Amount of Offer
A determination of the assets the taxpayer has is made by the IRS on a discounted basis in order to determine if the amount is acceptable for the Offer in Compromise. A quick sale basis is utilized to determine the net worth of the taxpayer then a determination is made of the ability for future payments to be made by the taxpayer. The future ability to pay is assigned a cash value which is aggregated with assets value in order to make the determination of an Offer in Compromise acceptable value. The minimum amount that an Offer in Compromise will allow tax liabilities to be settled for will now be the aggregate number.
A lower Offer in Compromise amount would be warranted by a special hardship or proof that the tax bill is not owed. The following principles are typically applied by the IRS in order to evaluate an Offer in Compromise: A minimum Offer in Compromise is determined by the IRS as a result of looking at Reasonable Collection Potential. Future Income and the Realizable Value of assets are the two factors utilized to determine Reasonable Collection Potential.
Asset Value
The net equity in all assets is what equals assets Realizable Value when the acceptable amount of an Offer in Compromise is determined. The value of assets minus any encumbrances that take priority over the Federal Tax Lien is used as the consideration for each Offer in Compromises starting point. The liquidation value of assets is utilized to determine the acceptable Offer of Compromise amount.
Potential Future Income
The amount that can be collected out of the taxpayer’s future income is taken into consideration by the IRS in the determination of an acceptable amount for an Offer in Compromise.
An Offer in Compromise specialist will take the past and present income, health, age, experience, education and trade or profession into consideration when evaluating the prospects for future income. There will also be an evaluation of future income to determine if there is a chance that actual income will increase to make it possible to pay delinquent taxes.
The monthly income has necessary living expenses subtracted for a set number of months to determine the potential collection amount to be taken from future income. The IRS typically determines future income by multiplying the amount of disposable income each month by 48 or 60 months.
Potential for Collection
Getting expert tax relief help can take the pressure off you when it comes to future income to the realizable value of assets to calculate a minimum acceptable offer.
Paying Offer in Compromise…
The taxpayer is no longer required by the IRS to come up with the full amount immediately when the Offer in Compromise is accepted!
An accepted Offer in Compromise has a number of options for making payments provided through new policies of the IRS. The taxpayer may pay cash within a ninety day time frame of the acceptance of Offer in Compromise. The value of forty-eight months of disposable income and total realizable value of assets are added together and used to figure a cash offer in compromise.
A deferred payment offer allows the option of paying the amount over two years by making monthly payments. A term of sixty months is used to figure the short term payment for an offer in compromise by taking the disposable monthly income value and adding it to the assets realizable value.
Installments are paid over the remaining time for the tax to be collected by a deferred payment offer.
Contact us for free tax relief help to determine if you could qualify for an offer in compromise and which terms are best for you.
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Process of Offer in Compromise
Clients are aided in through the entire process of an IRS Offer in Compromise by our experienced tax attorneys. A reduced amount of money than the delinquent tax bill is offered to the government by a taxpayer through the process of Offer in Compromise.
Clients are often told that the desire to give a break to delinquent taxpayers is not what motivates an Offer in Compromise from the IRS by professional tax attorneys. The IRS makes a calculated business decision to take a smaller amount as full payment instead of spending money to attempt collections from the taxpayer before the statute of limitations is up by accepting the Offer in Compromise.
It can take nine to twenty-four months for the Offer in Compromise to be completed even when a seasoned tax attorney is assisting depending on the district. The timeline and process for a typical Offer in Compromise:
STEP 1- Planning, Preparations and Submission of the Offer by a Tax Attorney
A review of the case to make the determination of qualification for an Offer in Compromise and the terms that are qualified for can be done by a tax attorney. Once the analysis is completed an Offer in Compromise package is prepared and submitted to the IRS by our attorneys. Every aspect of the Offer in Compromise process will be advised on when you seek professional tax relief help.
STEP 2- Offer is Received by the IRS and Additional Information is Requested
The IRS Offer in Compromise manual is utilized by the IRS to determine if the procedural requirements have been met by your Offer in Compromise. In order to make an adequacy determine of the Offer in Compromise the IRS will request proof of the financial condition of the taxpayer.
STEP 3- Financial Review by the IRS
A review of the Offer in Compromise is done by the IRS, documents are attached in order to determine if the Offer in Compromise is accepted and for what amount.
STEP 4 – Aggressive Negotiations with the IRS by Tax Attorneys
In order for the most favorable acceptance of the Offer in Compromise to be accepted the Tax Attorneys will aggressively represent the case for an Offer in Compromise to the IRS. The experience and skill of the tax attorney will have an effect on the success of the Offer in Compromise.
STEP 5- The IRS’ rejection of Offer in Compromise Appealed by a Tax Attorney
Tax attorneys appeal the case immediately when there is an unreasonable refusal of the Offer in Compromise. An IRS Offer in Compromise appeals officer will generally perform a review from the taxpayer’s district when the IRS has rejected and Offer in Compromise that is being appealed.
STEP 6- Reduced Tax Bill is Paid
Payments begin on the reduced tax bill according to the terms agreed upon once the Offer in Compromise is accepted. The taxpayer must be in compliance with the future tax laws for a period of five years once the Offer in Compromise is accepted.
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