Getting an acceptance of your IRS offer in compromise can be quite challenging. With careful planning and proper preparation however, you can greatly increase your chances of acceptance of your IRS tax settlement.
It is best to hire a tax attorney to get the job done. Only an experienced tax attorney, knowledgeable of the tax laws and art of IRS negotiation has the skill to analyze and determine if you will qualify for an offer in compromise. Do not waste your time with tax resolution companies, CPA’s, or enrolled agents. Get it done right the first time, and settle your IRS tax debt.
Here are some top tips to follow when filing your offer in compromise application:
1. File all unfiled tax returns
To the point, an offer cannot be considered if all required tax returns have not been filed. No exceptions.
2. Pay your estimated tax payments for the current year
Estimated tax payments must equal either 100 percent of your total tax from the prior tax year, or 90 percent of the income tax you expect to owe for the current year. Divide the total by 4 to get your quarterly payment amounts. All estimated tax payments that are due should be paid prior to filing an offer. For more information see Publication 505, Tax Withholding and Estimated Tax.
3. Prepare and file a complete offer in compromise application
Be sure that your application is complete. The offer in compromise forms can be found in the Offer in Compromise Booklet.
A complete application includes:
- Form 433-A or Form 433-B. This is a financial statement the IRS calls the Collection Information Statement for Wage Earners and Self-Employed individuals (433A) or for Businesses (433B). It gathers your income, assets, liabilities and expenses. The purpose of it is to determine the reasonable collection potential or RCP.
- Form 656-B. This form identifies the tax years and type of tax to be settled or compromises. It also identifies the offer amount and payment terms.
- Application fee. The offer in compromise requires a $186 application fee made out to the “United States Treasury.” There is an exception to this requirement if you meet the low-income certification guidelines found in the offer in compromise application.
- Offer amount. You must select a payment option and include the payment (made out to the “United States Treasury” with your application. This check must be separate from the application fee. This is where a tax attorney is invaluable. Knowing how much to offer generally depends on a lot of variables and must be demonstrated in your application. And just like the application fee, there is an exception to this requirement if you meet the low-income certification guidelines.
- Supporting documentation. All information listed in the 433A must have supporting documentation. Some of the most common include:
- wage and income statements (w-2, 1099, k-1)
- profit and loss statements if self-employed or own a business (LLC, S-Corp, C-Corp, Partnership)
- bank account statements (generally for the last 3 months)
- car loan statements
- health insurance statements
- 401(k), IRA or other retirement/investment plan statements
- child support, spousal support orders and divorce decrees
- mortgage statements/utility bills
- lease agreement
- loan documentation and statements
- child care bills/receipts
If your offer in compromise application does not include the above basic forms and information, the IRS will return your application. If all documentation is properly included, it will be moved on to assignment to an offer in compromise officer in approximately 6 to 9 months.
The IRS generally approves an offer in compromise when the amount offered represents the most they can expect to collect within a reasonable period of time.
Taxpayers needing tax resolution help with an offer in compromise should seek the advice of a tax attorney. The Attorneys at Delia Law have many years of tax relief experience and will competently represent you before the IRS. Please call for a no-cost tax attorney consultation for tax resolution. Our attorneys are primarily available to serve you in San Diego, Orange County and Los Angeles. We are also available nationwide. We look forward to helping you.
This blog post is not intended as legal advice and should be considered general information only.