Frequently Asked Questions Concerning Tax Debt Resolution

Help! I filed my tax returns but did not have the money to pay. Do I have options?

Taking the time to file your tax returns is the first step in working with the IRS. Since
you were unable to pay the taxes owed, the Internal Revenue Service will send you a
notice stating you owe back taxes. The amount is usually much higher than what you
thought because they have included penalties and interest. Since you are unable to pay at
this time, contact one of our Tax Professionals for a free, no obligation consultation.
They will analyze your situation and work with you to create a solution that works. For
many taxpayers, this typically leads to an Offer in Compromise, Penalty Abatement, or
Installment Agreement.

What is an Offer in Compromise?

An Offer in Compromise is an out of court agreement between the IRS and the taxpayer
that resolves the taxpayer's liability. The Internal Revenue Service has the authority to
settle or compromise federal tax liabilities by accepting less than full payment under
certain circumstances. These circumstances are:

Doubt as to Liability - The IRS may also accept an offer in compromise when doubt exists that the amount of tax owed is correct. The taxpayer needs to explain why they believe that they do not owe the tax that they would like to compromise. Financial inability to pay will not be considered under this basis alone.

Doubt as to Collectibility (most common) - Under this basis, there is doubt that the
amount of tax owed can ever be paid back in full. In order to successfully negotiate this
type of offer in compromise, the taxpayer must demonstrate through complete and
thorough financial statements and supporting documentation that there are insufficient
assets and income to pay the full amount of tax owed.

Effective tax administration - Under the third basis for an offer in compromise, there is
no doubt that the tax owed is correct and there are sufficient assets and income to pay the
entire liability. However, the taxpayer believes that, due to exceptional circumstances, it

would be unfair and inequitable to require full payment of the tax.

The primary determinant on “doubt as to collectibility” is based on a taxpayer’s personal
financial profile; including income, expenses, and assets. The IRS sets strict guidelines
for income, allowable expenses (categorized as: Living, Housing, Transport), and
available equity in owned assets. An additional benefit of submitting an OIC is that IRS
Restructuring Act prohibits the IRS from collecting a tax liability by levy during the
period in which the Offer is being processed, or 30 days following rejection of an offer,
or during the appeal of an OIC. This window of non-collection is frequently a respite for
our clients to avoid any IRS collection actions, thereby securing additional time for
clients to pay and prevents the IRS from seizing any assets in the interim.

If the offer in compromise is accepted, payment can be made via one of three options: 1) cash (within up to 90 days of acceptance); 2) short-term deferred payment plan (payable within 24 months of acceptance); or 3) a long-term deferred payment plan (payable over the remaining time left on the collections statute).

Once the offer in compromise is accepted, the taxpayer must remain in compliance with all filing and payment obligations, including staying current with quarterly estimated tax payments and not incurring any new tax debt, for five years or until the offer amount is paid, whichever is longer. Failure to abide by these terms may result in the default of the offer in compromise and the reinstatement of the original tax liability.

What if I’m making installment payments, can I still do an Offer in Compromise?

Absolutely, and in special situations the installment agreement can be suspended while

the IRS is evaluating the Offer in Compromise.

Ok, what happens when the Internal Revenue Service accepts my Offer In