Los Angeles, CA: The Holy Grail of Tax Settlement Part 3 – ETA OIC

By
Services for Real Estate Pros with Howard Richardson
https://activerain.com/droplet/5pNm

Taxpayers that do not qualify for an OIC DATC or an OIC DATCSC because they are able to pay their tax liability in full may qualify for an Effective Tax Administration Offer in Compromise (ETA OIC). The ETA OIC program allows an offer for less than the Reasonable Collection Potential (RCP) which consists of:

 

A. Net Monthly Income

B. Net Assets

 

ETA OIC offers are like the Siamese Twin or the second half of a Yin and Yang symbol in relation to an Offer in Compromise Doubt as to Collectability with Special Circumstances (OIC DATCSC). Both of them are rarely approved, so the case made by an applicant has to be compelling. The same two special circumstances are required for both programs as I wrote about in a previous post here:

 

1. Economic Hardship

2. Public Policy or Equity

 

ETA OIC formula

RCP>Tax Liability>Offer

 

Example

Tax liability: $100,000

RCP: $125,000

Accepted Offer: $50,000

 

In this case the IRS expects to be able to collect the full amount of the tax liability from the taxpayer within the statute of limitations. However, if all the requirements are met, an ETA OIC may be accepted for less than the full tax liability.

 

OIC DATCSC formula

Tax Liability>RCP>Offer

 

Example

Tax Liability: $100,000

RCP: $70,000

Accepted Offer: $50,000

 

This is slightly different from the ETA OIC example in that the amount the IRS expects to be able to collect (RCP) within the statute of limitations is less than the full tax liability. Due to special circumstances they will accept less than the RCP.

 

OIC DATC formula

Tax Liability>RCP

Offer=>RCP

 

Example

Tax Liability: $100,000

RCP: $70,000

Minimum Accepted Offer: $70,000

 

Just as with the OIC DATCSC example, the amount the IRS expects to collect from the taxpayer within the statute of limitations is less than the full tax liability. In this case, they will accept an offer equal to or greater than the RCP. Due to the lack of special circumstances, the offer must be higher than for an OIC DATCSC.

Of these three OIC programs, the OIC DATC is the most likely candidate for most taxpayers. The OIC DATCSC and ETA OIC should be viewed as more exotic options for exceptional cases.

 

Howard Richardson

Enrolled Agent

8939 S. Sepulveda Blvd., Ste. 102

Los Angeles, CA 90045

(323) 374-5034

howard@hrichtax.com

www.hrichtax.com

 

 

 

 

 

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