How long does it take to prepare an Offer-in-Compromise?

By
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. The IRS Offer-in-Compromise is an agreement to clear a tax debt for less than its face value. Paying less is a great goal but your effort will be waisted if you don’t do all the steps.

Making the offer is a time-consuming task that requires a considerable amount of reporting to the IRS to show that a write-down of the debt is in the interest of the government. This hard work could easily be for naught since the IRS rejects about 60% of the offers received.

First of all, you have to be in “compliance” or your offer will be rejected automatically. This means that all your required tax returns for the last 6 years must be on file with the IRS. Additionally, all your estimated tax payments for the current year must been made. The only way to get this step right every time is to get your IRS transcripts.

Next, you should run the numbers using the IRS formula known as the Reasonable Collection Potential or RCP. If your offer is not at least in the ballpark of the result from the RCP, it’s not likely to be accepted.

The fun part of developing a strategy to get the most out of the RCP formula is the logical next step. Don’t have life insurance, but need it? The RCP formula allows you to show a lower collection potential amount if you signup for life insurance. Here is the kicker on the timing on the life insurance and other tactics that might use to lower the formula result. You need to be able to show that you are regularly making these payments. The IRS is going to want to see three months of bank statements showing those payments. Jumping the gun on this is going to result in a rejection of your offer.

Generally, it’s going to take five to six months minimum to put an Offer together that has the potential to be accepted by the IRS. Jumping the gun and not getting your three months of payments or worse not checking your compliance status is a guaranty of wasted time and money.

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

I have been thru this once and its painful not difficult

Generally, it’s going to take five to six months minimum to put an Offer together that has the potential to be accepted by the IRS. Jumping the gun and not getting your three months of payments or worse not checking your compliance status is a guaranty of wasted time and money.

Nov 20, 2019 04:15 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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