At the Tax Law Offices of David W. Klasing in Irvine, our tax professionals help California clients negotiate settlements with the Internal Revenue Service through the Offer in Compromise program. An Offer in Compromise resolves a taxpayer’s liabilities with the IRS for less than the full amount owed. Not everyone qualifies, and certain conditions must be met before the IRS will consider the offer. Our tax professionals are well-versed in the program, know the parameters of the Offer in Compromise program, and can educate you about your potential options.
Combining a deep background in taxation with strong negotiating skills as an Orange County Tax attorney, our firm represent clients throughout Orange County, West Los Angeles and surrounding areas in all areas of tax law. We handle Offers in Compromise for all types of tax matters.
What Is An Offer in Compromise?
An offer in compromise is a type of tax relief that a taxpayer with an unsatisfied tax debt can apply to receive. If the relief is granted, the taxpayer will be permitted by the IRS to settle his or her tax debt for less than the full amount due. For taxpayers who may be facing a particular hardship or other circumstances where t is impossible to satisfy the tax debt may benefit from this type of relief. While this type of relief is appealing to a person with a large debt, approval is difficult to secure. In fact, only about one in every five applicants for the program will be approved. Therefore it is essential for taxpayers to work with an experienced tax professional who understands the program requirements and the types of evidence that must be present to the IRS.
Whether your offer in compromise is accepted or rejected is based on:
- Ability to pay & Doubt as to collectability – The taxpayer’s ability to pay the tax debt is computed on the basis of the reasonable collection potential (RCP) for the matter. In most cases the IRS will not accept an offer in compromise if it is less than the taxpayer’s RCP.
- Certainty regarding the liability – If it is clear that there is a tax liability due and owning, the IRS is less likely to grant a compromise request. A compromise can satisfy this potential grounds only when there is a real dispute about the existence of a tax debt or the amount under the applicable tax code provision.
- Hardship, equity, or exceptional circumstances – If principles of the effective administration of the tax code exist such that requiring payment would result in hardship or other inequity, the offer in compromise may be accepted. However, the bar to meet this standard is significant.
Interested taxpayers should complete a self-assessment to determine if they are a good fit for the offer in compromise program.
Offer in Compromise Pre-Qualifier
This “self-assessment” approach is designed to ensure that only those individuals who can meet the threshold requirements for the program. These IRS offer in compromise pre qualifiers might disqualify you from receiving this type of tax relief.:
- Do you have an open bankruptcy proceeding?
- Have you failed to file any required federal tax returns?
- Have you failed to make any required estimated tax payments?
- If applicable, have you failed to provide all required federal tax deposits for employment taxes?
If you answered in the affirmative to any of these questions, it is likely that you will not qualify for the offer in compromise program. However, if you qualify for the program, can comply with the ongoing terms of the program, and the minimum acceptable offer is less than the total tax, penalties and interest that you owe, an offer in compromise may be a viable and potentially lucrative option for you!
Filing for Tax Relief through an Offer in Compromise
Individuals who appear likely to qualify for the offer in compromise relief program must apply if they wish to receive this type of relief. This is typically handled by filing an offer in compromise booklet which can be obtained as IRS Form 656-B. A completed offer in compromise packet will contain:
- An application fee of $186.
- A payment with each form 656 submitted
- Form 656 for personal tax debt
- Form 656 for business tax debt
- Form 433-A (OIC) or Form 433-B (OIC)
- All evidence and documentation requested by Form 433-A (OIC) or 433-B (OIC)
You a much stronger chance of success by making an acceptable offer based on RCP at the outset and educating you on the terms of the program before you incur any legal fees in pursuing this option. Furthermore, offer in compromise requests will fail unless sufficient supporting evidence is submitted.
Rely on Experience when Considering Offer in Compromise Tax Relief
The Tax Law Offices of David W. Klasing strives to recommend this potential form of relief only where you are in a good position and are likely to benefit from the relief. Our experienced tax professionals will carefully prepare your Collection Information Statement, which is required by the IRS. As a Certified Public Accountant with more than 20 years of experience in taxation, David W. Klasing will make sure your financial documentation is in order. If your Offer in Compromise has been refused, our office can also appeal that determination. To schedule a reduced-rate consultation with an experienced tax professional call the Tax Law Offices of David W. Klasing at 800-681-1295 today or contact our firm online.
