If you owe a significant tax liability, or are engaged in a dispute related to taxes owed, there may be options available to work out a settlement for less than you owe. An offer in compromise (OIC) is an agreement with the IRS, in which the taxpayer settles for less than the total tax liability. To take advantage of discounted taxes through an OIC, call Tax Resolution Solutions. A Tax Attorney will review your current circumstances and determine whether you qualify. If you qualify, we provide experienced representation from an established local Tax Lawyer to help you through the process.
Offers in Compromise Based on Inability to Pay – Doubt as to Collectability Offer in Compromise
The IRS recognizes that it is often better to compromise and negotiate down to what the taxpayer can pay, so that the government receives something, instead of nothing. An offer in compromise is typically based on the taxpayer’s inability to pay the amount owed. The IRS will examine your assets and liabilities, including your household expenses, and apply a formula to determine whether you could pay if the total liability is reduced. We will handle the negotiations with the IRS and work aggressively to help you settle for a tax liability that you can afford. The formula for determining the minimum offer in compromise is as follows: (gross income – necessary household expenses)*12 + (equity in assets) = minimum acceptable offer.
Example – Your gross income is $4,000 per month. Your household expenses are $3,500. 4,000 minus 3,500 is $500. $500 multiplied by 12 is $6,000. The IRS will include $6,000 in your Offer. You also have a car worth $10,000 with an $8,000 loan and are underwater on your home. Your minimum acceptable offer is $6000 + $2,000 = $8,000. You will qualify for an offer in compromise if you owe more than $8,000 worth of tax.
Offers in Compromise Based on Disputed Amounts – Doubt as to Liability Offer in Compromise
The IRS claims you owe one amount, you disagree. This could be due to an error made by the IRS, you, or your accountant, which, if corrected would result in a lower tax liability. It could also be based on a difference in interpretation of the tax laws. If the amount you owe the IRS is subject to legitimate dispute, one way to resolve the issue is with an offer in compromise based on doubt as to liability.
Offers in Compromise for Exceptional Circumstances – Effective Tax Administration Offer in Compromise
Offers in compromised based on effective tax administration generally fall into one of two categories; hardship or public policy. If based on the IRS’s analysis you could afford to pay, but doing so would present an extraordinary hardship – like the inability to care for a disabled child, or the inability to obtain housing of any kind – you might qualify for an effective tax administration offer in compromise. Similarly, if you reasonably relied upon written but erroneous advice of an IRS employee, you might qualify for an offer in compromise based on effective tax administration. In all cases in order to qualify for an effective tax administration offer in compromise, you must not qualify for an offer in compromise based on doubt as to collectability or doubt as to liability. Effective tax administration offers in compromise are rare and you should discuss your circumstances with qualified tax counsel before beginning the process.
From offices in Smithfield, Rhode Island and Brockton, Massachusetts, our Tax Lawyer Matthew Fabisch and his network of CPAs, enrolled agents, and related tax professionals advise and represent clients in communities throughout Rhode Island and Massachusetts. Call our office at 401-324-9344 or contact our office by e-mail to arrange an initial consultation with an experienced tax attorney today.