The offer in compromise with the IRS…does this strategy work?

Yes, sometimes.

Like so many matters, pursued by an experienced professional who handles many of these, and can therefore anticipate what is needed, what works and what doesn’t work, an Offer In Compromise can be an extremely important and valuable part of a tax resolution program.

Simply stated an Offer In Compromise proposes a less then full resolution of an unpaid tax obligation. Keep in mind however that the service considers the unpaid interest and penalties as important as the tax itself, thus the entire obligation principle, interest and penalties are subject to collection, and while many believe that they will “knock of the penalties or interest if you offer to pay the tax, it just is not so.

I urge you however to obtain the help of a professional as there is much to consider and frankly you do not want to experiment on your own offer, as mistakes can be extremely costly.

First lets remove one huge misconception, the IRS does not as a rule negotiate.

There are moments when a decision can be insignificantly adjusted, but for the greatest majority of the times, the Service has separated  decision making,  so the offer is handled by a committee and not the revenue officer you may be assigned the collection responsibility  and thus working with you. There are  rules and equations and a system with checks and balances so the concept of negotiation is not realistic.

What is in play is understanding how the service computes a satisfactory offer, as it has its methods which must be thoroughly understood to successfully navigate the barriers and succeed in having an offer accepted. These measuring and evaluation devices are public and are typically sent to you or included in an offer to compromise package available from the IRS or on line.

The real creativity comes with arranging your financial affairs to best reflect the reality you may want to project. This does not mean miss-stating your assets or liabilities, never do that, but it does mean you are entitled to do whatever is in your legal power to pay as little tax as you can including organizing and presenting your financial position in the best light possible for your needs.

One must be able to demonstrate that your offer properly reflects your economic reality and supports your offer in compromise and this requires skill, requiring the experience of a seasoned professional to best determine, design and reflect whats possible and what will work.

While some may say the facts are the facts, and while this is very true, the presentation of the facts and the preperation of your financial condition in consideration of disclosing the facts are all part of the process and understood by the trained expert and not so obvious to the individual.

There are many re-organizational opportunities awaiting your consideration without violating tax liens, that can have a dramatic effect on the outcome.

Protecting ones home is a very important aspect of asset planning and can be a major consideration but must be executed appropriately and with the cooperation of the service, but can be done.

One has a few choices which must be effectively made which are part of the application process. Specfically indicating why the taxpayer is asking for relief and on what grounds.

Finally there is support documentation  required by the service. Usually not a problem.

Most important is to understand that success comes with compliance with the statute not negotiating against it, but if you do comply and present an accurate recitation of your financial condition that supports your workout request, you have a reasonably good chance to succeed.

We succesfuly submit many Offers In Compromise, and when successful its a wonderful benefit for the tax payer. It can take 6-12 months and can be very frustrating as they ask for the same documentation that you have already given them time and again, but with patience they eventually get it all together and come to a decision. That’s the good news, in the end it can be made to work for you.

So yes under the proper circumstances an Offer In Compromise is an excellent tool to reduce you tax debt and resolve the matter. A conclusion can include a lump sum payoff, a 90 day payout or even a two year or longer payout. Remember however that the lien remains in place effecting you and all your assets until the final payment is made.

Good luck call for help if you need it. 413-549-2966