If you are a real estate professional with significant IRS tax debt and her considering engaging a tax resolution firm that promises to settle your tax debt for a fraction of what you owe, you need to understand how the IRS Offer-in-Conpromise program works before filing the OIC.
One of the most misunderstood IRS programs to resolve IRS tax debt is what is known as an Offer-in-Compromise (OIC). An OIC is an agreement between a taxpayer and the Internal Revenue Service (IRS) that settles a taxpayer’s tax liabilities for less than the full amount owed. While the program is legitimate and is a great way to resolve IRS tax debt for those taxpayers that qualify for the program, the problem rests with unscrupulous tax resolution firms that take advantage of those seeking to have their tax debt settled for “pennies on the dollar”.
These unscrupulous firms tell the uninformed taxpayer that the IRS has this great program where tax debts can be totally forgiven by making the IRS a small monetary offer to have their debt forgiven. These firms charge a significant up-front fee (usually non-refundable) and later inform the taxpayer that the IRS rejected their offer. The unsuspecting taxpayer winds up owing the IRS more money due to the accruing interest and penalties, and is out the fee paid to the unscrupulous firm.
To combat these scammers, the IRS has initiated a program whereby the IRS is sending its agents to the national tax resolution firms posing as a taxpayer with substantial IRS tax debt. If the firm agrees to represent the taxpayer before the IRS, for an up-front fee fee to file an OIC, and fails to perform the required financial analysis to determine if the taxpayer qualifies for an OIC, the IRS will take action against this firm.
The IRS focus will be to identify those firms that charge a large up-front fee, ususally non-refundable, perform insufficient (if any) financial information gathering, file the OIC (which with almost full certainty will be rejected), and then notify the taxpayer that the offer was rejected.
To qualify for the OIC program, the taxpayer must complete a financial analysis (IRS Form 433-A (OIC)) that reports the taxpayer’s assets, liabilities, sources of income, and allowable expenses. This data is used to compute the taxpayer’s RCP, reasonable collection potential. In other words, the form is used to compute the taxpayer’s ability to pay the IRS. If the taxpayer is eligible for an OIC, this financial analysis is used to determine the taxpayer’s minimum offer to the IRS (IRS Form 656). The misconception of some taxpayers is that they make some monetary offer to the IRS that they consider equitable to settle their tax debt, rather than understanding that the IRS requires full financial disclosure and that the IRS determines the amount (RCP) that the taxpayer can afford to pay.
An experienced tax resolution specialist, who knows the IRS rules and procedures, understands how to properly prepare the OIC offer to minimize the taxpayer's OIC offer.
If you have IRS tax debt and are interested in learning more about the OIC program, call several firms and inquire how their process works. If the firm does not perform an analysis of your financial condition to determine your ability (or inability) to pay prior to saying you are eligible to file an OIC, find a firm that does.
For real estate professionals with IRS tax debt issues or tax planning issues, feel free to contact me at (610) 594-2601 or by email at info@keysolutions.us.
Bryan Haarlander, an Enrolled Agent and a Certified Tax Resolution Specialist, is a member of the American Society of Tax Problem Solvers (ASTPS), PA Society of Tax & Accounting Professionals (PSTAP), the National Society of Accountants (NSA) and the National Association of Tax Professionals (NATP). He is the author of “How to Resolve Your IRS Tax Debt Problems” as well as a book on how to start your own business. He has been practicing in Exton for 18 years. His blogs http://www.taxexpertblog.com and http://www.stopmytaxproblems.com
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Keystone Financial Solutions, Inc. specializes in providing innovative tax planning, tax preparation, and solving IRS tax problems. The company’s web site is https://www.keysolutions.us and its telephone number is (610) 594-2601.
If you have any IRS tax debt issues or tax planning issues, feel free to contact me at (610) 594-2601 or by email at info@keysolutions.us.
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