IRS Attorney for Texas*

As an IRS attorney, I do more Offer in Compromise cases than anything else. The IRS Offer in Compromise program is an awesome program. It can wipe away your back tax for a lump sum settlement. If you hear “fresh start” or “tax settlement,” is is the IRS Offer in Compromise. They have the same general meanings. There are three main parts of the IRS Offer in Compromise.

(1) Getting into the OIC Program (a good IRS attorney will spend a lot of time in this stage)

The first part is actually getting into an Offer in Compromise. The IRS has some rather strict rules about when they will even look at your fresh start settlement offer. As a proven IRS attorney for Texas, I know this and spend a lot of time making sure that our clients actually get their Offer’s reviewed. How sad is it to do all of the work involved with preparing an Offer only to be told by the IRS (30 days later by snail mail) that they are closing your Offer because you didn’t meet the requirements to even get it looked at.

So, what does this mean? You must file all past tax returns. They say “all,” but that typically means the past 6 years. If you filed the return, but it’s not processed, mail a copy of it with the Offer. Additionally, estimated tax (or withholdings) must be current. To figure this amount, take last year’s tax (less credits/withholdings) and divide by 4. This number is your quarterly estimated tax due.

Additionally, you can’t be in open bankruptcy. If you bankruptcy recently closed, wait until the IRS shows it as closed on your transcripts. Further, you may have to include a 20% deposit (and application fee) with your Offer. If you don’t include this, the Offer is being returned to you.

(2) Preparing & Submitting the OIC

Once you know you can get into an IRS Offer in Compromise, then you prepare it. This is the tricky part. I recommend a good IRS attorney. Include 3 months of all bank statements. You include 6 if you are self-employed. You must have copies of the household’s most recent paystubs. Additionally, include statements from asset accounts (401k, stocks, etc.). And of course, statements from loans (mortgage, cars, etc.).

All of this information must then be added to the IRS form 433-A (OIC). If you have a corporation or partnership, this form is the 433-B (OIC). Generally, certain assets (like your house) can have their values decreased by 20%. This is called the IRS quick sale value for the Offer in Compromise. Other assets, like cash, are generally reduced by only $1000. If an asset has a loan, you can deduct the loan amount from the asset’s value.

Once you have all of your asset net values, then you move on to the future income. This is rather tricky as the IRS will take your income and deduct allowed household expenses.

Allowed expenses include housing, food, vehicle, health, taxes, etc. There are certain “caps” or standards that you cannot exceed without a REALLY good reason. Once you deduct these allowed expenses from your income, you have your leftover net income. This is then annualized (i.e. multiplied by 12) to come up with your “future income” number.

Take this “future income” number and add it to your net asset number. Voila. You now have the amount the IRS will consider for the Offer in Compromise.

But wait, there’s more. Any good IRS attorney for Texas will know this. You have to look at your IRS tax account and determine how much time is left on the statute of limitations. If you could, hypothetically, pay it off on an installment agreement, you do not qualify for the Offer in Compromise program.

Assuming you do otherwise qualify, you know get to submit your Offer. Make sure the forms are complete and signed. Get all of the supporting documentation. Send it by UPS to the address on the back of the IRS Form 656 Offer in Compromise form. If you are required to include a 20% deposit, make sure to include that as well.

It is so important that you make sure to have the base requirements from number one complete. Otherwise, the IRS may return your Offer and keep your 20% deposit. I can’t stress this enough. As am IRS attorney, I bend over backwards to make sure this never happens.

(3) Satisfying the Accepted OIC

Once the IRS accepts the Offer in Compromise, you now need to make sure that you satisfy it. Payment of the remainder of your settlement amount us due within 5 months of acceptance. It is worth mentioning that there is a 24-month periodic Offer in Compromise. We typically do not pursue that option as it will typically cause your Offer amount to increase.

Make sure that you track your payments you send to the IRS. Ensure they post it by viewing your transcripts. Additionally, make sure you get the “Offer satisfied” letter. Once your Offer is satisfied you are good to go – almost.

For the next five years, you have to ensure that you do not owe past the April tax deadline. Even if you file an extension, current tax must be paid by the April deadline. As an IRS attorney, I recommend to our clients to file early. You do not want that fresh start to get wiped out by owing a few dollars accidentally.

Additionally, it is worth noting that if the IRS does not accept your Offer, you can appeal. We file many appeals and have great results with IRS appeals. The appeals function is much more taxpayer friendly. There are a lot of strategies we deploy as well to get our clients an even better Offer amount.

Get a Fresh Start with an IRS Attorney for Texas Today

If you are ready to have an IRS attorney look at your case to see if you qualify for an Offer in Compromise, click here to get the process started today. Or call us directly for a free consultation at 330-331-7611.