Tax Liability Settlements are available from the IRS and state tax authorities for when you (or your business) cannot pay its tax bill. The reasons can be almost any legitimate ones, but you have to petition and fight for the settlement. The tax attorneys at B & B Law Group will navigate the requirements and advise you on legal ways to protect assets from seizure.
By filing an Offer in Compromise, you are offering to pay less than the full amount of your tax debts to the Internal Revenue Service. The IRS, at its discretion, may accept less than full payment of your tax debts if there is doubt as to whether the IRS could ever collect the full amount of tax debt or if there is doubt as to whether you are actually liable for the tax debt. Submitting an offer in compromise is one of five ways to get out of tax debt.
In a nutshell, you agree to:
If your Offer in Compromise has been approved, you need to make sure the IRS does not revoke your Offer. At all costs, make sure that you:
The marketing slogan, "pay pennies on the dollar," can be misleading and usually is. In a successful offer in compromise, the taxpayer pays less than the full amount of taxes, penalties and interest. However, the taxpayer must prove that the amount he or she is paying is equal or more than the reasonable collection potential (RCP) as determined by the IRS. The RCP, broadly speaking, is the IRS' best guess about how much money you could come up with in the next 24 months to pay off your tax debts.
The Internal Revenue Service approves only a small number of offer in compromise applications each year. In 2004, the IRS approved 19,546 offers, about 16% of the total number of offers received. As of May 2010, the IRS has accepted about 24% of offers. (Source: National Taxpayer Advocate, 2011 Objectives Report to Congress.)
The key to a successful Offer in Compromise is making sure that the IRS can process your application, and that you submit complete backup documentation to support your offer.
It will take one to two years to complete the Offer in Compromise process. In our experience, the amount of time is dependent on the circumstances. Our shortest one was accepted in 9 months and our longest was accepted after 23 months.
The timeline for an Offer in Compromise looks like this:
Yes. The IRS charges a user fee of $186 to process an Offer in Compromise. You must pay this fee whether you prepare the Offer yourself or hire a tax professional. If you are living below the poverty line, the IRS will waive the fee if you prove your gross income is below the poverty line for your family size.
Below is an acceptance letter for an offer in compromise. The taxpayer experienced bankruptcy and several other setbacks and owed over $350,000 in taxes, penalties and interest. We got the IRS to accept $1000 to settle the entire debt. This result is NOT TYPICAL but no matter what your circumstances, we will fight to get the best settlement deal possible for you.
(Anonymized for privacy)
Here is another example of our work. The taxpayer owed taxes to the District of Columbia. DC settled almost $80,000 for only $12,000. This settlement is more typical of the type that most people will get, unless there are other issues (illness, unemployment, bankruptcy, etc).
Call B & B Law Group for a free consultation and get help now!