reasonable collection potential: How does the IRS define “Economic Hardship”?
- 10/03/22 12:12 PM
Economic Hardship is a kind of get-out-of-jail-free card when it comes to dealing with IRS Collections Division. It can be used to get a levy released or an Offer-in-Compromise accepted if the financial analysis showed the result would place the taxpayer in an economic hardship
So, just what is an Economic Hardship? Economic hardship occurs when a taxpayer is unable to pay reasonable basic living expenses. The IRS considers the taxpayer’s equity in assets and expected cash flow to determine how much money should be available to pay their tax debts. This information is brought together with a formula that is … (9 comments)
reasonable collection potential: Why Should the IRS Accept an Offer to Pay Pennies on the Dollar?
- 03/31/20 06:38 AM
I represent taxpayers in Gainesville and the state of Florida who have tax issues with the IRS. You see the ads on TV about the IRS accepting “pennies on the dollar” to clear their backlog of tax debts. Seems like an easy answer to a big problem. But, as they say, “too good to be true, is usually not true.” The reality is that while the IRS does accept these offers, 60% of them are rejected according to the IRS Data Book that is issued annually. This makes a ton of sense when you think about it. Afterall, why should a government agency with more collection powers than … (1 comments)
reasonable collection potential: How the RCP Formula Works – Part 3
- 08/23/19 02:05 PM
I represent taxpayers in Gainesville and the state of Florida who have tax issues with the IRS and Florida Department of Revenue. The IRS Offer-in-Compromise is an agreement to clear a tax debt for less than its face value. How many dollars is the IRS willing to compromise on depends upon a formula. This formula is called the “Reasonable Collection Potential” or RCP for short.
My previous two posts covered how the calculations are made to determine an amount that the IRS hopes they can collect from a taxpayer. Now the fun part (at least from my perspective). What can we do to make the formula produce the best deal … (1 comments)
reasonable collection potential: How the RCP Formula Works – Part 2
- 08/23/19 01:05 PM
I represent taxpayers in Gainesville and the state of Florida who have tax issues with the IRS and Florida Department of Revenue. The IRS Offer-in-Compromise is an agreement to clear a tax debt for less than its face value. How many dollars is the IRS willing to compromise on depends upon a formula. This formula is called the “Reasonable Collection Potential” or RCP for short.
My previous post covered the first part of the formula which calculates the value of property owned. Today, I will cover the second part which is based on future income. This is not future income for the rest of the taxpayer’s life. Rather it’s the … (1 comments)
reasonable collection potential: What about the Offer-in-Compromise?
- 07/10/19 07:33 PM
I represent taxpayers in Gainesville and the state of Florida who have tax issues with the IRS and Florida Department of Revenue. The most misunderstood option in dealing with the IRS is the Offer-in-Compromise. TV ads regularly promote the idea that some large national firm can clear your debts at “pennies on the dollar” through their superior negotiating techniques. The truth is that whether the IRS will except an Offer-in-Compromise is based purely upon a formula and not some reasoned argument by an expert in negotiations.
What is the formula used by the IRS? It’s called the “Reasonable Collection Potential” or RCP for short. There are two basic parts. The … (1 comments)
Related Links:
Jim Payne, CPA
CPA firm practicing in the area of IRS Collections
Economic Hardship is a kind of get-out-of-jail-free card when it comes to dealing with IRS Collections Division. It can be used to get a levy released or an Offer-in-Compromise accepted if the financial analysis showed the result would place the taxpayer in an economic hardship 
;)
;)
;)
