Overcoming Tax Burdens – Insider Tips For Qualifying for an Offer in Compromise

Far too many business owners and individuals are looking over their shoulders in fear of the IRS. I appeared as the guest tax expert on Strictly Business on BlogTalkRadio.com earlier this month to share some insider secrets of tax relief with business owners and individuals struggling to overcome their tax burdens.

I discussed some of the tax resolution strategies we employ with the program’s host Anna D. Banks, a business coach and consultant who is dedicated to helping support and build entrepreneurship within a local community, and throughout the county.

Among other things, we talked about how more people will be qualifying for offer in compromise settlements now than in the last few years because of the state of the economy.

Listen to the full interview here or check back for transcripts from the show!

Anna Banks: You were explaining some of the different options in your tax relief toolbox. If you could go a little more in depth with that, because a lot of people don’t know these things

Michael Rozbruch:  Let’s start with the offer in compromise, because that’s probably the one that most people are familiar with because they see these commercials on TV that say, “Let us settle your debt for pennies on the dollar.” However, most people do not qualify for the offer in compromise unless you’re destitute.

The program is the closet thing to amnesty that the government will offer and its basically meant for the government to collect a small lump sum now – in other words, it’s cheaper for them administratively to accept a small lump sum now, then to go after the tax payer until the statue on limitation expires, which is 10 years on the debt. They don’t want to spend all this money administrative and salaries to go after somebody who doesn’t have the money or who will never have the money, its like getting blood out of a rock, they would much rather take a small settlement now and get them back in the system and off their books.

That’s the offer in compromise program, it’s a very formulaic driven process, it takes a look at one’s assets and also their monthly household income verse their monthly household expenses, the people who are best qualified are the people who are just making ends meet or who are in the negative each month, and not having any equity in assets. To tell you the truth were seeing a lot more people qualifying now than in the last few years because of the state of the economy.

That was something I was about to mention, because of what is happening in the economy do you think that the IRS will accept more people for the offer in compromise?

I think there will be a lot more submissions and acceptances. However from a percentage standpoint just to give you an idea from 2007 and I am talking national there were only 46,000 offers submitted and only 12,000 accepted. That’s about 17% -20% not even that much, our success rate is 5 times that amount because we don’t submit frivolous offers, like I said most people don’t qualify.

Just a few years ago that number that submitted were almost 140,000 that submitted and more people were accepted. When the economy was strong the IRS really tightened the rules on offers, but now what they have got to do is loosen the screws a little bit. But you know is a bureaucracy and it takes along time for them to do anything, I just hope they do it sooner than later, because a lot of people do deserve to take advantage of the offer in compromise program.

AB:  I agree with you Michael. But the thing is because of the President signing the help for people who were in foreclosure I would think that the IRS would want to follow suit with that, because it is happening nationally, at all areas of the socioeconomic levels.

MR:  On the other hand, that’s the only place the government has left to really beat the taxpayer over the head with a club to get the money, because with the decrease of revenues at the state level and at the federal level to pay for a lot of these programs, they’re going to go after the people who have not filed with regard to doing more audits using their computer technology in more advanced way to find the cheater and non-filers.

I think and I’ve already seen it – that they have already stepped up in forced collection, I think they got marching orders from the Treasury. You don’t hear about that in the media about the treasury easing up or adding more pressure. But that’s where they’re going to get the money; they’re going to be going after the back taxes to get the money.

AB: So can you go over some of the processes? Some of the things people need to go through. What is it that people do when they get letters? What should they do, what happens?

MR:  There is usually a series of five letters per quarter, if you do payroll taxes, once you’re in the collection division which means you owe taxes, the first letter its called the cp-14 that’s what it says on the top part of the letter says you have to pay this amount in 10 days, that letter usually doesn’t require a response if you have the money pay it.

If you don’t pay that money in 10 days a tax lien already exists. In other words, even though the IRS doesn’t have to file a piece of paper with the county recorder – that’s why I call them a very special creditor – which means legally a lien already exists against all your property and all the property you acquire in the future. And if you think about it that’s why they can levy your bank account and your wages without filing the piece of paper, which is the certificate notice of federal tax lien with the county recorder.

Now the second notice is a little worse than the first but we usually don’t respond to that one either, the 3rd one is called the cp-503 and that’s the one we start to respond on and a lot of times were able to get a 60 day hold or freeze on the account so were able to work it out.

AB:  Is that when you’re talking about “we” that’s their representative we’re talking about – like your company? The general taxpayer or business owner doesn’t have that?

MR: Correct, they have got to remember when they’re calling the automated collections system of the IRS which is the 800 numbers on these notices they’re speaking to clerical people who are making 9- 10 bucks an hour and they have your financial fate in their hands. So that’s another reason you need, see we know the law, we protect our clients rights that are preserved under the constitution and under the law, and we assert those rights, I got tell you 9 out of 10 times the IRS person on the other side of the phone has no clue of those rights. And that is scary.

AB: You’re right that is more than scary. They have all of our financial fate and health in their hands these clerical people, as well meaning as they might be.

MR: They can come without a court order and pad lock your front doors of your business, if it goes far enough and you ignore the notices and you owe all this money and you’re not filing your returns they can actually pad lock your front doors.

AB: That’s so scary. Please continue, you said they have the 5 letters, and you said they usually don’t come to you till the 3rd and then you start to respond.

MR:  and the 4th and 5th letters are the most important those come certified. Let me explain that most people say that they don’t receive letters. The IRS under operation of law is only obligated to send notices to the last known address so if you haven’t filed for a long time chances are you moved, the IRS is not obligated to find out where you moved and serve you with those notices they just send them to the address that’s in the computer that could be years old, that’s how people wake up in the morning and go to the morning and see that the money isn’t there or the human resources person in pay roll has just given them a wage garnishment to fill out.

So the 4th letter comes certified its called a cp-504 but the last letter is the one that we can do a lot of good stuff with the last letter is called the final notice of intent to levy where they say they are going to take your first born if you don’t respond in 30 days.

AB: Haha depending who your first born is!

MR: Ha yea come and get them. What we do is in the small print in the letter, that you could never interpret is an opportunity to file what is called a request for a processed due hearing letter, an appeal collection due process, which means we change the venue of the case form collections to appeal, that means we stop everything in its tracks.

In that collection due process appeal letter we put in all the things that we have in our tool box that we may or may not use because we don’t know that were going to be doing for the resolution part, but it takes 4 or 5 months to get that hearing so by that time we have things sorted out we have the returns filed we know the financial situation of the tax payer so were able to go to that hearing and present that case whether its an offer in compromise or a payment plan, or innocent spouse defense or an audit defense based on the time available to ascertain what is going on.

For more advice and information on negotiating an offer in compromise settlement, visit the Tax Resolution Services web site for a free tax relief consultation or call 866-477-7762.

More Tax Help, IRS News and Tax Relief Tips:

  1. Why the IRS Picks on Small Businesses and How to Avoid Triggering an Audit
  2. Cracking Down on Businesses with Payroll Taxes Problems: New Economic Stimulus Plan Calls for Heightened IRS Enforcement
  3. No Income Tax Rate Increase Until 2011 But Expect Increased IRS Audits of Tax Returns in Near Future
  4. IRS Asserts Position on Tax Protesters: Sanctions Imposed for Advancing and Maintaining a Frivolous Argument
  5. Tax Help For Taxpayers Short on Cash: Filing a Tax Return Late is Better than Filing a False Tax Return

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2 Responses to “Overcoming Tax Burdens – Insider Tips For Qualifying for an Offer in Compromise”

  1. » How to Make Deals with the IRS on Taxes Owed - Reduce Tax Debt Including Interest and Penalties! » Tax Relief Tips from the Experts at Tax Resolution University » Blog Archive Says:

    [...] recently blogged about offer in compromise settlements and my guest appearance as the tax expert on Strictly Business on BlogTalkRadio.com earlier this [...]

  2. Dick Wilkins Says:

    I do not have any money to pay a professional for help. $67 in the bank, $42 in my pocket, am on temporary disability for the next ten days of $239/wk. The job I had considers us part-timers, though I averaged 3 classes a week at $118/class, so I will move to the back of the line and will likely only average 1 or 2 classes a week. I have a 19 yr old $900 car and am sleeping on a freind’s couch. Have not filed taxes since 1991. The IRS sent me a note that they will take funds from my bank. I do not have any hope of buying the services of a professional for help. Should I overdose on the medication the indigent county program is giving me for my epileptic seizures?

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