Taxation law can be one of the most difficult and complicated areas to practice. So, when you’re facing tax issues, who should you turn to? James L. McCutchen is an experienced SC tax lawyer who’s negotiated plenty of offers in compromise. Our purpose is to provide our clients with specific legal services depending on their tax needs. If you are struggling with tax debt, we can help. You could qualify for a tax debt settlement. Contact our offices today to schedule your free consultation.
What are Offers in Compromise?
This could be a solution for someone that is saddled with the weight of their tax debt. If you want to reduce your tax debt, an Offer in Compromise (OIC) could be your solution. An OIC will allow a taxpayer to settle for less than the amount owed. The IRS and State will not accept every Offer in Compromise. There are guidelines that must be considered. The IRS/State is going to thoroughly go over all past, present and future finances of the taxpayer.
Offers in Compromise can easily be returned by the IRS, and the process is very complicated. There are many different forms you need to fill out, financial records to collect, and then the filing of the offer. Oftentimes, the Offers in Compromise are returned because of technical issues. If you’re missing a form, your offer will never make it to the final stage for review. Having an experienced tax lawyer on your side can ensure that you get all the proper documentation committed before the proper deadlines.
How do you file an Offer in Compromise?
An Offer in Compromise requires that you file IRS Form 656 as well as IRS Form 433-A. If you are a business owner, you must also file 433-B. To file an Offer in Compromise takes extensive knowledge of tax laws and experience. So, we recommend hiring a tax attorney. You can see from the above forms, that this is going to be complicated. You deserve to have a shot at having your debt settled. So, give yourself the best chance of success by hiring a tax attorney.
Many Offers in Compromise are returned to the sender without even being reviewed. The inexperience of the filer really puts them at a disadvantage. When these OICs have been returned to the taxpayer, the IRS never even considered the offer.
Are there different types of OICs?
Yes. You can file an Offer in Compromise as a “doubt to liability”. In this circumstance, you are saying that you don’t owe the tax. “Effective tax administration” means that you have the amount to pay the debt but paying it would leave you in hardship. You wouldn’t be able to take care of your daily bills if you paid your tax debt. Finally, “doubt as to collectability” means that you don’t have the amount of money to pay the debt. You should discuss your tax circumstances with your lawyer, to determine which Offer in Compromise is right for you.
What is the Fresh Start Initiative?
In 2012, the Fresh Start Initiative was introduced by the IRS. This is a more flexible Offer in Compromise, meant to help those struggling with their tax debt. Some of the ways that the terms of Offers in Compromise have changed under the Fresh Start Initiative include:
- Reevaluating the taxpayer’s future income
- Letting the taxpayer pay their student loans
- Letting the taxpayer pay local and state taxes
- Raising the Allowable Living Expense amount and category
The IRS is going to calculate the earning potential of the taxpayer. The difference is, they will only look at one year, when the payment is supposed to be paid in under 5 months. The IRS will look at two years of your income, for offers that will be paid between 6 months to 24 months.
Are their liens after an Offer in Compromise?
Just because you file an Offer in Compromise, doesn’t mean that the IRS will stop trying to collect their debt. So, they could file a Federal Tax Lien against your property, if one hasn’t been filed. They could even garnish your wages or bank accounts, as well as seizing assets. Once an Offer in Compromise is filed, collection on accounts will temporarily be put on hold. However, the IRS can decide to reject an offer is they think that the taxpayer is delaying the process. In fact, Offers in Compromise have been used for decades to delay the IRS. An OIC isn’t applicable for everyone, but a skilled attorney can give you guidance on your case.
You must be compliant!
If you are not up to date on your payments or involuntary compliance, the IRS will not consider your offer. Not being compliant can derail several tools that we could use to settle or reduce your tax debt. So, make sure that you are up to date on everything before you bring your case to an attorney.
How do you structure the repayment to the IRS?
If you are under a non-collectible status, you don’t have the money to pay your debts. If your entire paycheck goes to daily living expenses, then you could have your debt reclassified as non-collectible. If you get this status, the IRS will suspend your payments for a certain amount of time, which allows you to get back on your feet.
Installment agreements with the IRS are also popular. You must provide all your financial statements to the IRS, showing your ability or inability to be able to pay. The IRS will review all of this documentation and determine the number of your payments and the date that they will start.
Should I speak to an IRS investigator?
No. Sometimes you can say things that will incriminate yourself. You should leave any conversation with the IRS or SC Revenue Department to your lawyer. You could get arrested because of your taxes, so don’t take this lightly. Contact a criminal defense attorney if you have been contacted by an investigator.
Contact a skilled Offers in Compromise attorney
If you are struggling with tax debt, you’re not alone. We can help you go over your options. Contact our office today to schedule an appointment to discuss your case.