Received directly from IRS. It does a good job of explaining a taxpayer's alternatives when they get behind in their obligations to IRS.
Note that the "offer in compromise" is not a negotiation with the IRS over tax disputes----------- rather, one would do better to think of it as a offer to settle the obligations, based on the taxpayer's cash flow.
I might add that those commercials you see on TV where the XYZ Settlement Service can settle the issues for pennies on the dollars----------- are usually correct.
The way that such happens is that the IRS has most likely issued a notice of additional taxes due, or probably in the case of delinquent, unfiled returns, has "filed a SFR"---substitute for return------- where the IRS calculates the taxes due based on INCOME of which they have knowledge, such as 1099s. Therefore, obviously, IRS does not include any expenses..........they have no knowledge of expenses, only the income. When there is no return filed, IRS computes tax, files it as a SFR, and sends a bill.
The amount of IRS-computed taxes will therefore be HUGE.
If the bill is not addressed, within typically a few months, the assessment becomes FACT, and the only way to get around it is to file in, essentially, district court.....pay the tax assessed, pay the attorney, and sue in court for a refund. Cannot go to Tax Court.
What the XYZ Settlement Service really does is just what any preparer can do-------- file a completed tax return before the billed tax becomes FACT. That tax is obviously much, much less than the IRS-computed amount.
The ads on TV make the XYZ Settlement Service sound like they actually beat up the IRS and force settlements where the mere humans would fail.
Another point while I am thinking about it--------- we are getting "powers of attorney" from most all clients now. IRS has stepped up the "correspondence programs", and typically none of that comes by certified mail. Therefore, the burden becomes the taxpayer's to make sure that they receive the mail........in order to be aware that a timely response is due.
The "power of attorney" allows the IRS........actually, it "requires" them...........to send copies of all correspondence sent to the taxpayer to be sent also to the person having the power of attorney. Obviously, in that manner, someone is likely to notice the correspondence.
Issue Number: IRS Tax Tip 2013-57 Inside This Issue
IRS Fresh Start Program Helps Taxpayers Who Owe the IRS The IRS Fresh Start program makes it easier for taxpayers to pay back taxes and avoid tax liens. Even small business taxpayers may benefit from Fresh Start. Here are three important features of the Fresh Start program: • Tax Liens. The Fresh Start program increased the amount that taxpayers can owe before the IRS generally will file a Notice of Federal Tax Lien. That amount is now $10,000. However, in some cases, the IRS may still file a lien notice on amounts less than $10,000. When a taxpayer meets certain requirements and pays off their tax debt, the IRS may now withdraw a filed Notice of Federal Tax Lien. Taxpayers must request this in writing using Form 12277, Application for Withdrawal. Some taxpayers may qualify to have their lien notice withdrawn if they are paying their tax debt through a Direct Debit installment agreement. Taxpayers also need to request this in writing by using Form 12277. If a taxpayer defaults on the Direct Debit Installment Agreement, the IRS may file a new Notice of Federal Tax Lien and resume collection actions. • Installment Agreements. The Fresh Start program expanded access to streamlined installment agreements. Now, individual taxpayers who owe up to $50,000 can pay through monthly direct debit payments for up to 72 months (six years). While the IRS generally will not need a financial statement, they may need some financial information from the taxpayer. The easiest way to apply for a payment plan is to use the Online Payment Agreement tool at IRS.gov. If you don’t have Web access you may file Form 9465, Installment Agreement, to apply. Taxpayers in need of installment agreements for tax debts more than $50,000 or longer than six years still need to provide the IRS with a financial statement. In these cases, the IRS may ask for one of two forms: either Collection Information Statement, Form 433-A or Form 433-F. • Offers in Compromise. An Offer in Compromise is an agreement that allows taxpayers to settle their tax debt for less than the full amount. Fresh Start expanded and streamlined the OIC program. The IRS now has more flexibility when analyzing a taxpayer’s ability to pay. This makes the offer program available to a larger group of taxpayers. Generally, the IRS will accept an offer if it represents the most the agency can expect to collect within a reasonable period of time. The IRS will not accept an offer if it believes that the taxpayer can pay the amount owed in full as a lump sum or through a payment agreement. The IRS looks at several factors, including the taxpayer’s income and assets, to make a decision regarding the taxpayer’s ability to pay. Use the Offer in Compromise Pre-Qualifier tool on IRS.gov to see if you may be eligible for an OIC. Additional IRS Resources: IRS YouTube Videos: IRS Podcasts:
Edited by jakescia 4/21/2013 13:13
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IRS Tax tips---- if you owe money to IRS, and cannot pay timely.......
