The focus of our tax practice is representing taxpayers before the IRS. An Offer-in-Compromise allows a taxpayer to settle their tax debt for less than the full amount. Although this is one of the most common options for tax resolution it is not always the best route for everyone and there are still a lot of misconceptions regarding Offers. I deal with clients everyday looking to resolve their tax debts through the IRS Offer-in-Compromise program, and below are a few of the most popular urban legends I hear:
- The IRS never accepts offers
- There is no way to change the amount of your Offer
- There is a special “Fresh-Start” program that helps you settle IRS debts
- The IRS doesn’t care about the current year
- If you transfer away everything before you submit your Offer it wont be considered as an asset
- The Offer amount is based on how well you negotiate with the IRS
- IRS doesn’t consider your retirement assets
- The IRS is desperate to make deals
- You must offer a certain percent of the tax debt
- An Offer in Compromise is a quick process
None of these are true. In most cases the reason the taxpayer is submitting an Offer is because the taxpayer either doesn’t have a lot in assets or doesn’t have the money to outright pay the tax debt. The IRS utilizes a formula, called “Reasonable Collection Potential”, or “RCP” for evaluating a taxpayer’s ability to pay, and they do look at assets transferred away in the last three years. There is little room for negotiating in this process, as it truly is a numbers game. The Offer process is generally 6-12 months and Offers are worked in the order received. And though the IRS would like to be paid they don’t accept Offers because they are desperate to make deals.
And there is no such thing as the “Fresh Start” program. “Fresh Start” were changes announced by the IRS in 2012 to make it easier to get Offers done. Those changes are permanent. So if you hear about there being a special “The Fresh Start” program on a radio ad, that company is lying to you. Run in the other direction!
When it comes to Offers the IRS will take into consideration the taxpayer’s income and expenses as well as assets, including retirement accounts and real estate. That said, if you are eligible, the Offer program, may save tens or hundreds of thousands of dollars, get the liens lifted and allow you to resolve your back tax with the IRS for far less than you owe.
If you want more information on an Offer-In-Compromise, IRS tax debts or anything else IRS related, then you can contact me at either (203) 285-8545 or by email at ngolino@gs-lawfirm.com.
1 Audubon Street, 3rd Floor
New Haven, CT 06511
Ph. (203) 285-8545 ~ ngolino@gs-lawfirm.com
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