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.

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: 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.

OICs 101 : Do You Feel Lucky, Punk?

Have you ever known that guy or girl who always wins raffles or contests, or they win stuff from radio stations by being the 8th caller? Do you personally know anyone who has won a jack pot in Vegas? I wish there was at least someone in my family who won the lottery. That would be close enough to lucky for me.

For the rest of us, here are the odds we have to beat to be one of the lucky ones with the IRS. As of last count, there are 8.2 MILLION delinquent tax payer accounts actively in the IRS's system for the year of 2007. Out of those delinquent accounts there were 12 thousand OICs accepted. I hate math but this math I really didn't enjoy. You have less than ONE % chance with those numbers to come out with an OIC accepted.

I mentioned luck in my title. There really isn't any room at all to rely on luck. Self representation (doing it yourself) or calling a firm that promises everyone an OIC is definitely a good way to be another statistic. Tax offers or OICs need to be done the first time by a reputable tax resolution firm.

OICs 101

Today's post begins a series of blogs where I will shed some light on OICs (Offers In Compromise), the most advertised and sought after option for handling IRS debt. I will give you the "inside scoop" from enrolled agents, who have the daunting task of negotiating correctly this calculated, complicated resolution that seems to be a cure-all for IRS debt. I will cover and uncover numerous myths about OICs during this series of blogs. So hang on and see where it takes you !