Articles Posted in Offer In Compromise

We specialize in tax negotiation and working with taxpayers to resolve there IRS back tax problems. With the proper tax relief methods applied and using IRS doctrine, we provide our clients with a compromise between what the IRS wants and what the taxpayer can comfortably deliver,  promoting compromise and compliance is the hallmark of what we do here at 101 Tax Strategies . In addition to executing offer in compromises, we resolve IRS back taxes, audits, late filings, unfiled returns, wage garnishments, bank levies, tax liens  and much more so that taxpayers nationwide can receive professional tax help and take advantage of immediate tax relief.

Whether your looking for tax help,  tax relief or back taxes help, citizens across the country require IRS back tax relief  on numerous dilemmas, whether it stems from business back taxes to unpaid stock transactions to levied wage garnishments,  we have the know how to provide tax relief for our clients with the proper tools to satisfy most IRS demands.

The mere mention of IRS back tax liabilities spark stress and tension. The IRS has developed a reputation of foiling all would be back tax evaders. The trick is not to try to outsmart the IRS, but work within there guidelines to deliver a tax relief agreement between what the IRS wants and what the taxpayer can deliver. This is the area in which we specialize, promoting compliance, tax relief and compromise is the hallmark of what we do.

When a taxpayer asks the IRS to eliminate their tax debt through an offer in compromise, the IRS will look at the persons assets and past income to determine if there is a likely chance that the taxpayer will be able to pay back the total tax owed. In some cases, if the taxpayers income history has been variable, the IRS will want to get a portion of the future income above certain thresholds. This is known as a future income offset agreement. It is not a typical request but it is sometimes part of the settlement with the IRS. The good news is that this may cause the deal to be accepted by the IRS, so it is worth considering.

a9-300x300While this arrangement has certain complexities, the overall idea is that the taxpayer may be able to afford more in the future than what they show they can afford today (on a form 433(OIC), and within certain limits, that they can pay more than the total amount offered if it was paid overtime. While this money is not a certain guaranteed payment to the IRS, it may cause them to be willing to accept the deal with the hope that in the future they may get more. From my experience, the IRS will only look to the next few years, so it would not be the case that five years from now they are still trying to get money from you.

The taxpayer is looking to make a deal to settle their tax debt, so often these additional monies being paid to the IRS is workable to most people. As an example of this concept, say a person owes $100,000 in back taxes (including interest and penalties). They may be currently working and making $60,000 a year from their wages. They have a 401(k) retirement plan that is worth $20,000, but that after taxes are paid they will net about $11,000. It is clear that will not be able to pay back the whole $100,000 owed since the $60,000 in wages only covers normal living expenses. Say the person offer the value of their retirement account of $11,000 plus an additional $4,000, for a total offer of $15,000. It may be that the IRS accepts such an offer if it was made by someone in their sixties, but they would not if the person was forty years old. In the case of the forty year old, the IRS may accept the lump-sum of the $15,000 and then ask for twenty percent of the monies earned for the next three years greater than the wages of $60,000 a year. If the person makes, for instance, $80,000 for the next three years, the IRS would receive the initial $15,000 plus $12,000 ($80,000-$60,000 times 20%), or $27,000, in total.

When you receive a big tax bill from IRS, or have a large tax debt, you may be dismayed with paying off the amount all at once. As a matter of fact, IRS has an option for people who cannot afford to pay off their total tax debts. The IRS call this program the Offer in Compromise Program. The form 656 serves this purpose.

The nature of this form is an agreement between IRS and taxpayer to settle a tax debt amount that is less than what the taxpayer owed through an offer by the taxpayer, and then a negotiated settlement. The ultimate goal of this form is to settle an agreement that fits both parties’ interests. However, the IRS does not guarantee the approval of this application. However, there are little downsides of trying this process.

a5-300x300There are some pre-qualifications issues related to using this debt reduction tecnique. To be eligible for this process, you must have filed all your income tax returns that are legally required, and make all required estimated tax payments for the current year. Along with these three requirements, you cannot apply for offer in compromise if you or your business is currently in an active bankruptcy proceeding. You should go to IRS pre-qualifier test before you start the process. The link to the test is

Tax issues surround our daily lives, whether it is tax on your income or sales taxes you owe for your business. However, there are times in your life, whether its a sickness, divorce, death in the family, business problems, or just being busy,  that you overlook that there are income or sales taxes to pay. Therefore, it is always good to look back and try to determine if there are tax issues in your past that needs to be resolved now by creating a tax payment plan or filing an offer in compromise. Whatever the issue, a tax debt is never eliminated quickly. For instance, New York State typically has 20 years to collect on taxes that you owe to them. When a tax debt increases with time (due to penalties and interest for not paying on time), your financial well being only worsens and the tax problem only becomes more difficult to resolve. Its best to act quickly and to monitor your tax health. In general terns, the Internal Revenue Service has 10 years to collect the tax once they make an assessment, so this is both a Federal and State tax law issue.

The Issue of Unpaid Taxes and example of lack of contact

At my office about five times a year, I receive a call from a person who use to live in New York State, and then moved out of state many years ago. They call and tell me that there bank account was frozen by New York State, and the monies taken for unpaid taxes. Often, there taxes can relate to tax years ten to eighteen years ago, and involve a business tax debt (often sales taxes). The enforcement arm (i.e. collections department) of the New York State Tax Department does not spend time trying to contact the errant taxpayer, they just take the asset to satisfy the tax debt, so it comes as a surprise (emotional and financial) to the taxpayer that they have an issue. For these people, while they were troubled that their business failed, and leave the state, it only becomes worse to ignore the unpaid taxes since with penalty and interest I have seen tax debts of $20,000 grow to a few hundred thousand dollars. Therefore, it is important to stay in touch with the tax authorities, and provide them with current mailing addresses, so you are not blind sighted by a tax levy (where they take your assets). For the person who simply does not know if they have a tax issue lurking in there past, they can always call the state that they resided in, or the IRS, and ask if they owe any taxes, and also review there own credit report to see if that shows any tax debts.

When a person owes substantial tax liabilities to the IRS, he or she may feel paralyzed with worry. However, the IRS has an Offer In Compromise program that could allow the individual to settle the tax debt for less than is owed or, in some rare situations, eliminate the debt completely.

Essentially, the IRS Offer In Compromise program is for individuals who cannot afford to pay the tax liabilities that they owe and doing so would create a financial hardship.

To determine whether an individual qualifies for an Offer In Compromise, the IRS evaluates the person’s ability to pay, income, expenses and asset equity. On its website, the IRS cautions that other payment options should be explored before an offer is submitted.

Is the upcoming tax season drawing up a sense of fear and anxiety within you over your unpaid taxes? Do you feel overwhelmed and at a loss over how you will ever be able to pay the back taxes you owe? Are you expecting your tax debt problems to only get worse with the upcoming tax deadline?

If you answered “yes” to any of these questions, you can now breathe a sigh of relief because we are here to help.

Our firm of skilled tax attorneys knows how to work with the IRS to:

When taxpayers prepare their annual income tax return, they must include all taxable income generated for the tax year they are filing. This holds true, unless the income is excluded by a specific provision of the Internal Revenue code. Section 104 (a) (2) states a way in which income generated from damages can be excluded from gross income.

To be eligible for exclusion under the Internal Revenue Code, the income must have been received due to personal physical injuries or physical sickness. The damages are not excluded if they are punitive damages or have no physical component.

If damages are received by a taxpayer due to a settlement agreement, the nature of the claim will determine whether they can be excluded or not. If the settlement does not explicitly state the nature of the claim, the court will look at all facts and circumstances to determine the nature of the claim.

The Internal Revenue Service Partial Payment Installment Agreement option was created on January 17, 2005 as an option to the Offer in Compromise to pay off tax debts. In a partial payment installment agreement, taxpayers enter into an installment agreement that can result in a partial payment of their tax liability over the lifetime of the collection statute.

Previously, taxpayers who had tax liabilities could not enter into an agreement with the IRS unless they could pay the liability in full. This meant that taxpayers who were unable to pay in full had limited options to pay off their tax debt. This new payment program became possible through the passage of the American Jobs Creation Act of 2004. This statute amends the tax code to allow the IRS to enter into installment agreement for both full as well as partial payment for the taxes owed.

To set up the partial payment installment agreement program, you will need to know the total amount owed to the IRS in unpaid taxes. This amount will be the original tax due, as well as penalties and interest. An experienced New York tax attorney can help you find the correct amount that you owe the IRS. The calculation of the actual installment payment will be based upon IRS collection financial standards in 2013. After the terms of the partial pay installment agreement are fulfilled, the remaining tax debt will be forgiven.

Many people in New York City and beyond have faced financial difficulties in recent years. Those financial difficulties have made it hard for some people to pay off their tax debt. That appears to be the case for one man.

New Yorkers are likely familiar with Anna Wintour. Wintour is the editor of Vogue and in the running to become President Obama’s ambassador to Great Britain. Despite her success, her long-term boyfriend, J. Shelby Bryan, is facing problems with the Internal Revenue Service. Reports indicate that he owes the IRS more than $1.2 million.

Bryan was worth millions at one time. However, like so many people, he suffered setbacks as a result of the recession. It appears an unusual set of circumstances put him in this predicament.

For some taxpayers it is legitimately impossible to pay the full tax liability owed to the IRS or, if they did so, paying the full liability would create extreme financial hardship. The IRS allows these taxpayers to settle tax debt for less than the full amount owed, but only if an installment agreement or other method would not work. An Offer in Compromise is an agreement between a taxpayer and the Internal Revenue Service that settles the tax liability for less.

In order to be able to apply for an Offer in Compromise, the taxpayer must meet a certain set of requirements. The taxpayer must be current with filing all of their Individual Income Tax Forms (Form 1040), as well as any payments owed to the federal government. Taxpayers who are in an open bankruptcy proceeding unfortunately are not eligible to apply.

You can find step-by-step instructions and submit an Offer in Compromise through the IRS form, Form 656-B. The booklet explains the documents that are needed such as;