TAX SETTLEMENT & OFFERS IN COMPROMISE
OFFERS IN COMPROMISE
EXPERIENCED TAX ATTORNEY HELPING CLIENTS ELIMINATE TAX DEBT
Filing an Offer in Compromise
An Offer in Compromise is filed with the Internal Revenue Service by filing IRS Form 656 (Offer in Compromise) and IRS Form 433-A (Collection Information Statement for Wage Earners and Self Employed Individuals). IRS Form 433-B (Collection Information Statement for Businesses) must also be filed if the taxpayer owns an incorporated business or if the taxpayer is a business. Filing an Offer in Compromise and negotiating a settlement requires experience and knowledge of IRS collection policies and procedures. Most Offers in Compromise filed by non-experienced individuals are returned as simply being unprocessable because they do not meet the IRS's criteria for acceptance. Consequently, when they are returned as unprocessable, the IRS never even considers the merits of the proposed offer.
Types of Offers in Compromise
An Offer in Compromise may be filed based on "doubt as to liability" (I don't owe the tax), "effective tax administration" (I owe this amount and have sufficient assets to pay, but due to my exceptional circumstances, requiring full payment would cause an economic hardship or would be unfair or unequitable), or "doubt as to collectibility" (I have insufficient income and assets to pay the full amount). To discuss your specific circumstances and the options available for resolving your outstanding tax matter, please contact our office in Charleston today for an initial consultation with an experienced tax lawyer.
Fresh Start Initiative
In May, 2012, the IRS announced more flexible Offer in Compromise terms to help a greater number of struggling taxpayers under its Fresh Start initiative. The new Fresh Start initiatives are designed to assist some taxpayers who have faced the most financial hardship in recent years. In certain circumstances, the changes to Offers in Compromise terms include:
1. Revising the calculation for the taxpayer's future income;
2. Allowing taxpayers to repay their student loans;
3. Allowing taxpayers to pay state and local delinquent taxes;
4. Expanding the Allowable Living Expense allowance category and amount.
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 months (down from four years) and two years of future income for offers paid in six to twenty-four months (down from five years). All Offers must be fully paid within twenty-four months of the date the offer is accepted.
Other changes to the program include narrowed parameters and clarification of when a dissipated asset will be included in the calculation of reasonable collection potential. In addition, equity in income producing assets generally will not be included in the calculation of reasonable collection potential for on-going businesses.
To discuss whether you may qualify for an Offer in Compromise under the new Fresh Start initiative, please contact our office in downtown Charleston, South Carolina today for an initial consultation with an experienced tax lawyer.
Liens, Asset Seizure and Wage Garnishment During An Offer in Compromise
While an Offer in Compromise is being considered or processed by the IRS, the IRS can file a Notice of Federal Tax Lien against the taxpayer if one has not already been filed. Collection activity, such as seizure of assets and garnishment of bank accounts or wages, will stop during the Offer in Compromise period. This is one of the benefits of filing an Offer in Compromise, however the IRS can return an offer if it determines that the Offer in Compromise was filed for the sole purpose of delaying collection activity. This is one reason that Offers in Compromise have been abused as a tool for helping taxpayers solve their outstanding tax matters. An Offer in Compromise is only one solution to the resolution of a tax matter. It is not applicable to all taxpayers and should not be considered if the particular facts of a client's case do not support a reasonable likelihood that the IRS will accept it.
Compliance! Compliance! Compliance!
The importance of being current, or being in voluntary compliance, cannot be overstressed. The IRS will not accept an Offer in Compromise as processable from a taxpayer who is not current. Not being in compliance can derail the entire settlement process, whether you are trying to discharge tax debts through bankruptcy, the filing of an Offer in Compromise, or by entering into an Installment Agreement. Income tax returns that have not been filed or taxes for the most recent years that have not been paid create a multitude of problems. We all know the three rules of real estate: location, location, location! Consider these the three rules of tax law: compliance, compliance, compliance!
Get A Game Plan!
A well devised plan for discharging tax indebtedness is important and almost impossible to achieve without the help of an experienced professional who understands the process or various processes that may be involved, what is possible and what is not, and the full range of remedies available. Remember, there are often multiple solutions to the settlement of a tax debt. As a tax attorney with more than 30 years in practice, John Kachmarsky and the staff at the Law Office of John Kachmarsky have that experience and knowledge.
Contact our Charleston, South Carolina law office today to make an appointment for an initial consultation.