Uncollectible? Now might be a Great Time to make an Offer

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Services for Real Estate Pros with Backoffice Squared

I represent taxpayers in Gainesville and the state of Florida who have tax issues with the IRS and Florida Department of Revenue. Getting the best deal possible with the IRS is all about strategy. The key data input into your strategy is the Reasonable Collection Potential formula that goes by the acronym of RCP.

The RCP in many cases may come out as zero or some small number. This means that it is unlikely that the IRS will be able to collect on that debt and as a result it’s a waste of time to continue pounding on the taxpayer for no return. They will therefore change the status on the case to “Uncollectable”, schedule a revisit for a couple of years down the road, and move on. Typically, the taxpayer will decide that their best plan is to then wait for the Statute of Limitations to run and eliminate the debt.

There is another option to consider in these cases. That is to make an Offer-in-Compromise to settle the debt for some smaller amount. Success with this idea gets the taxpayer out of having to resubmit all their financial information every couple of years and the stress of dealing with the IRS each time. The rub is that they must make an offer to pay some amount of money and that amount has to be big enough for the IRS to want to bother with accepting it. Of course, the source of the cash can’t be something the IRS could grab anyway. But it is possible that a relative might want to help them out with a cash loan or a guaranty on a loan to make the offer possible.

The critical question then becomes “how much to make the Offer-in-Compromise for?” It’s a crap shoot, too small and the IRS might decide they would rather wait a few years and revisit. One simple approach is to take whatever amount is available and make the offer for 25% of that amount. If they say no, you could have some room to make a counter. But who knows, they might want to get it off the books badly enough to accept.

If you or someone you know has received a Notice of Intent to Levy or some other federal or state tax issue, please feel free to contact me at either (352) 317-5692 or email jim@backoffice2.net.

 

Jim Payne, CPA

Backoffice2

Gainesville, FL

Cell (352) 317-5692

Office (352) 376-9401

Fax (352) 376-9440

jim@backoffice2.net

https://backoffice2.net

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Rainer
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Sham Reddy CRS
H E R Realty, Dayton, OH - Dayton, OH
CRS

IRS offer in Compromise is complicated, I went thru this a few years ago!

One simple approach is to take whatever amount is available and make the offer for 25% of that amount. If they say no, you could have some room to make a counter. But who knows, they might want to get it off the books badly enough to accept.

Oct 09, 2019 04:24 AM #1
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Rainmaker
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Jim Payne, CPA

CPA firm practicing in the area of IRS Collections
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