements. Because of the complex nature of the OIC requirements, it would be beneficial to have a tax attorney CPA review your tax situation to see if you’re eligible.

As a rule, for any IRS Resolution program, you must comply with all your income tax requirements. To be compliant, you must have filed appropriate tax returns and, if required, made all required estimated tax payments during the year. Here are some additional eligibility requirements for the IRS OIC program:

• You must have received a tax bill pertaining to at least one of the tax liabilities you’ve included in your offer.
• You are not in an active bankruptcy case.
• You must not be reasonably capable of paying your tax bill in full.

How to Apply for an Offer in Compromise Doubt To Collectability

To apply for this type of offer in compromise, you must submit the following forms to the IRS:

• Form 656 (Offer in Compromise)
• Form 433-A (Collection Information Statement for Wage Earners and Self-Employed Individuals)
• Form 433-B (Collection Information Statement for Businesses)

To make the Offer In Compromise, you must use Form 656. To provide information about your financial situation, use Form 433-A; for business information disclosure, use Form 433-B. In addition to thoroughly completing the applicable 433 Forms, you must provide financial documentary support.

An application fee of $205 will be included with the application. Depending on the offer type being used will determine what needs to be included. If your Offer In Compromise seeks a periodic payment, you must make your first monthly payment with the application. If the Offer In Compromise is for the lump sum tax payoff, you will need to include a 20% down payment.

You may qualify for a low-income fee exclusion where there $205.00 fee is waived. To see if you qualify, please refer to the income chart in the instructions for Form 656.

If you submit an Offer In Compromise based on Doubt as to Liability, the only form submission will be Form 656-L. Under this request, no application fee or 433 forms are required.

What to Expect If the IRS Accepts Your Offer In Compromise?

It’s essential to recognize that the IRS may request additional information during the approval or denial process. It is imperative to respond to these requests promptly; otherwise, the IRS will reject your offer. Having a tax professional represent you is an ideal way of safeguarding that all IRS information requests are timely. If the IRS rejects your offer due to a lack of response, you will not get to appeal that decision.

When your Offer In Compromise (OIC) is approved, the IRS will notify you in writing of its decision. Approval means the IRS has agreed to allow you to pay off your taxes for less than you owe. If approved for the Lump-sum offer, you would have five months to make the payments. If this deadline is missed, your offer is no longer valid. If approved for the Periodic Payment Offer, the monthly payment period would be between six and 24 months.

In either offer plan, you must stay compliant with tax filings and payment obligations; otherwise, the IRS reserves the right to terminate the agreement and demand payment for the tax balance owed.

In addition, if you are due a tax refund for the tax year the offer was accepted, the IRS may keep that refund. The IRS’s keeping this refund will not adjust the offer amount owed.

What to Expect If the IRS Rejects Your Offer In Compromise?

The IRS will notify you in writing if your offer has been rejected. Any payments made up until that point will be applied toward your tax balance and will not be refunded back to you.

While the IRS is determining an OIC, tax debt collection efforts are halted; however, they will resume immediately after rejection unless an adequately filed appeal has been made. An appeal request must be made within 30 days of receiving the offer’s rejection.

It’s essential to ensure that you have put together a well-constructed offer package and have other payment arrangement considerations available in case of rejection. Employing a tax attorney-CPA will ensure you have adequate coverage for either situation.

What does an IRS Offer in Compromise Time Frame Look Like?

Narrowing down an exact time schedule is challenging because most situations have variations. However, the list below portrays what a typical time frame from start to completion could reasonably be.

• First Day, contact a tax lawyer-CPA for an initial consultation. Based initial information presented, they will approximate the expected time frame for your situation.
• One to Three Weeks — Fact gathering time where tax attorney-CPA will retrieve tax records from IRS and personal or business financial data from you. OIC Plan is drawn up for reviewal and submission.
• Thirty Days After Rejection — Thirty days is the amount of time you must appeal if the IRS rejects your offer. During this time, the IRS will not reengage in collection efforts. If an appeal is not warranted, another resolution option must be pursued.
• Five Months After Acceptance — Amount of time allotted for the Lump Sum Payment option, where the entire amount must be remitted once the IRS approves this plan.
• Twenty-Four Months After Acceptance — Amount of time allotted for the Periodic Payment option where the entire amount must be remitted via monthly payments once the IRS approves this plan
• Five Years After Acceptance — The terms of most OICs stipulate that you must stay compliant with tax payment and filing obligations for five years after you get an OIC. If not, the IRS may be able to revoke the agreement and demand payment in full.

There could be variations to this time frame depending on your situation. IRS could complete the review before six months or even take up to a year or more.

The Expense of an Applying for an Offer in Compromise

There are various factors to consider when determining the expenses for applying for an OIC:

• The application fee for OIC is a standard fee to pay unless you’re applying for Doubt As To Liability or you qualify for a low-income fee waiver.
• If applying for a Lump Sum OIC Payment Offer, an initial 20% of your total offer will need to be included with the application. Once this offer is approved, the remaining portion of the offer will need to be paid off within five months.
• If applying for Period Payment OIC Offer, you must pay the remainder of your offer in payments over two years. With this plan, there is the option to make a lump sum payment at any time during the twenty-four-month period.
• Professional fees are usually based on the amount of taxes owed.

What is the Advantage of Hiring a Tax Lawyer to Help Prepare your IRS Offer in Compromise?

A tax attorney CPA uses their skillsets and experience to help your OIC approval odds while ensuring the lowest offer possible is submitted. Since the overall approval average is around 30%, having a tax professional help you is advantageous. In addition, a solid tax lawyer will only suggest you apply for an offer in compromise after establishing whether you meet the strict guidelines required by the IRS. Often it takes a skilled tax lawyer to complete the required comprehensive financial analysis of your situation correctly to ensure you pursue the best tax resolution option available.

Will Harmon, Tax Attorney-CPA-IRS EA, Can Help with Your Offer in Compromise

If you believe you might be eligible for an offer in compromise, contact the Will Harmon Tax Attorney-CPA of Harmon Tax Resolution, LLC to review your circumstances. With the free initial consultation, Will Harmon can evaluate your financial situation and other eligibility requirements to see whether you qualify for this type of IRS program or others to address your back taxes.

To learn more, call him at 772-418-0949 or submit an inquiry request.

Call today so that you can sleep well tonight!

A Partial Payment Installment Agreement (“PPIA”) allows you to pay off your tax debt for less than the total amount you owe. This agreement puts you on a monthly set amount payment, which then ceases as of the Collection Statute Expiration Date (“CSED”). Once the CSED has occurred, any tax balances tied to this date are not collectible, and the IRS dismisses any remaining portion of the balance owed.

In essence, a PPIA will reduce tax debt and affords you a set monthly payment plan. A PPIA can save money; however, it is a complicated process involving strict criteria for qualification.

Are you considering if this option is right for you? Would you like to see if you qualify for this payment plan? Will Harmon, tax attorney-CPA-IRS EA of Harmon Tax Resolution, LLC, can help you decide if a PPIA is ideal for your situation. And if so, he can guide you through the application process. Here’s the critical information.

What Is a Partial Payment Installment Agreement?

Under a Partial Payment Installment Agreement (“PPIA”), the taxpayer makes monthly payments towards the tax debt up until the Collection Statute Expiration Date (“CSED”), which ordinally, the CSED period is for ten years after the date the tax was assessed. The CSED limits the time frame the IRS can collect on the debt. A PPIA creates a payment plan which ends when the CSED ends. Any remaining applicable tax balance is then removed by the IRS.

How Partial Payment Plan Installment Agreements Work

Here’s an example: Hypothetically, a taxpayer owes $30,000. They can only afford to pay $200 per month, and the collection statute expires in four years. They will make the $200 monthly payments for 48 months if they qualify based on their situation. At that point, the CSED expires, and even though the taxpayer has only paid $9,600, they won’t owe any additional money. In essence, they cut $20,400 off their tax bill.

PPIA seems ideal for those who qualify; however, there are stipulations with the plan one should consider. With PPIAs, the IRS reviews the taxpayer’s financial situation every two years. In the proceeding example, let’s say the IRS investigated the taxpayer’s finances after the first 24 payments. The IRS concluded that the taxpayer was earning sufficiently more money where the taxpayer could afford $500. Based on their new income determination, the IRS has the option to increase the monthly payments to $500/month for the last two years of the plan. Therefore, it’s essential to consider what possible changes may occur throughout the life of the PPIA period.

In addition to income and expenses, the IRS also factors your equity situation. Let’s say that when the IRS looks over your situation and discovers that you inherited an additional property home from a relative, the IRS can demand that you borrow against this home or sell it and use the proceeds to pay off some or all the tax debt. The ability of the IRS to enforce against acquired equity is an area of crucial concern to the partial payment installment agreements.

Should I Enroll in a Partial Payment Installment Agreement?

You should consider this program if you cannot afford to pay your tax debt under a payment plan before that Collection Statute Expiration Date. Here are some other indicators which may indicate that you should apply:

• You are unable to pay your tax bill in full.
• You don’t have any assets or equity in them that you can sell or borrow from to pay your tax debt in full.
• You are unable to acquire a loan to pay off your tax debt.
• The traditional IRS Installment Agreement monthly payment is unaffordable.
• Your IRS Offer-In-Compromise proposal was rejected.
• You cannot obtain Currently Not Collectible status or qualify for hardship status.

The PPIA is ideal for people who can’t afford to pay their tax debt in total but at the same time are unable to qualify for hardship status. The PPIA falls somewhere in between either of these options; however, strict criteria must be met to qualify. Talking to a qualified tax attorney-CPA will guide you on whether this is the right option to pursue.

Partial Payment Installment Agreement Requirements

Here are the qualifications for this plan:

• The tax Balance owed must be at least $10,000
• Establish that you don’t have assets that could be sold to pay the tax debt.
• Show that you cannot afford to make the monthly payments under a base IRS Installment Agreement.
• The tax debt under consideration was not covered under a previously approved IRS Offer-In-Compromise (“OIC”). Once the tax debt is approved under OIC, you cannot opt out of the Partial Payment Installment Agreement.
• You are currently not in bankruptcy.
• You must comply with tax filing requirements, federal tax deposits, and estimated tax payments.

The IRS will review your financial situation every two years during your PPIA. If your finances change, the IRS may require a larger monthly payment or you must pay off the balance in full.

Ideally, if you are approved, it is recommended that you agree to set up a monthly direct debit payment from your checking account or even have payments taken directly from your paycheck.

How to Apply for a Partial Payment Installment Agreement

The IRS requires you to provide complete and in-depth information to establish your qualification for approval for PPIA. This information is completed on several forms; IRS Form 9465 (Installment Agreement Request), IRS Form 433A (Collection Information Statement for Wage Earners and Self-Employed Individuals), or 433B (Collection Information Statement for Businesses). This form will report all your assets, liabilities, income, and expense items. Some expense items may be subject to IRS limitations. However, there may be justification, which, if adequately advocated for, may allow certain overages to be accepted by the IRS. A tax attorney-CPA could help tremendously secure the best agreement possible with the IRS.

What the IRS Uses to Determine Your Monthly Payment

The IRS representative will review the application and may request additional information. The amount of the tax debt will often determine the level and depth of inquiry. The IRS representative may request information not listed within the typical IRS request forms or even make inquiries regarding income or expense fluctuations of 20% or more.

The IRS goes through financials to determine your equity component. They then decide whether certain assets should be sold or loans should be made against them. After this, the IRS calculates your monthly payment to be made.

The monthly determination is based on strict adherence to IRS expense standards, determining how much you can afford. The IRS standards will determine how much of your excess income will be used in the payment calculation. The standards are based on detailed guidelines that assign expense criteria to the national and regional standards. Certain expenses will fall under one of these types. IRS is very strict with its standards applications.

For example, suppose the amount of your car or housing payment exceeds the IRS standard listings. In that case, the IRS will only allow you to use amounts up to the standard and not the excess when determining allowable expenses. Many of your basic expenses will fall under the IRS guidelines. The IRS is very inflexible with allowances outside of its guidelines. This is an excellent reason to have a knowledgeable tax attorney-CPA working with you to ensure the IRS adheres to the greatest allowances possible in your case.

If it turns out that your allowable financial listings result in an inability to pay at least $25 a month payment, you may want to see if you qualify for hardship status. If you qualify, the IRS will cease collection until the statute expires or your financial situation changes before the collection expiration date.

What to Consider if the IRS Calls for Selling Assets within the Partial Payment Installment Agreement

The IRS may require you to sell assets or take a loan against them to cover part of your tax liability. For example, if your tax debt is $25,000 and you have a brand-new boat, you’ll probably be required to sell it or take a loan. Only a very minimal amount of assets is excluded from this regulation.

There may be some situations that allow you to avoid selling your assets or borrowing against them:

• The assets have minimal equity.
• There is no market to sell the asset to.
• Unable to obtain an equity loan from a creditor
• Co-ownership of the asset by a spouse who is not liable for tax debt and is unwilling to take a loan out on the asset.
• The asset is required for income generation needed for the PPIA plan.
• You would suffer severe economic hardship from selling the asset.

It would be prudent to consult with a tax attorney-CPA if you plan on selling your assets to help ensure you’re making the best choice and negotiating ideally with the IRS.

Make Sure to Consider All of Your Options.

There may be other options that would better resolve your tax situation.

Partial Pay Installment Agreement (PPIA) vs. Offer in Compromise (OIC)

A PPIA and an OIC allow you to settle your tax debt for a lower amount than you owe. In either case, the IRS will agree to pay your tax debt for less than you owe. After completing all the terms of either program, the tax debt is gone permanently.

Additionally, either program has strict application criteria and completes comprehensive, detailed personal/business financial 433 forms. The approval rates are not high for either program. If you want to get approved for either of these programs, you should consider working with a tax attorney-CPA.

Bear in mind there are significant differences between a Partial Pay Installment Agreement and an Offer In Compromise, which are essential to consider. Here they are:

• Time Frame of Payments

An Offer In Compromise – Inability to Pay requires you to pay the offer in a lump sum or monthly payments over 24 months. With a PPIA, you make payments until the collection statute expires. The time could vary from a couple of years to many years.

• Understand Your Financial Situation

When you get an offer in compromise, you must comply with tax filing and payment obligations for five years. For instance, you must file your returns and make your estimated quarterly tax payments if required. If you don’t, the IRS can rescind your offer and demand full payment of the tax debt. However, the IRS can’t take away the offer with an OIC if your financial situation changes.

In contrast, if you have a PPIA, the IRS reviews your case every two years, and you may have to pay the entire tax liability if your situation improves. A PPIA might save you money in the long run if your financial situation is stable. Still, if you believe your financial situation will improve during the tax statute expiration time frame, OIC may be better for you. It’s crucial to under your financial situation presently and in the future as well as possible when determining which plan may work best.

• Approval Rates

Generally, the IRS tends to approve Partial Payment Installment requests at higher rates than OICs. OICs, on average, only get approved 33% of the time. When you talk with a tax professional, they will know which programs you’re likely to qualify for. The IRS is the final arbitrator on any tax resolution case; however, you significantly increase the situation by working with a seasoned tax attorney-CPA-IRS EA who specializes solely in working with tax resolution clients.

Should You Avoid Applying for an Offer in Compromise?

No, conducting a proper investigation is prudent to determine what would work best in your situation. It may be that the Offer In Compromise terms works better than a PPIA. To determine which tax relief option is best for your case, you should consult with a tax attorney-CPA. They can use their experience and knowledge to engage the problem correctly and steer you to the best IRS resolution option that fits your needs and finances.

In addition, the IRS may deny your PPIA application and direct you to apply for an Offer In Compromise if IRS believes an Offer In Compromise would be better for you.

Get Help Applying for a Partial Payment Installment Agreement

PPIAs are complicated to set up. For those in Port Saint Lucie, Fort Pierce, and Stuart who are looking for a tax attorney to help with a stressful tax situation, Harmon Tax Resolution, LLC can provide vital assistance to you throughout the process. At Harmon Tax Resolution, LLC, an experienced multi-licensed tax attorney-CPA-IRS EA will ensure you get the complete representation you deserve. Call today so that you can sleep well tonight.

Certain taxpayers are surprised that they owe additional income taxes yearly even though their employer withholds taxes from their weekly paycheck. Having an outstanding tax debt is not as uncommon as you think, and there are many reasons it could happen. About 24% of all Americans owe back taxes. If you’re among them, you know how nerve-racking it can be, whatever the amount.

Although sometimes it may seem that way, the Internal Revenue Service (“IRS”) is not out to maliciously target you. Since some of the tax code is confusing, it is easy to make mistakes; even the IRS makes them. It is essential to recognize this to remain calm when dealing with this situation.

Just getting a notice from the IRS can be unnerving. If you don’t agree with the IRS’s assessment of a tax owed or don’t understand the IRS’s position, the best approach is to write out your points and questions methodically. This purpose is to put your information and questions into a concise format to allow a conducive discussion with the IRS.

If you are responding in writing, include your name, social security or tax ID, and the notice’s reference number, which you can find in the upper right-hand corner of the first page of the notice.

Please remember that the goal is to resolve the issue quickly; how you engage the IRS personnel could assist or impair this. Your issue will be addressed by an individual and not a faceless careless entity. Being polite and cordial will make your issue more likely to be addressed and resolved.

If your situation entails owing an undisputed tax debt to the IRS and you cannot pay it, you have options. Ignoring the debt is never viable since the tax debt will not go away and will increase with additional penalties and interest. Eventually, your situation will be compounded by the IRS taking a more aggressive approach involving the issuance of liens followed by levies and or garnishments. You could even have your passport taken from you.

Dealing with the IRS in the same manner as described earlier to devise a payment arrangement known as an installment plan is a viable option. The IRS has several types of installment plans, each of which is deviated based on assessed tax amounts owed. The information-gathering requirement for each type varies as well.

Suppose you’re in a financial predicament where you cannot pay basic living expenses and the IRS tax debt. In that case, you may qualify for other options, such as being placed into a Currently Not Collectible Status (“CNC”), where the IRS will halt collection activities. In contrast, your financial situation remains as such. Under this plan, the ten-year Collection Statute Expiration Date (“CSED”) continues to run, and once you reach the CSED for an assessed tax, the IRS can no longer collect the debt, and it gets removed from collections.

Other options may include qualifying for a form of an Offer In Compromise (“OIC”), where there is a settlement agreement to pay the debt for less than the original amount. OICs are considered by the IRS when tax liability or collectability of the debt is in doubt. In other words, if they’re not sure about how much you owe or if they believe you might not ever pay, the IRS could settle for a type of OIC.

In addition, you may qualify for a Partial Payment Installment Agreement (“PPIA”) which allows for a lesser payment. This is like OIC consideration, where one cannot pay the entire tax balance owed before the CSED. In some cases, this is a better option and an OIC.

Regardless of the plan, you must comply with your tax return filings. Otherwise, you will be ineligible. Generally, six years is how far back you have to comply with filing your tax returns. In some cases, the IRS could require beyond that.

Most installment plans where full tax debt payment is to occur can be set up with the IRS without too much headache. However, if you are dealing with an OIC, PPIA, or CNC, it is highly recommended that you seek the help of a qualified tax resolution firm like Harmon Tax Resolution, LLC. You will deal directly with a multi-licensed Tax Attorney-CPA-IRS EA who will ensure your case is adequately represented. In addition, any required tax compliance work can be addressed as well.

Do you owe back taxes? Are you doing anything to fix the problem? You can have a free consultation directly with a multi-licensed Tax Attorney-CPA-IRS EA. Not taking action doesn’t solve the problem make the call today and sleep well tonight.

What should I seek from an individual advising me to file an OIC?

For starters, I would ensure they are competent in what they are talking about.

Most IRS agents neither have expertise in how to investigate an offer in compromise properly nor do they have a say in the decision to accept or reject them. The only IRS agent trained to compromise your taxes is an OIC investigator. Yet many people, unfortunately, deal with IRS Collection Agents either consisting of an IRS Revenue Officer or an Automated Collection Services (ACS) representative –neither of which is usually qualified to give you any substantive offer in compromise advice. Their primary function is to collect taxes and not to compromise.

IRS collection agents are not trained to investigate an offer in compromise. Their primary function is to collect taxes from you, not how to compromise. Due to a lack of training in this area, they are not tasked to investigate OICs and do not have a say in the decision to accept or reject them. Therefore, IRS Revenue Officers and ACS representatives have very little to do with your OIC, and reliance on their advice in this area is not wise.

Even though either of these individuals may be acting in good faith to help you, your chances of getting approved without a complete investigation of your case are greatly diminished.

So, you may be wondering why would any of these individuals provide advice on this, to begin with. Simple, this advice could be a way to move your file off their desk, making their workflow and case inventory look ideal. Once this election is made, the file will no longer belong to them, and it could take up to 12 months before the OIC decision is rendered. Also, filing for an OIC tolls any collection efforts as well. Hence, the IRS Officer or ACS Representative will no longer have to deal with you. There are many reasons that seem in your favor but are not in favor of the IRS revenue agent.

OIC involves IRS rules and not accounting rules. Unless your accountant is well versed in this, which very few are, they may not be able to offer prudent advice on this. This is also the case for attorneys who do not specialize in this area of IRS tax.

The IRS follows the Internal Revenue Manuel for making its determinations on OIC. There is a complete section dedicated to it.

The Internal Revenue Manual’s rules on a compromise include:

• Calculate and reduce the equity in your house, car, and household belongings using their quick sale value.
• The IRS uses conditional and necessary living expense allowances to oversee your lifestyle and spending.
• Reducing the value of business assets.
• Documentation and rules on how to value retirement accounts.
• Review and valuation of bank account balances.
• How to calculate the net realizable equity and reduce the value of your property.
• Documenting your wages, mortgages, car loans, student loans, and divorce obligations.
• Exemptions in your property allow you to protect it from the IRS.
• Allocating shared expenses and a non-liable partner’s income so that person does not pay your IRS debt.
• Formulas to calculate your future earnings and ability to pay the IRS until their collection statute expires.
• The Collection Expiration Statute Dates on balances

The IRS rules, formulas, and calculations are designed to make an OIC harder, not easier. Lack of familiarity can result in you paying the IRS more to settle than you should or having your offer rejected.

Unless one has done a complete inventory of your assets, debts, income, and living expenses, they are not feasibly able to provide advice. One must submit this information to the IRS for them to apply their formulas and calculations.

The IRS makes its decision strictly based on fitting your finances into the rules contained in the Internal Revenue Manual. Our goal is to be able to show (1) equity in your assets (per IRS formulas) and (2) the amount you can pay the IRS over up to 10 years in an installment agreement (according to IRS calculations) to be less than your tax debt. If so, then an OIC could be for you.

It is prudent not to take advice to file an OIC from someone who does fully know the ins and outs of the Internal Revenue Manual and has not provided their calculation to you based on an actual thorough review of your sources of income, and living expenses, property ownership, and liabilities.

Unless someone has done a detailed analysis, it is unlikely they could give you sound advice on whether to proceed.

Success with an offer in compromise does not come down to chance. It all comes down to how your reported finances fall within the government formulas and calculations. Because of how this is reported to IRS, only about 35% of all offers get accepted by the IRS. Make sure with certainty that the information reported to IRS is done by a knowledgeable tax professional who deals directly in the OIC area and is advocating for you versus someone who is either not on your side or does not have actual hands-on knowledge in this field. Choosing who helps you could go a long way in helping you get the relief you seek.