Sunday, July 13, 2008

Caution: Pennies on the Dollar Part IV

In the first three parts of this series on an Offer In Compromise (OIC) we have discussed some of the pitfalls and things to look out for when using this as a resolution. We have attempted to make you a little more aware and a little more educated on the process and what will be acceptable by the IRS. We also went over the first two areas where an OIC might be an option for taxpayers which are "Doubt as to Collectibility" and "Doubt as to Liability."

Finally, let's take a look at the last area where an OIC might be accepted. It is known as Effective Tax Administration (ETA). This is an area where there is NO DOUBT as to the liability and there is potential to collect the liability in full but other circumstances are present that would allow the IRS to consider an OIC. There is no monthly disposable income, equity in assets owned is equal to or greater than offer submitted, the customer is not able to procure a loan on such assets, and extreme circumstances are involved such as health or sickness of an individual. To be eligible for this extreme circumstance the taxpayer must demonstrate that the collection of the tax would create an economic hardship or be unfair or inequitable. These offers are very rare.

Some other things to keep in cannot be in bankruptcy or have bankruptcy pending, you must pay a $150 application fee, you must submit 20% of your submitted offer up front if you are submitting a lump sum cash offer, you must be in full compliance with filing (no unfiled returns), you must be current with any quarterly estimated tax payments if you are self-employed, and 941 taxes are not eligible for an OIC.

So to wrap it all up - you absolutely need a professional to work on your tax resolution on your behalf but BEWARE of the company you choose. I recomend you do your due diligence and research their reputation as well as their BBB ratings and history. You must be aware that you actually qualify under the restrictions of the program we discussed before you submit an OIC or you will only waste time and money but your tax liability will still be there. Whatever you do, DO NOT WAIT to get your tax liability professional help immediately.

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