OIC 101: Doubt As To Liability

In some cases tax payers are convinced they either don't owe their tax liability at all or in part. This is known as "Doubt As To Liability ." Normally you file an OIC on a form 656-A. In this case you would be referred to the alternatives to offers and compromise section in the IRM (Internal Revenue Manual). You may also use these remedies if you disagree with the accuracy of the tax. These alternatives are usually allot less complicated than OICs.

If you choose to compromise the tax amount, you must submit in writing why you think you don't owe the tax. You must also describe in detail the circumstances how the said totals are inaccurate. Include any documentation and evidence you have to support your claim. If you believe you owe none of the tax, see the alternatives section. One thing to consider is that an OIC will not be accepted on any tax that has been finally determined by tax court, any other courts or by the commissioners final closing agreement.

OIC 101: Doubt As to Collectibility

With this OIC you get to bare your soul and say "I did it! I owe it! But I cant pay in this life time or in two life times. Woo I feel better ! NOW that I got that off my chest."

Actually it is a little less dramatic than that. If you owe a tax and there is not enough time left on the statute of limitations to pay it, you could qualify for this offer. There are some circumstances that could disqualify you—namely assets that could be liquidated. Also, if you have a high enough monthly income the IRS feels you could pay enough of a payment. They will look at these first by doing a full financial investigation. This will include documentation proving your monthly income, assets, and liabilities.

To have a chance at the OIC do not attempt to put this information together on form 433 by yourself. This is a common mistake of your "do it yourself people". The IRS loves this but you will not like the outcome. Seek out a professional tax resolution firm.

OIC 101:Which One Fits ?

There are several different types of OICs.
A professional tax resolution firm needs to assess your individual situation to submit the proper OIC or you can waste a lot of time and money. One of the keys to getting a OIC accepted is ensuring it is processable. This is only possible when you have submitted a offer consistent with the qualifications necessary to qualify for the type of OIC you are trying to get.

There are actually 4 completely different types to look at:
○ OIC doubt as to liability, OIC doubt as to collectibity
○ OIC effective tax administration
○ OIC partial pay installment agreement.

A reputable tax resolution firm will verify your qualification for each of these.

OIC 101: In The Governments Best Interest

Have you ever tried to get ahead of your car payments or mortgage? You thought I've got to get this balance down. Maybe if I take and make some double payments on some of my bills I can get them knocked out. SURPRISE! The IRS is just like the mortgage companies and car loan places in as much as they like interest and penalties.

In 2006 the new TIPRA law was introduced . This is basically the introduction (as you know from prior blog posts) of the 20% plus $150 filing requirements. Taxpayers are not required to but may designate the application of the TIPRA payments. The designation must be made in writing when the offer is submitted or when they make their first payment on the offer. If not submitted in writing the IRS will apply the 20% "In The Governments Best Interest" A professional tax resolution firm can, and should be used to set this up. This will insure your best interest is protected instead of you just paying more interest.

OIC 101: I'm Free! Are You?

It's not over until it's over! Even after you've had an OIC successfully negotiated for you, there are stipulations that could jeopardise all the hard work and money you invested. It is expected the taxpayer will have no further delinquencies. If taxpayers do not abide by all the terms of the agreement (including filing all future returns on time and making all payments when required for 5 years or until the offered amount is paid in full, whichever is longer), their OIC may be declared in default.

The IRS will not give you a second chance or allow you to say "whoops." This is another reason to consider whether an OIC is your best option. There are 20 other resolutions, viable options, that could satisfy your obligation to the IRS. If you can't pay all the required payments as scheduled, you risk defaulting.

Financial hardship is not taken into consideration after an OIC has been accepted. Under-reporting, or not paying current taxes is not an option. A fresh start or freedom from enforced collections can be realized through many other resolutions.

OIC 101 : No Double Dipping

Frequently I hear clients tell me they are on the verge of bankruptcy. In fact, many have it in their mind to fix all their problems by filing bankruptcy and filing for an OIC for their tax liability. Unfortunately the current bankruptcy laws prohibit the filing of any type of resolution with the IRS simultaneously. While you are in bankruptcy all collections are suspended for the period you are in bankruptcy plus 6 months. Some tax resolution companies will file an OIC and never even ask you if you are in bankruptcy. It will not come up until you have already paid them and you have a denial letter. These tax resolution companies are concerned about generating revenue. This type of information should be disclosed in some type of free consultation to determine if you qualify for an OIC. If the Tax resolution firm is genuinely trying to help you, they will avoid wasting your time and money by making a frivolous offer.

OIC 101: First Things First

Often, as a senior tax consultant, I'll get phone calls from clients who want to bypass everything and get into a conversation about settling their tax debt. Clients do not understand taxpayers requesting an OIC must have filed all required federal tax returns. If in business, they must also have filed and paid any required employment tax returns on time for the two quarters prior to filing the OIC, and to get themselves current with deposits for the quarter in which the offer in compromise was submitted.

Recently, actor Westley Snipes discovered that it is a federal offense to refuse or to neglect to file your taxes. In such a case, there are two aspects to be considered:
1) Criminal Aspect, non filing and
2) the Civil or Monetary Aspect

One cannot come before the other. The IRS will not even allow a tax resolution firm to file an OIC on behalf of a client who has any unfiled years of taxes. The IRS considers them criminals.

OIC 101: When All Else Fails

The OIC is a very important component to the IRS 's programs for a select group who qualify. The only problem is many companies are charging large fees and are delivering so little. The OIC can be considered only after all other avenues of payment have been exhausted. Monthly installment plans and full paying the tax must be turned down first. Make no mistake that the IRS wants all the money if they see there is any way to get it. There are actually 21 different options beside the OIC when all else fails. They leave the best for last. It is the ultimate solution to your tax problem.