Offer in Compromise - Reduce Your Tax Liability To The IRS
Through An Offer In Compromise
The IRS may
legally compromise a tax liability owed based on "Doubt
as to Collectibility", and/or "Doubt as to
Liability". Additionally, although there is no doubt
the tax is correct, and no doubt the amount owed could be
collected, exceptional circumstances may allow the IRS to
still consider an offer (Effective Tax Administration).
Generally, the IRS will not accept an offer unless all of
your tax returns have been filed.
to Collectibility" exists when there is doubt that
you could ever pay the full amount of tax owed. Financial
information must be provided to the IRS describing in
detail why the Service cannot collect more than offered
from your assets and present and future income. A factor
considered is that the IRS generally has 10 years to
collect the liability.
to Liability" deals with doubt as to whether you owe
the amount of tax assessed. If there is doubt as to
liability, you must submit a written statement describing
in detail why you do not believe you owe the liability.
Financial information is not required if you are
submitting an offer on this basis alone. The IRS cannot
accept a compromise where the liability has already been
decided by a court.
Tax Administration" - to be eligible for compromise
on this basis, you must demonstrate that collection of the
tax would create an economic hardship or would be unfair
and inequitable. Financial information is required when
submitting an offer on this basis.
offer does not automatically suspend collection activity.
However, there are actions that can be taken to suspend
collection if collection would result in a financial
hardship. Further, merely submitting an offer serves to
extend the statute of limitations on collection (i.e., the
period of time that the IRS can pursue you for the tax
(generally, ten (10) years). Thus, the statute of
limitations must be reviewed before an offer is submitted
(together with other factors which may have served to
extend the statute).
goal of an offer-in-compromise is a settlement that is in
the Government's and taxpayer's best interest.
An offer based
upon "Doubt as to Collectibility" requires you to submit
information on your assets and liabilities, in addition to
information regarding your monthly income and expenses. If
the offer is not accepted, the financial information can
serve as a road map to IRS seizure (e.g., levy) in the
future. However, in order to have such offer considered,
such information is required. Thus, you want to make sure
that the information is prepared by a professional who can
advise you on the prospects of acceptance / rejection. The
forms should be reviewed by a trained professional (who
works IRS collection cases and offers), before
submission to the IRS.
8. Generally, the amount of
the offer (e.g., Doubt as to Collectibility) should be the
"realizable value" of your assets, plus the
amount the IRS could collect in the future. In determining
the future collection factor, the method by which you
proposed to pay off your offer is another variable (e.g.,
Cash Offer; Short-Term Deferred Payment Offer; Deferred
Payment Offer). Thus, when reviewing such an offer, the IRS
considers such factors as:
The amount collectible from your assets.
The amount collectible from present and future
income. The IRS will consider the present value of
money in relation to future collection potential. In
other words, by accepting the offer, the IRS will get
money that is worth more today than in the future.
The amount collectible from 3rd parties.
Sources of funds that are available to you but not
subject to the IRS's collection action.
IRS encourages deposits, such isn't required.
If the IRS
accepts your offer, you must indicate the time period for
paying the offered amount. For example: Cash Offer;
Short-Term Deferred Payment Offer; or Deferred Payment Offer.
your offer is rejected, the rejection can be appealed.
The above limited information is intended for
informational purposes only. If legal advice or other expert
assistance is required, the services of a competent professional should
be sought, and this general information should not be relied upon
without such professional assistance.
assistance, please contact A. Nathan Zeliff, Attorney at Law