OIC... a few basic questions

Hello,

I'm trying to learn about Offer in Compromise... a client of mine seems to be a candidate for it.

Here are a few basic questions that I have. I cannot locate adequate resources to get them answered. It appears that the IRS does not make its OIC team available for phone consultation.

* Is taxpayer be considered "in compliance" if the IRS has prepared substitute tax returns for years he didn't file?

* Does it ever make sense to offer LESS than the online OIC calculator proposes? Does the IRS generally make a "counteroffer" to a lowball offer? And does the IRS frown upon upping the offer when a lowball offer is rejected?

* Does "doubt as to liability" apply if a substitute return is prepared by the IRS (e.g., reporting all of taxpayer's self-employment income but none of the expenses against the income)?

* Can anyone recommend resources for more questions (like these) that may arise?

Thanks,
xnewtaxguy

* Is taxpayer be considered "in compliance" if the IRS has prepared substitute tax returns for years he didn't file?

No. Actual returns need to be prepared.

Sources :
Form 656 Instructions
IRS Notice 2006-68
IRS Fact Sheet 2006-22
OIC frequently asked questions at IRS website (very good )
Online seminars that are archived ; many of them are free including CPA Academy
Online seminars provided by professional organizations that are current
Last but not least goggle "Offer in Compromise "

It does make sense to offer less than the online calculator .

Hello,

I'm trying to learn about Offer in Compromise... a client of mine seems to be a candidate for it.

Here are a few basic questions that I have. I cannot locate adequate resources to get them answered. It appears that the IRS does not make its OIC team available for phone consultation.

* Is taxpayer be considered "in compliance" if the IRS has prepared substitute tax returns for years he didn't file?

* Does it ever make sense to offer LESS than the online OIC calculator proposes? Does the IRS generally make a "counteroffer" to a lowball offer? And does the IRS frown upon upping the offer when a lowball offer is rejected?

* Does "doubt as to liability" apply if a substitute return is prepared by the IRS (e.g., reporting all of taxpayer's self-employment income but none of the expenses against the income)?

* Can anyone recommend resources for more questions (like these) that may arise?

Thanks,
xnewtaxguy

Many times CPA Academy offers OIC classes at no charge.

Hello,

I'm trying to learn about Offer in Compromise... a client of mine seems to be a candidate for it.

Here are a few basic questions that I have. I cannot locate adequate resources to get them answered. It appears that the IRS does not make its OIC team available for phone consultation.

* Is taxpayer be considered "in compliance" if the IRS has prepared substitute tax returns for years he didn't file?

* Does it ever make sense to offer LESS than the online OIC calculator proposes? Does the IRS generally make a "counteroffer" to a lowball offer? And does the IRS frown upon upping the offer when a lowball offer is rejected?

* Does "doubt as to liability" apply if a substitute return is prepared by the IRS (e.g., reporting all of taxpayer's self-employment income but none of the expenses against the income)?

* Can anyone recommend resources for more questions (like these) that may arise?

Thanks,
xnewtaxguy

IRS substitute return does not qualify for compliance in any instance. Make sure all returns for the past 10 yrs are prepared and filed.
I recommend Eva Rosenberg's IRS Series of courses at CCH CPELink.

The offer is based on current income and IRS allowed expenses. i.e.: TP owes 46K over last 10 years; IRS calculator recommends a mere 800-900 as Offer. Based on TP's current income (100K plus)/allowed expenses IRS denied Offer because TP has a small balance in both his 401k and govt savings-to which he is currently required, by employer, to make contributions.

In order to be considered for OIC TP must:
1. be current with all filings (10 years)
2. have sufficient withholding taken from income to cover tax liability for each of the next five years
3. agree to file the next 5 years of returns on time
4. submit income and expense documents requested...usually 2 months minimum

I do OICs as a 3-part service; obtain and review yearly documents, determine years requiring prep/filing; prepare/file required returns, prepare and file interum IA; prepare and file OIC (IA payments continue while OIC is being considered. Sufficient retainer is required prior to any work being started for each part.

I strongly, strongly and with absolute certainty disagree that you must file a return in order to be eligible for an offer. ANY assessment is all you need and there is absolutely no need to file a return if an SFR or an audit assessment was previously done.

The online Offer calculator is a guide. I have never used it and won't use it. Generally speaking, lowball Offers don't make sense. However, there are times when a de minimis Offer makes sense.

There is no Doubt as to Liability because IRS did an SFR.

I strongly, strongly and with absolute certainty disagree that you must file a return in order to be eligible for an offer. ANY assessment is all you need and there is absolutely no need to file a return if an SFR or an audit assessment was previously done.

You will learn Grasshopper.

You will learn Grasshopper.

I'd find learning Spanish much more useful.

You will learn Grasshopper.

What are you talking about? Skassel is an absolute expert with this stuff and what he says is totally accurate. This issue isn’t a matter of opinion or interpretation. It is a black and white yes or no.

As gentle as I can be, I am really, really discouraged that you continue to post clearly misleading information on this site. If you aren't sure, say so.

In my experience in this part of the country, OICs are usually a waste of time. The IRS is very stingy with them and does not like to concede much. Because the taxpayer has not even filed the returns, the IRS still has many years to collect. When the IRS has many years to collect, an OIC becomes even more difficult. Good luck, but if you do an OIC, be realistic. A payout based on current financials may be a better option. I have a client in his late 70s paying $100 a month on an over $30,000 tax debt. The IRS wouldnt accept an offer of $20,000 but they would do the payout. Go figure.

I definitely do not agree that Offers are a waste of time.

BAD Offers are a waste of time and more importantly, a waste of your client's money.

I used to do a lot more, but haven't done many the past few years. However, I just had one accepted for $16,000 on a liability of $200,000+.

Your location has no impact on Offer acceptance as almost all Offers are worked in a centralized environment. The VERY rare Offers worked locally will be for very large dollar cases where significant assets exist.

Remember that Offers should never be your first option. Partial Payment Installment Agreements are an option to explore as is quite frankly, running out the collection statute.

Pitch78, could you explain what you mean by "The IRS wouldnt accept an offer of $20,000 but they would do the payout".

Thank you, Jeff-Ohio. I appreciate it.

What do you mean, what do I mean? The IRS would not accept a $20,000 offer but would accept $100 per month from a guy in his 70s. It will take them almost 20 years to match the $20,000.

Because IRS cannot set up a payment agreement of that length. Something is not correct.

By statute, ALL installment agreements must provide for payment in full of the liability during the statute of limitations. Period. No ifs, ands or buts. I know this issue about as well as anyone alive. This very issue got me on Page One of the New York Times and onto Good Morning America.

In order to get an Installment Agreement that does not pay the liability in full, you must get a PPIA.

Did the taxpayer receive notice of a formal installment agreement being set up? I suspect that it is an informal IA with nothing in writing.

Yes it did happen and yes it is in writing. Guess they dont do it the same all over the country.

Not so. I'm sorry, but I don't believe it. The law is the same nationwide and if you handle collection cases regularly you know that.

Not trying to be snarky, but I value precision. The other reason I don't believe your statement is the verbiage that you used. NO ONE that handles collection cases would ever say, IRS "would do the payout". I've been in this business 30 years and I do know exactly what I'm talking about.

There isn't ANY IRS employee that has the ability to set up a payment agreement that will go out for 20 years. The system cannot accept such an agreement.

Hello,

I'm trying to learn about Offer in Compromise... a client of mine seems to be a candidate for it.

Here are a few basic questions that I have. I cannot locate adequate resources to get them answered. It appears that the IRS does not make its OIC team available for phone consultation.

* Is taxpayer be considered "in compliance" if the IRS has prepared substitute tax returns for years he didn't file?

You do not need to file a return if IRS has made an SFR assessment. The substitute for return is prima face good for all purposes.

The goal of an offer in compromise is to get the taxpayer back into compliance and stay compliant in the future. If there is a substitute for return case, IRS has determined tax due and issued a Statutory Notice of Deficiency giving the taxpayer the opportunity to dispute it in Tax Court. Your client has apparently not disputed the IRS determination. Yet. He does not need to do anything different now and, if he is a good candidate for an offer in compromise it would be pointless to do so because all this would do is reduce the amount he can't pay and not affect the amount he would have to offer. He has to show that all returns that are due have been filed be they by SFR or him and that he is paying enough current tax by withholding or estimated tax payments.


* Does it ever make sense to offer LESS than the online OIC calculator proposes? Does the IRS generally make a "counteroffer" to a lowball offer? And does the IRS frown upon upping the offer when a lowball offer is rejected?

In a normal Doubt as to Conductibility offer you have to offer an amount that reflects the reasonable collection potential of the account based on fair market value of assets and current ability to pay after applying IRS standards. The value of assets may be subjective but the number at the end of the equation using the values used is not. If the client has a special situation an offer based on Effective Tax Administration may be appropriate.

* Does "doubt as to liability" apply if a substitute return is prepared by the IRS (e.g., reporting all of taxpayer's self-employment income but none of the expenses against the income"

If that is an issue you should prepare a correct return marked "SFR Protest" at the top and send it to the iRS office that generated the original assessment. If the return passes the smell test IRS will adjust the liability to what is on the new return. If the client can't pay what he thinks he owes--including penalty and interest--then you are back to a doubt as to collectibility offer.

* Can anyone recommend resources for more questions (like these) that may arise?

CPA Academy has a free Basic OIC course that is good for two CPE Hours for EA's or CPA's.

Thanks,
xnewtaxguy

Not so. I'm sorry, but I don't believe it. The law is the same nationwide and if you handle collection cases regularly you know that.

Not trying to be snarky, but I value precision. The other reason I don't believe your statement is the verbiage that you used. NO ONE that handles collection cases would ever say, IRS "would do the payout". I've been in this business 30 years and I do know exactly what I'm talking about.

There isn't ANY IRS employee that has the ability to set up a payment agreement that will go out for 20 years. The system cannot accept such an agreement.

Been doing it 30 years myself. You may value precision. I value results. Believe or not believe what you want. I dont care. I stand by my post.

Maybe what’s going on here is that the IRS rejected the OIC…but he’s just on a current IA for $100 month…and the 20-years isn’t any kind of agreed-upon fixed term???

Kind of. To be precise, I never said they had a 20 year agreement. Just that the IRS will take almost 20 years to collect what we offered up front. The $20,000 was rejected.