Tax Experts Share Offer in Compromise Strategies

For this Wednesday’s Live Webcast, “6 Simple Steps to an Offer-in-Compromise: Completing Form 656” Eva Rosenberg, aka TaxMama® and yours truly walked tax practitioners through the six important steps in the Offer in Compromise (OIC) process highlighting the importance of “knowing” the IRS Form 656. We also discussed OIC strategies that negotiate the best deal for a qualified client and ways to get Offers accepted by the IRS.

The Offer in Compromise program was designed to benefit distressed taxpayers by giving them the opportunity to settle their tax debt for considerably less than the original amount. But the Offer in Compromise Program helps the IRS too. Here are some of the benefits:

  • The IRS receives some money from taxpayers who would otherwise not pay at all.
  • The IRS receives payment for tax debts from sources it can’t go after such as family and friends.
  • The IRS collects more from a taxpayer who volunteers to pay the IRS debt than from seizing their property and selling it.

Here are the six steps tax practitioners must “know” to succeed with the Offer in Compromise program:

  1. Understanding the different types of “Offers” and how to properly fill out Form 656 and 656L. All Offers are filed on some version of Form 656 and while these forms look simple enough, they are complicated. Learning the forms is tantamount to Offer acceptance.
  2. Properly reduce client’s disposable income by understanding the following: how to value assets, how to vary the IRS standard expenses and how to create additional allowable expenses that result in a more realistic Offer for the taxpayer to pay.
  3. Utilizing the strategies to negotiate the best IRS tax settlement for a client.
  4. All taxpayer information must be: completed in entirely, typed not handwritten, carefully prepared, and organized to explain the case to the IRS in a clear and logical manner. Be advised: OIC dates are critical to acceptance in the program. Stay on top of them!
  5. Let the client know what to expect through the waiting period and once an Offer is accepted.
  6. Expect the best, but plan for the appeal. Make sure all paperwork is duplicated and that client and IRS conversations are thoroughly documented.

Note: Once the IRS accepts an Offer in writing – the taxpayer has no ability to contest it and if a taxpayer defaults, all bets are off – the IRS will go after the full balance and impose penalties and interest.

As mentioned in the webcast, an IRS representative confirmed increased IRS collection activities meant to reach taxpayers that owe over $10,000 in back taxes. These field officers are visiting taxpayers in their homes and businesses (unannounced) to accomplish the following objectives:

  • Determine an individual taxpayer’s or business’ financial situation
  • Collect any unpaid taxes through various legal means
  • Educate taxpayers and small businesses about payment obligations

If your IRS problems amount to more than $10,000, you need tax relief ASAP! Contact a certified tax resolution specialist or tax attorney who can analyze your delinquent tax issues and recommend an IRS payment plan such as IRS installment or Offer in Compromise depending on your situation. But act now before the IRS pays you a personal visit!

Next up in the IRS Practice Series: The Un-agreed Collection Alternatives and Appeals Wednesday, June 13, 2012 9:00am-12:00pm PST.

More Tax Help, IRS News and Tax Relief Tips:

  1. IRS Bankruptcy-Five Tax Relief Options for Back Taxes
  2. IRS Helps Unemployed Avoid Penalties
  3. IRS Offers Tax Help Tips-Worker Classification
  4. Talking Tax Resolution with Fox 11 Tony Valdez
  5. New Offer in Compromise Policies Bring Tax Relief

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