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Although the IRS is the most brutal collection agency, you still can settle for less than what you may owe! This process is generally called an “Offer in Compromise”. Many taxpayers are eligible to negotiate with the IRS to pay a smaller amount than what the IRS may say they owe.
If you are successful in qualifying for an Offer in Compromise (OIC), some or all of the tax, penalties, and interest you owe could be negotiated down. Also, if you are successful, all federal tax liens will be released. Sometimes you qualify for an Offer in Compromise because you are an innocent spouse (see “Innocent Spouse“), other times, it’s because you are simply not able to pay your tax bill. Whatever the situation, you can possibly reduce your IRS tax debt substantially.
Lots of time the taxpayers handle their own Offer in Compromise and unfortunately wind up worse off than when they started. This is a common mistake due to a lack of experience dealing with the IRS. Most of the time, the taxpayer makes the big mistake by saying the wrong thing or being deceptive which could result in facing criminal prosecution for tax fraud. This is very risky. Keep in mind that the IRS knows more about taxation and what to look for in a cheater or tax evader than you do.
Tenina Law, Inc. can handle the entire case for you, restrict or limit the amount of your offer, and keep you within the law. Once, we begin the representation, you will never be required to meet with the IRS. The negotiations are based on the proper valuation of your assets, typical living expenses, and, monthly income.
Three ways the taxpayer can qualify for an Offer in Compromise (OIC):
The IRS does not think the full amount of tax owed could ever be paid.
The taxpayer has a serious economic hardship. an expensive, life-threatening illness for example.
At Tenina Law, Inc., we will negotiate an offer in compromise with the IRS on your behalf. Dealing with tax issues is extremely complicated and stressful. you need a tax lawyer who specializes in tax law and has experience in helping people get rid of their IRS problems.
Consider the following scenario: a taxpayer finds themselves in a predicament where they owe the Internal Revenue Service a significant sum of $40,000. Unfortunately, their current financial circumstances prevent them from settling the full amount. In such cases, it’s essential to note that there is no inherent entitlement to a reduction in income tax payment. Nevertheless, the Internal Revenue Code (7122) presents an opportunity for taxpayers to submit an offer, which will be carefully assessed and taken into consideration.
The IRS requires that certain conditions be met before considering an offer of compromise.
The most common reason is doubt about the collectibility of the debt meaning that the agency may not be able to collect the full amount now or in the future.
The concept of Effective Tax Administration can be used to determine if any special circumstances may cause economic hardship for the taxpayer.
The question of liability, which is rare, arises when a person is uncertain if they legally owe the amount. IRS Form 656-L is used to complete the form in such cases.
You can take the Pre-Qualifier Test to assess if your financial situation allows you to file an OIC. The IRS uses this test as a guide to determine a taxpayer’s ability to pay their taxes. If you fail the test, you can still file an OIC. It is advisable to speak to a Tax Lawyer from Tenina Law regarding your financial situation.
IRS Booklet Form 656 is available on the IRS website and contains all the information that the agency may ask you for. Reviewing it before filing an OIC will help you navigate the process. This serves as a guide for completing Form 433-A, which you will use for your OIC.
For individuals, retired individuals, or those who are unemployed, the IRS Form 433-A is used to file OICs. Small business owners use Form 433-B or “Statement of Collection Information for Businesses.”
Remember that when preparing your application, the IRS places importance on reasonable collections potential. This refers to the amount the IRS expects you to pay each month over two years based on your monthly income and assets.
When calculating your offer, it should equal the net realizable value of your assets, plus any additional income you receive after subtracting your monthly expenses. Multiply this amount by 12, 24, or 36, depending on your preferred payment period.
IRS Form 433-A provides instructions for calculating tax liability. It is important to strictly follow these instructions, as offering a higher amount could hinder your goal of paying a lower liability.
At Tenina Law we have over 20 years of experience and dedication to serving our clients. Our extensive expertise in these practice areas guarantees the best outcome for all of our clients!
Each of our clients are treated like family and just another case. Our personal approach leads to better results for the client.