Alliance Financial Tax Resolution Services

Mike Mead’s Complete Guide to Resolving Your IRS Tax Problems

IRS Problems Have a Way of Ruining All Aspects of Your Life. They Take A Toll on You Financially, Physically, and Emotionally. You Can Never Really Forget About Them as They Always Come Back Each Morning When You Wake Up!

My name is Mike Mead and I am an Enrolled Agent. Which means that I am Enrolled & Licensed by the US Treasury to represent taxpayers before the IRS in all 50 states. I provide solutions to taxpayers like you who find themselves at odds with the IRS. Your IRS Problems are unlike many other problems in life, which may in fact go away by themselves. Unfortunately, IRS Problems just continue to get worse and more costly with new penalties and interest being added each day.

How do They Expect You to Pay Off Your Taxes if They Keep Adding Penalties?

We don't know what the IRS thinks, but we do know that they ruin people's lives every day with these ridiculous penalties. IRS penalties were supposed to be a slap on the hand to make you learn from your mistakes. But instead, they are used as a hammer to pound you into the ground, so far that there are only a few options on how to get out.

What do They Expect You to do With Federal Tax Liens on Your Credit Report?

How Can You Possibly Get a Loan to Pay Them Off, When Your Banker Won't Even Talk to You? Federal Tax Liens prevent you from being able to borrow any money for a car or a home.

Taxpayers with IRS Problems often have to shop at Buy Here, Pay Here car lots because these car dealers don't care if you have a Federal Tax Lien, because they charge so much for the cars and usually have very high interest rates.

Cars are expensive enough without having to pay 18% to 21% interest on a used car loan, but with a Federal Tax Lien you don't have any choices.

The banks have gotten so tough on opening new bank accounts that anyone with a Federal Tax Lien is usually prevented from even having a simple checking or savings account.

This makes it hard on some taxpayers to cash their paychecks or to pay their monthly bills. Often, they have to pay more money and use money orders or certified checks, just to pay their rent or utility bills.

Taxpayers with IRS Problems Always Have to Look Over Their Shoulder for the IRS!

Once you owe the IRS money, they become very aggressive in their collection attempts. One of the more common collection methods the IRS uses is the LEVY!

They will use either a Bank Levy or a Wage Levy. If you're lucky enough to still have a bank account, the Bank Levy allows the IRS to present your bank with a piece of paper that requires the bank to immediately withdraw all the money you owe the IRS. Many times, these Bank Levies are wrong, but the IRS doesn't care and it's up to you to correct the problem. Meanwhile, the checks you've written are bouncing all over town.

The worst thing about the IRS Bank Levy is that it may capture your children's, parent's, girlfriend's or spouse's bank account, if your name happens to be on the account. Even if it's just on there for convenience. The IRS doesn't care, they just want to get paid and they don't care who pays your taxes.

After the bank has cleaned out all checking and savings accounts with your name on them, they send the money to the IRS. You should take this as notice that the IRS will issue another Bank Levy against you in the future to satisfy any remaining amounts owed to them.

It’s kind of like hitting the lottery for the IRS. Once they find out how to get your money they will continue to see if they can keep winning by taking your money by issuing more bank levies.

As Bad as The Bank Levy is, the Wage Levy (Garnishment) is Much Worse!

The bank levy is a one-shot deal. Meaning that the IRS must continue to issue a new Bank Levy every time they want to clean out your bank account. The Wage Levy (Garnishment) is much, much worse. Its designed to bring you to your knees.

The Wage Levy is issued to your employer and it instructs the employer to immediately start withholding ridiculously high amounts of money to pay old tax liabilities in addition to the normal taxes being withheld. Wage Levies often result in you receiving only a few hundred dollars per pay period. This usually makes it impossible to pay your bills and eat. The IRS knows that Wage Levies cause all types of harm to you and your family, but they mail out thousands every day.

Having IRS Problems Gets Old!

There can be no real rest and relaxation until the problem is completely solved. It's hard to keep a good job or get your credit report cleaned up, when the IRS continues to issue Federal Tax Liens and Wage Levies.

Without a bank account, it's difficult to cash your checks or even pay your monthly utility bills. Even if you're lucky enough to have a bank account, you have to always worry about the IRS wiping out all of the money in the account without notice. Some taxpayers with IRS Problems have a few assets they want to hang on to!

The IRS Pulls Out All of the Stops. They Simply Seize your Assets and Sell Them at Auction!

Getting the IRS mad enough at you to seize your assets is not that difficult. Many taxpayers with IRS Problems simply cannot bear to part with all kinds of possessions.

For example:

-        Autos

-        Boats

-        Motorcycles

-        Real Estate

-        Retirement Funds

-        Insurance Policies

-        Antiques

-        Collectibles

-        Jewelry

All of these things may be very personal or sentimental in value to the taxpayer. The IRS could care less. If the taxpayer won’t agree to whatever the IRS wants, then they risk having their assets seized. Do not underestimate any IRS employee's ability to follow through on the threat of seizure. Every IRS office in the country has a public list of recently seized assets and details about the upcoming IRS auction to sell those seized assets.

Payroll Taxes are the Worst!

Many small businesses get in Cash Flow Problems for all kinds of reasons. How they handle these problems, especially when payroll taxes are involved usually determines if they stay in business or not. The IRS takes an extremely strong position on payroll tax violations. They would rather close the business and sell off all the assets instead of trying to work out a deal with the business.

The worst thing about business payroll taxes is that the IRS has the ability to collect business payroll taxes from anyone they think was responsible for not paying the taxes. For example, the business owner, or any check signer on the business bank account may be singled out for collection activity.

They will try everything to get these payroll taxes. Usually a visit to your home or work is in order to start the collection procedures. Then all of the weapons in their arsenal can be used (Liens, Levies, or Seizure) until the taxpayer has agreed to some type of repayment.

Once the IRS has determined that the business cannot pay the payroll taxes and they have turned their sights on the individuals they think are responsible ... look out!

What About Buying a Car or Home?

Driving a new car or an almost new car these days requires you to borrow or lease the car. That's because they cost so darn much. Well, without the ability to walk into your local Auto Dealer and cut a deal on a new or almost new car, you're stuck with that old unreliable clunker, just because you have a tax problem. It doesn't seem fair, but it's hard to get an auto loan or lease when you have an IRS problem.

Home loans are even harder to get. Heck, they are hard to get when your credit's good if you don't put a pile of money down on the home. Not having a home to write off causes you to pay even more taxes than your friends or neighbors because you have no tax deductions.

People that do have homes and then get into IRS problems risk the chance of losing their home to the IRS. Yes, I mean selling the home and giving the money to the IRS for payment of back taxes or letting the IRS seize it and selling it at auction. You see, having a home before you get into IRS problems, may be even worse than not having a home at all.

For example, if you own a home and then find yourself owing the IRS $25,000 for some income or payroll taxes, you could be making house payments on your home that effectively is owned by the IRS.

Once they file a Federal Tax Lien on your home, you can't sell it without paying off the IRS. This means that you continue making the monthly payments, continue to take care of the home, and the IRS just sits there and waits. You pay all the bills on your home and they get all the equity. What a Deal!

Imagine Having the IRS Attack Your Pension, Retirement or Social Security Check!

The IRS leaves no stone unturned in its never-ending quest to collect all taxes, penalties and interest. Sure, people think the IRS can't or won't levy retirement funds. They hope that when they get old, the IRS will forget about them and how much they owe the IRS.

Don't believe it, the IRS never forgets! They just keep adding penalties to what you owe each day until they find you, or your money, or your income source. Then it's Pay Day for the IRS!

Taxpayers with IRS Problems Never can Build Up Retirement Funds or Assets!

You'll always be looking over your shoulder for the IRS. This usually means you have to work until you die. You'll have no opportunity to save up for the days when you can't or don't want to work anymore.

There is no end in Sight!

You just get up every day with this incredibly large problem on your shoulders. You wonder if today's the day when the IRS shows up at work, at home, or if they decide to levy your bank account or paycheck. It's a large load to bear every day. Most people around you don't know what you're going through. You just keep going, but you know in your heart that doing nothing about your IRS Problems is not going to make them go away.

Are There Ways out of IRS Problems?

Yes, there are ways to end IRS Problems, but you must decide to end them, no one else can decide for you. When you decide that enough is enough and you want to have the things that everyone else has and you're really ready to do something about your IRS Problems, there are options available to you!

Our firm specializes in ending the misery of IRS Problems! There are many possible ways to end these problems, but they all require you to take the first step. No one can help you until you decide to help yourself. We are very successful in ending IRS Problems, but the taxpayer must be ready to follow our advice. We can walk you through the IRS maze. We do all the talking to the IRS. We also handle all the meetings and correspondences with the IRS.

Most of Our Clients Never Meet With the IRS!

The solutions to solve IRS Problems often include ling old tax returns to get you in current compliance with the IRS. The IRS will not negotiate with anyone unless they are current with all required lings. This means all income tax returns and payroll tax returns if you have employees.

The IRS assumes that if you won't at least get your required tax returns led, then why waste the time trying to negotiate with you.

It’s a rather simple request and we have easy ways to complete old tax returns. We realize that many taxpayers have lost old records or just can't find them! We can help you le old tax returns without any records, but you have to take the first step. Once we have led all your old tax returns, then the IRS will at least listen. What we tell them is how you what to end your IRS Nightmare by...

Cutting a Deal to Pay Less Than What You Owe!

How much Less? Well, if you qualify, a lot LESS! The IRS looks at these old tax liabilities and knows it can't collect most of them. So, they have set up this great new program called Offer in Compromise. This program allows taxpayers to pay mere pennies on the dollar to settle up on old income tax and payroll tax liabilities.

When we say Settle Up, we mean completely, 100%! Once the IRS has accepted the amount you offered and you pay the reduced amount, then the IRS releases all Federal Tax Liens. Your IRS nightmare is over and you get your life back.

Many Taxpayers Have Been Able to get the IRS to Reduce the Penalties.

For Taxpayers who don't file an Offer in Compromise - They request the IRS to Abate the IRS penalties for "Reasonable Cause."

It's is a great way to drastically reduce the total amount you owe the IRS and all it takes is a few penalty abatement letters.

Many taxpayers use our firm to keep the IRS away from them and their families. Most of our clients Never Meet or Speak with the IRS. We make the IRS call US, so our clients can go to work and carry on a normal life.

Your IRS problem will not go away by itself. You only have three choices to end your IRS Nightmare. You can either:

1. Pay the IRS 100% of What They Think You Owe Today or

2. Set up a Monthly Payment Which Never Goes Away Due to the Additional Penalties and Interest That Continue to Add Up or

3. Reduce the Total amount You Owe to an Affordable Figure and Get your life back in order!

You Decide!

We can help you explore all the choices and options, but you must take the first step. You can call me for a free consultation to discuss your options in confidence. You have nothing to lose except the peace of mind most people already enjoy. Why not get some for yourself and your family. Visit us today at: www.AFITonline.com

P.S. Unless you take the first step to resolve your IRS problem, it will never go away. Call Today 816-220-2001 to take this first step. What have you got to lose except a few minutes of your time? Your Free Consultation may give you back the chance to get on with the rest of your life. Call Now!

P.S.S. The fact that you read this entire report shows me that you're not like the normal person with IRS Problems. You're trying to end your IRS Problems. Why not call me. Call Today! 816-220-2001 - Don't procrastinate any longer. Call Now!

Mike Mead, EA, CTC
Alliance Financial & Income Tax
807 NW Vesper Street
Blue Springs, MO. 64015
P - 816-220-2001 x201
F - 816-220-2012
AFITOnline.com

https://www.facebook.com/AFITonline/

Marine Corps Commercial: "Toys for Tots -- Guard Duty"

Art Williams - JUST DO IT SPEECH - motivational and inspirational

Weekly Tax Tips from Alliance Financial & Income Tax

Offer in Compromise

An Offer in Compromise is an alternative way for you to settle for less than what you owe. This is based on your net disposable income; after all reasonable and necessary living expenses have been paid, your net equity in assets, and any unique circumstances you may be faced with. Depending on what’s going on, this may or may not be the best approach to resolving your tax problem, so give me a call to discuss this further. 816-220-2001

Client Videos from Alliance Financial & Income Tax

Alliance Financial & Income Tax's Monthly Newsletter

Tax Preparation vs. Tax Planning

Many people assume tax planning is the same as tax preparation but the two are actually quite different. Let's take a closer look:

What is Tax Preparation?

Tax preparation is the process of preparing and filing a tax return. Generally, it is a one-time event that culminates in signing your return and finding out whether you owe the IRS money or will be receiving a refund.

For most people, tax preparation involves one or two trips to your accountant (EA), generally around tax time (i.e., between January and April), to hand over any financial documents necessary to prepare your return and then to sign your return. They will also make sure any tax reporting on your return complies with federal and state tax law.

Alternately, Individual taxpayers might use an enrolled agent, attorney, or a tax preparer who doesn't necessarily have a professional credential. For simple returns, some individuals prepare and file their own tax forms with the IRS. No matter who prepares your tax return, however, you expect them to be trustworthy (you will be entrusting them with your personal financial details), skilled in tax preparation and to accurately file your income tax return in a timely manner.

What is Tax Planning?

Tax planning is a year-round process (as opposed to a seasonal event) and is a separate service from tax preparation. Both individuals and business owners can take advantage of tax planning services, which are typically performed by a CPA and accounting firm or an Enrolled Agent (EA) with in-depth experience and knowledge of tax law, rather than a tax preparer.

Examples of tax planning include bunching expenses (e.g., medical) to maximize deductions, how to use tax-loss harvesting to offset investment gains, increasing retirement plan contributions to defer income, and the best timing for capital expenditures to reap the tax benefits. Good recordkeeping is also an important part of tax planning and makes it easier to pay quarterly estimated taxes, for example, or prepare tax returns the following year.

Tax planning is something that most taxpayers do not take advantage of - but should - because it can help minimize their tax liability on next year's tax return by planning ahead. While it may mean spending more time with an accountant, say quarterly or even monthly, the tax benefit is usually worth it. By reviewing past returns an accountant will have a more clear picture of what can be done this year to save money on next year's tax return.

If you're ready to learn more about what strategies you can use to reduce your tax bill next year, help is just a phone call away.  816-220-2001

What do They Expect You to do With Federal Tax Liens on Your Credit Report?

How Can You Possibly Get a Loan To Pay Them Off, When Your Banker Won't Even Talk To You?

Federal Tax Liens prevent you from being able to borrow any money for a car or a home.

Taxpayers with IRS Problems often have to shop at Buy Here, Pay Here car lots because these car dealers don't care if you have a Federal Tax Lien, because they charge so much for the cars and usually have very high-interest rates.

Cars are expensive enough without having to pay 18% to 21% interest on a used car loan, but with a Federal Tax Lien, you don't have many choices.

The banks have gotten so tough on opening new bank accounts that anyone with a Federal Tax Lien is usually prevented from even having a simple checking or savings account.

This makes it hard for taxpayers to cash their paychecks or to pay their monthly bills. Often they have to pay more money and use money orders or certified checks, just to pay their rent or utility bills.

Have a Tax Problem? Mike Mead can help. Call us today at 816-220-2001

Why it’s important for taxpayers to know their filing status

When a taxpayer files their tax return, they need to know their filing status. What folks should remember is that a taxpayer’s status could change during the year. So, any time is a good a time for a taxpayer to learn about the different filing statuses and which one is best for them.

Knowing the correct filing status can help taxpayers determine several things about filing their tax return:

• Is the taxpayer required to file a federal tax return or should they file to receive a refund?
• What is their standard deduction amount?
• Is the taxpayer eligibility for certain credits?
• How much tax they should pay?

The taxpayer’s filing status generally depends on whether they are single or married on Dec. 31 and that is their status for the whole year.

Here’s a list of filing statuses and a description of who claims them:

• Single. Normally this status is for taxpayers who are unmarried, divorced or legally separated under a divorce or separate maintenance decree governed by state law.
• Married filing jointly. If a taxpayer is married, they can file a joint tax return with their spouse. When a spouse passes away, the widowed spouse can usually file a joint return for that year.
• Married filing separately. Alternatively, married couples can choose to file separate tax returns. It may result in less tax owed than filing a joint tax return.
• Head of household. Unmarried taxpayers may be able file using this status, but special rules apply. For example, the taxpayer must have paid more than half the cost of keeping up a home for themselves and a qualifying person living in the home for half the year. Taxpayers should check the rules to make sure they qualify.
• Qualifying widow(er) with dependent child. This status may apply to a taxpayer if their spouse died during one of the previous two years and they have a dependent child. Other conditions also apply.

More than one filing status may apply and taxpayers can generally choose the filing status the allows them to pay the least amount of tax.

Have questions?  Give us a call at 816-220-2001.  Learn more about your specific tax preparation today. 

Top 7 Questions You Should ask Your Tax Resolution Specialist

For those looking to get tax relief from back taxes here are some things to know about tax problem resolution.

1) The first of many questions people ask is how long does it take to resolve their tax problems and get tax relief?

A: From the time we receive all of the appropriate documentation, a typical tax resolution case usually takes 3–4 months assuming the taxpayer is compliant and has filed all their tax returns. Some cases can take up to 9 months or more.

2) What documentation is needed for the tax resolution company to complete and resolve a tax problem?

A: A reliable tax resolution company would obtain the taxpayer's tax records, and also obtain the taxpayers financial statements to analyze the taxpayer's reasonable collection potential (RCP).

3) But what if the taxpayers does not have all the necessary paperwork to file unfiled tax returns, can tax resolution be performed?

A: Yes, a respected tax resolution company would be able to get your tax records such as W2's, 1099's, 1098's etc. The taxpayer should not worry about obtaining their lost tax documents.

4) Can I use my own tax preparer to resolve my tax problem?

A: From our experience, it is most beneficial and cost efficient for the taxpayer to retain a tax resolution specialist who is very familiar with and specialize in tax problem resolution and representation field. Don't compromise on your representation, it's your fundamental right to protect yourself and learn about all your tax relief options.

5) What about the cost of your service?

A: Simple, we resolve the taxpayer's tax problem based on a reasonable flat fee, no additional fees are incurred by the taxpayer. All fees are quoted to the client at their initial free consultation.

6) Another popular, and very important question is who will handle the taxpayer's case from start to finish?

A: Not all tax resolution companies like this question. Many companies out there will have you speak to "consultants", "assistants", "case managers", and so on. Your case is handled from start to finish by the principal of the firm, Mike Mead EA, CTC himself. Mike will be your power of attorney and represent you before all administrative levels of the IRS. 

7) Will tax resolution professionals be available to assist with an IRS audit?

A: Yes, a respected and licensed tax resolution specialist can represent you at an IRS audit. Mike Mead EA, CTC represents all his clients and to the client's surprise they do not have to be personally present at the audit.

Now that you have answers, who do you call for a free case analysis?

Contact Mike Mead EA, CTC at 816-220-2001.

Mike Mead focuses his tax practice on tax resolution services in all 50 states including Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Guam, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Puerto Rico, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming.

WHAT IS CURRENTLY NOT COLLECTIBLE STATUS FROM THE IRS?

Big companies are known for getting all sorts of breaks, but when average people fall behind, they rarely receive help. When you owe back taxes, but can’t afford to pay them, then you may qualify for a special tax status known as currently not collectible. 

If you’re approved for currently not collectible status, then the IRS must not only cease its collection efforts but can no longer garnish your wages or seize your property. 

Want to know if you qualify for currently not collectible status? Contact our firm here for a specific evaluation of your situation. Contact us today. 

What is Currently Not Collectible Status? 

If the IRS agrees you can’t both pay your back taxes and cover your reasonable living expenses, it may place your account in Currently Not Collectible status. It’s based on your current financial situation. 

You can request currently not collectible status by submitting the proper form and proof to the IRS of your income and expenses, as well as whether you can sell any assets you may have or get a loan.

As you’ll need to be able to document your inability to pay, be sure to gather copies of all your bills, your most recent paycheck stubs, and statements detailing other sources of income such as alimony, pensions or investments. If the IRS determines that your necessary expenses exceed your income, then it will notify you of your Currently Not Collectible status

WARNING: Don’t try to do this alone. We recommend reaching out to our tax resolution firm to guide you through your options. Talking to the IRS directly could be like shooting yourself in the foot. They’ll ask you very invasive questions that could land you in deeper trouble. Remember, the IRS is not your friend. Their job is to collect what they believe you owe them, so it’s best to have a professional in your corner. 

Not a Permanent Solution

Keep in mind that currently not collectible status applies only to your back taxes. You will still have to file tax returns, and you will not be exempted from paying current and future taxes. You will also continue to accumulate penalties and interest on your unpaid taxes. After a year or two, the IRS may review your status, and if you’re able to begin paying your back taxes, then you must do so. If you’re still not able to pay, then your status will be renewed. 

Statute of Limitations   

The IRS can attempt to collect outstanding taxes for only 10 years from the date the taxes were assessed against you, usually that’s the date you filed.  If at the end of this 10-year period the IRS hasn’t collected, then the taxes are no longer owed. 

In difficult times, many families have trouble meeting their commitments. If you’re worried about the IRS garnishing your wages, levying your bank account or taking your home, then reaching out to our firm and getting a free, no-obligation, confidential consultation on your tax problem may give you some peace of mind. If you’re not approved for Currently Not Collectible status, our firm will explain the many other tax relief options with you. Contact us now.  Contact us today.

4 MISTAKES THAT YOU DON'T WANT TO MAKE WHEN FILING YOUR TAXES. (THEY COULD LAND YOU IN TAX TROUBLE)

It can be a stressful experience preparing your taxes and filing them. It can be even more stressful however, if you make these mistakes that land you into tax trouble. It's important to remember that if you make mistakes that are serious enough, you might end up triggering an audit of your tax return or owe more in back taxes.

It’s early to be talking about tax season, but if you're planning on filing your own taxes this year, here are four mistakes that you should avoid.

Don't neglect to report all your income

Whatever your sources of income may be, whether it's your regular paycheck, a side gig, gains that you've made on the stock market, or interest that you've earned from deposits in the bank, it's important to remember that you should account for all of it in your tax return. If you don't, the IRS may come looking for it.

Every time you make at least $600 in income working as an employee of any description, you get a 1099 form stating what you've made. The IRS gets a copy of the form, as well. This means that it makes no sense to try to hide your income from the IRS.

When you make any kind of income, you should report it on your tax return. Technically, you should even record smaller chunks of income, the kind for which you don't get 1099 forms.

Don't just guess at what your deductions are

There are many possible tax deductions that you could take advantage of. It's important to remember, however, that you do need to back up every attempt at a deduction with documentary proof like receipts or logs. If you attempt a rough estimate at what your deductions should be, you could trigger suspicion, especially if the sum that you claim is high for your income level, or if it is a convenient round figure.

Don't automatically reject the idea of itemizing

Most tax filers choose to take the standard deduction, rather than itemize. This doesn't mean that you shouldn't itemize. It depends on your specific circumstances. If you have many legitimate deductions to make, say, because, you pay a great deal of mortgage interest, you might be better off itemizing, even if it takes more work to do it.

Don't put off filing

Preparing your taxes is a complex process. If you're self-employed, or if you need to itemize, it can only get worse. It's important to not rush through the process. Any mistakes that you make may prove costly. Take out the time to file your taxes well ahead of the tax deadline. If you need extra time, you can always file for an extension. This way, you can avoid the late filing penalty, which can add up to a whopping 25% of the original tax amount

Making a mistake on your tax return is the last thing you want to do. Mistakes can be complicated to correct and recover from. It's important to give yourself enough time.

Whatever you do, don’t skip filing. Many clients come to us with not only years of unfiled tax returns but owing large sums of money to the IRS.  Many times we can help you obtain a “fresh start’ settlement for up to 85% off the original amount owed, including penalties and interest, if you qualify.

If you do run into tax trouble, reach out to our tax resolution firm and we’ll schedule a free, no-obligation confidential consultation to explain your options in full to permanently resolve your tax problem. Contact us today with your specific questions.  

IRS Expands ID Protection Program

IRS Expands ID Protection Program: An IP PIN is a six-digit number assigned to eligible taxpayers that helps prevent the misuse of their Social Security number on fraudulent federal inc

SETTLING TAX DEBT WITH AN IRS OFFER IN COMPROMISE

An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service that settles a taxpayer's tax liabilities for less than the full amount owed. That's the good news. The bad news is that not everyone is eligible to use this option to settle tax debt. In fact, nearly 60 percent of taxpayer requested offers in compromise were rejected by the IRS. If you owe money to the IRS and are wondering if an IRS offer in compromise is the answer, here's what you need to know.

Who is Eligible?

If you can't pay your full tax liability or doing so creates a financial hardship, an offer in compromise may be a legitimate option. However, it is not for everyone, and taxpayers should explore all other payment options before submitting an offer in compromise to the IRS. Taxpayers who can fully pay the liabilities through an installment agreement or other means, generally won't qualify for an OIC.

To qualify for an OIC, the taxpayer must have:

• Filed all tax returns.
• Made all required estimated tax payments for the current year.
• Made all required federal tax deposits for the current quarter if the taxpayer is a business owner with employees.

IRS Acceptance Criteria

Whether your offer in compromise is accepted depends on a number of factors; however, typically, an offer in compromise is accepted when the amount offered represents the most the IRS can expect to collect within a reasonable period of time. This is referred to as the reasonable collection potential (RCP). In most cases, the IRS won't accept an OIC unless the amount offered by a taxpayer is equal to or greater than the reasonable collection potential (RCP), which is how the IRS measures the taxpayer's ability to pay.

The RCP is defined as the value that can be realized from the taxpayer's assets, such as real property, automobiles, bank accounts, and other property. In addition to property, the RCP also includes anticipated future income minus certain amounts allowed for basic living expenses.

The IRS may accept an OIC based on one of the following criteria:

Doubt as to liability. An OIC meets this criterion only when there's a genuine dispute as to the existence or amount of the correct tax debt under the law.

Doubt as to collectibility. This refers to whether there is doubt that the amount owed is fully collectible such as when the taxpayer's assets and income are less than the full amount of the tax liability.

Effective tax administration. This applies to cases where there is no doubt that the tax is legally owed and that the full amount owed can be collected but requiring payment in full would either create an economic hardship or would be unfair and inequitable because of exceptional circumstances.

Application and Fees

When requesting an OIC from the IRS, use Form 656, Offer in Compromise, and also submit Form 433-A (OIC), Collection Information Statement for Wage Earners and Self-Employed Individuals. If you are applying as a business, use Form 433-B (OIC), Collection Information Statement for Businesses. A taxpayer submitting an OIC based on doubt as to liability must file additional forms as well.

A nonrefundable application fee, as well as an initial payment (also nonrefundable), is due when submitting an OIC. If the OIC is based on doubt as to liability, no application fee is required, however.

If the taxpayer is an individual (not a corporation, partnership, or other entity) who meets Low-Income Certification guidelines they do not have to submit an application fee or initial payment and will not need to make monthly installments during the evaluation of an offer in compromise.

The initial payment is based on which payment option you choose for your offer in compromise:

• Lump Sum Cash. Submit an initial payment of 20 percent of the total offer amount with your application. If your offer is accepted, you will receive written confirmation. Any remaining balance due on the offer is paid in five or fewer payments.
• Periodic Payment. Submit your initial payment with your application. Continue to pay the remaining balance in monthly installments while the IRS considers your offer. If accepted, continue to pay monthly until it is paid in full.

If the IRS rejects your OIC, you will be notified by mail. The letter will explain why the IRS rejected the offer and will provide detailed instructions on how to appeal the decision. An appeal must be made within 30 days from the date of the letter.

Questions?

If you have any questions about the IRS Offer in Compromise program, don't hesitate to contact the office for more information.