Enrolled Agents Help Settle Your Tax Debts With The IRS
The Offer in Compromise (OIC) program in the United States is an Internal Revenue
Service (IRS) program that represents an agreement between the taxpayer and the IRS that settles the taxpayer's liabilities for less than the amount owed. You, usually use the checklist in the Form 656 to determine if you are eligible for this program. If you believe you are eligible to file an OIC you should seek out representation from either attorneys, Certified Public Accountants (CPA) or Enrolled Agents who can represent taxpayers in front of the IRS. Enrolled Agentsare great representatives when filing an OIC. Enrolled Agentsare admitted to practice by the IRS and can do so nationwide, unlike attorneys and CPAs. In order to become an Enrolled Agent, one must pass theSpecial Enrollment Examination, also referred to as the EA Exam. TheEA Exam is tax specific and covers tax law more in depth than the BAR or CPA Exam. In most cases, the IRS rejects an OIC unless you offer an amount that is equal to or greater than the Reasonable Collection Potential (RCP). The RCP is what the IRS uses to measure your ability to pay, and includes the value attached to your assets like bank accounts, properties, automobiles, etc. Additionally, the RCP also takes into account your anticipated future earnings, and adjusts them accordingly for basic living expenses using set standards. AnEnrolled Agent with OIC experience will know how to calculate the RCP and can help determine a reasonable offer amount to help prevent rejection. Offer in Compromise: Considerations An OIC can be requested based on the following conditions: Doubt as to Collectibility: You show a reason for doubt that you can repay the full amount of the tax liability you owe to the IRS within the stipulated time for repayment. For instance, if you owe $20,000 in unpaid tax liabilities, you agree to what you owe is correct and accurate. Also, you show that your monthly income does not meet your living expenses, you do not own any property, and you are unable to pay off your liabilities in a lump sum or through installments.
Doubt as to Liability: You show a reason for doubt that your assessed tax liability is accurate and correct. Possible reasons for this doubt include mistakes by the tax examiner, failure of the examiner to consider your evidence, or you have new evidence.
Effective Tax Administration: To be eligible for an OIC under these grounds, you must show the IRS and the tax collectors that paying off your liabilities would create a situation of economic hardship for you. For instance, you may have enough funds to pay off your taxes within the specified time, but due to some unforeseen reasons, paying the taxes would worsen your economic situation beyond repair.
Offer in Compromise: Payment Options Ideally, you are required to submit a $150 application fee along with Form 656 - Offer in Compromise. However, certain low income taxpayers may qualify to waive the application fee. You may choose to pay the OIC using one of the following options: Lump Sum Cash Offer: The amount due must be paid within five or less non-refundable installments upon notice of acceptance. When filing your Form 656, you are required to pay 20% of the offer amount. A Lump Sum Cash Offer is calculated as follows: If the offer will be paid in 5 or fewer installments in 5 months or less, the offer amount must include the net value of your assets and the monthly anticipated future earnings amount multiplied by 48 months.
If the offer will be paid in 5 or fewer installments in more than 5 months but less than 24 months, the offer amount must include the net value of your assets and the monthly anticipated future earnings amount multiplied by 60 months.
If the offer will be paid in 5 or fewer installments in more than 24 months, the offer amount must include the value of your assets and the anticipated future earnings amount spread over the remainder of the statute.
Short Term Periodic Payment Offer: You must pay the offer amount within 24 months of the date the IRS received the offer. The first payment is made along with the $150 application fee when Form 656 is submitted. The monthly installments must continue to be paid while the OIC is under review and are non-refundable if the OIC is rejected. If the offer will be paid in 5 or more installments within 24 months, the offer amount must include the net value of your assets and the monthly anticipated future earnings amount multiplied by 60 months.
Deferred Periodic Payment Offer: You must pay the offer amount over the remaining statutory period for collecting the tax liabilities incurred by you. If the offer amount must include the net value of your assets and the monthly anticipated future earnings amount spread over the remainder of the collection statute.
The IRS officials are not bound to offer you terms as proposed by you. The OIC investigator may propose a different plan after assessing your financial condition and ability to pay off your taxes. IRS Circular 230 Disclosure Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.
Enrolled Agents Help Settle Your Tax Debts With The IRS
By: Sawyer Adams
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