7 IRS Offer in Compromise Tips [Settle Your Back Taxes ]

An IRS Offer in Compromise may be a great way for you settle your tax liability with the IRS.

The bad news is that, a large percentage of the “Offers" submitted to the IRS for consideration are rejected for a number of reasons. 

Let’s face it, the Internal Revenue Service is not going to make it easy for you to wipe away a large percentage of your tax liability, along with penalties and interest.

If you would to have the best chance of success in settling your tax liabilities, contact experienced tax attorney Charles Rosselli. We can assist you regardless of location. 

Here are 7 strategies and suggestions to save you frustration and money during the process of getting your IRS Offer in Compromise accepted:

I always tell my clients that you are NOT negotiating a car with a salesman at a car dealership.

You cannot write a low ball number on your 656 IRS form and expect that the IRS will accept it.

The acceptance or denial of an IRS Offer in Compromise is based upon an analysis of your current assets and your cash flow (disposable income).

Your cash flow consists of your income versus your allowable expenses.

The IRS will consider your monthly disposable income multiplied by twelve months or twenty four months depending upon the type of offer being submitted.

You must have documentation that supports the “numbers” that are submitted on your IRS Offer in Compromise.

The IRS requires 3 months of documentation.

You are also required to provide 20% of the Offer amount with your application.

Once you have submitted the above documentation, the Offer is considered processed by the IRS.

Now the fun begins.

The negotiation phase of the Offer in Compromise approval phase begins when the Offer specialist contacts you or your tax attorney.

If you fail to do all that is required, your offer will be rejected.

You will be required to begin the process all over again with a new application fee as well as a new 20% down payment.

Don’t Wait Until You Have More Money

It may not sound like the right strategy.

However, the best offer in compromise you will be able to submit to the IRS will be when you have the least amount of assets and income.

If you need to borrow money from a family member or friend, it may be something worth thinking about to get your tax liability, including penalties and interest, reduced.

The IRS will look at one year of disposable income if you can off the tax liability in 5 months and two years of disposable income if you can pay the offer in 24 months.

It is important that a professional help you determine your disposable income.

If you make a mistake on your 433-A or 433-B IRS form, it can cost you thousands of dollars.

It can take 6-12 months to have an Offer Specialist assigned to your case.

If all of a sudden, you get an increase in income or inherit some money, the terms of the Offer may change upon review by the IRS.

Also, the IRS changed the offer in compromise rules  to benefit taxpayers.

However, no one know if future changes on the horizon will be as beneficial.

Therefore, submit your OIC sooner vs. later.

The IRS  requires that you file and pay your taxes for five years following the acceptance of your Offer.

Failure to do so will void the agreement and you will be back to square one again, with the same tax liability, penalties and interest.

As discussed above, it can take up to 12 months for the IRS to review your IRS Offer in Compromise application.

If you are self employed or work on commission, you need to stay current with your estimated taxes, paying them every 3 months, while your offer is pending.

When your offer is reviewed, you will need to be current in your filings as well as quarterly payments. Failure to do so will sink your chances of acceptance.

You have to make sure that the Collection Information Statement is prepared correctly.

The IRS may accept certain expenses that you are not aware of.

A tax attorney can explore with you specific strategies to get the best tax settlement.

As such, it is important that experienced tax attorney Charles Rosselli review your assets, income, and expenses to determine the most optimal resolution option based upon the specifics of your finances.

As you can see from the previous tips, there are a lot of pitfalls in dealing with the IRS or the State.

Mistakes can cost you thousands of dollars as well as quite a few sleepless nights.

Let’s fact it, you are up against the government.

Their employees advocate their interests, not yours.

You are at disadvantage. You will be pressured and possibly bullied.

You need someone that will be your advocate and that will fight for you.