Wednesday, September 17, 2008

OIC 101: Effective Tax Administration

An Effective Tax Administration OIC , aka ETA is not well known when it comes to OIC'S. The reason for that will be very apparent as we go through the qualifications to successfully get one accepted. First of all there can be no doubt you owe the tax. So if your the typical delinquent tax fugitive who thinks they shouldn't owe that stinking tax anyway. Hang it up! There has to be no doubt that you owe the tax. You also cannot be a candidate for a doubt as to collectability. Another words you got the money to pay it in full or the ability to pay it over time.Compared to Doubt as to Collectibility (DATC) In a Doubt as to Collectibility (DATC) offer, the tax liability equals or exceeds the taxpayer's reasonable collection potential (RCP) which is:
Net equity, plus
Future income
In an Effective Tax Administration (ETA) offer, the tax liability is less than the taxpayer's reasonable collection potential (RCP). The taxes owed can be collected in full either:
In a lump sum, or
Through an installment agreement (IA) as stated previously.

Now that you know what will disqualify you what does a tax payer have to do to get an ETA offer accepted ?Here are the 3 basics.

Before we can consider a compromise based on economic hardship or public policy/equity considerations, three factors must exist:
A liability has been or will be assessed against taxpayer(s) before acceptance of the offer.
The net equity in assets plus future income or reasonable collection potential (RCP) must be greater than the amount owed.
Exceptional circumstances exist, such as the collection of the tax would create an economic hardship, or there is compelling public policy or equity considerations that provide sufficient basis for compromise.

A very narrow amount of these offers are accepted. Only a tax resolution firm usually has the expert staff IE enrolled agents to get a ETA offer accepted.

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