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IRS Offer in Compromise - Get A Fresh Start

Since 2012 the IRS has been much more willing to accept an IRS Offer in Compromise with taxpayers with overwhelming tax debt than in the prior decade. IRC §7122 permits the IRS to accept an IRS offer in compromise in settlement of tax obligations for less than the full outstanding tax debt. The willingness of the IRS to exercise this authority has ebbed and flowed over the years. In 2012 as part of its Fresh Start initiatives, the IRS greatly liberalized the standards that it uses for an acceptable IRS Offer in Compromise. The statistics for some recent fiscal years are:

Offers in Compromise years: 2012 2013 2014
Number of offers received: 64,000 74,000 68,000
Number of offers accepted: 24,000 31,000 27,000
% accepted: 38% 42% 40%

MOST IRS OFFER IN COMPROMISE REJECTIONS ARE DUE TO TAXPAYERS DOING THEIR OWN OFFER IN COMPROMISE.

IT IS BEST TO AN AN EXPERIENCED IRS TAX LAWYER PREPARE YOUR IRS OFFER IN COMPROMISE SETTLEMENT.

95% OF FLAT FEE TAX SERVICE, INC.'S CLIENTS HAVE HAD A SUCCESSFUL IRS OFFER IN COMPROMISE.

In general, an offer in compromise is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. An IRS Offer in Compromise is generally not accepted if the IRS believes the liability can be paid in full as a lump sum or a through a payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination of the taxpayer’s "reasonable collection potential." IRS Offer in Compromise submissions is subject to acceptance on legal requirements. To determine the taxpayer’s ability to pay, the IRS determines a value of the taxpayer’s assets and adds the value of his ability to pay in the future. The combined value of those two components is known as “Reasonable Collection Potential”(RCP).

95% OF FLAT FEE TAX SERVICE, INC.'S CLIENTS HAVE HAD A SUCCESSFUL IRS OFFER IN COMPROMISE.

READ MORE: IRS.GOV

Get Your Dancing Shoes On - Settle With The IRS

You will feel like getting up and start dancing when you settle your income tax debt. Contact the best IRS team at Flat Fee Tax Service, Inc. and find out exactly what your options are and what can be expected. Are you ready to dance?

Under the IRS Fresh Start policies when the IRS calculates a taxpayer’s reasonable collection potential, it will now look at only one year of future income for offers paid in five or fewer installments, down from four years; and two years of future income for offers paid in six to 24 months, down from five years. All IRS Offer in Compromise submissions must be fully paid within 24 months of the date the IRS Offer in Compromise is accepted. The prior policy resulted in IRS demands for very large compromise payments even when the taxpayer had few assets. The revisions have resulted in a 75% reduction in the amount required to settle tax obligations in five or fewer installments. They will result in a 60% reduction in the amount required to be fully paid within 24 months.

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YOU CAN HAVE A SUCCESSFUL IRS OFFER IN COMPROMISE

When reviewing a taxpayer's budget to determine ability to pay in the future, the IRS applies Allowable Living Expense standards. The standard allowances impose parsimonious budgets upon a taxpayer in collection determinations by incorporating average expenditures for basic necessities. Notwithstanding substantial criticism of the IRS over the years, it is insisted upon applying the same standards for food and clothing in all areas of the country whether high-cost locales like Alaska, Hawaii, and New York City or lower cost Midwestern areas. These standards are used when evaluating offer in compromise requests.

In response to criticisms from the National Taxpayer Advocate and taxpayer representatives, the IRS expanded the National Standard miscellaneous allowance to include additional items. Taxpayers can use the miscellaneous allowance for expenses such as credit card payments and bank fees and charges. In the past, the IRS refused to recognize taxpayer obligations to pay student loans and state tax delinquencies. The new guidance now allows payments for loans guaranteed by the federal government for the taxpayer's post-high school education. In addition, payments for delinquent state and local taxes may be allowed based on a percentage basis of tax owed to the state and IRS.

IRS Tax Lawyers are well-advised to review the current IRS offer in compromise guidelines when advising taxpayers with large tax obligations. Taxpayers should be wary of nationally advertised tax resolution firms which may not deliver on their broadcast promises. Many tax resolution firms have been forced out of business by strict enforcement of consumer protection laws by state and federal authorities. Prior to hiring any heavily advertised tax firm to check the better business bureau and the state attorney general’s office for complaints. Because of the complexity of the offer process, most taxpayers should seek out the services of an experienced Enrolled Agent, CPA or attorney before submitting a proposed compromise to the IRS.

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