An offer in compromise can put IRS troubles behind you and bring a fresh start on your taxes.
But the road to a fresh start with the IRS is not necessarily as simple as it may sound.
The IRS has very strict criteria that they use to determine if a tax debt should be compromised.
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Before jumping in with a compromise, there is much you need to know about the IRS settlement process, including:
– Whether you should even file an offer in compromise. For example, if the IRS has a limited time left to collect your debt (out of the 10 year period they are given by law), should you jump in or remain on the sidelines? Sometimes, it is better to hold ’em, but you need to know when.
– What are your chances of success. The IRS rejects more comprises than it accepts, due in part to its rigorous financial guidelines that are used to determine if they should settle or if they believe they can get paid in full. Know if your situation merits the time invested to settle ahead of time.
– How to use the internal IRS criteria to negotiate the best settlement. It is important to know the IRS offer in compromise valuation formula before jumping in. Do you make too much to settle? What if you spend too much and the IRS wants you to cut your budget so you can pay them more? The IRS has specific formulas that are used in valuing a compromise that should be reviewed and applied to your situation before jumping in.
– The best ways to handle the full financial disclosure that the IRS requires. The IRS wants to know where you work, bank, the amount in your retirement accounts, what cars you drive, what your house is worth, what you make, and what you spend. What if your income varies year to year, and right now it is at a high? What income do you pick (hint: the IRS permits income-averaging over several years to even out the highs and lows)?
– How to complete the IRS financial statements and compromise forms. For example, the IRS guidelines permit you to reduce the value of your cars and house by 20% on the financial statements, effectively lowering the value of your compromise by 20%. Proper completion of the forms can result in significant savings in settlement.
– Your rights to dispute an IRS rejection of an offer in compromise. Maybe they think your home is worth more than it is. Or aren’t allowing you necessary living expenses. Or think you earn more than you do or will in the fixture. Either way, any IRS compromise decision is subject to an independent review by the IRS Office of Appeals. Many offers that are initially turned down are ultimately accepted by appeals.
Success with an offer in compromise is based on knowing the IRS’s settlement guidelines, understanding how to apply those rules to your situation, and responding if the IRS does not properly follow and implement them.
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If you think that you may need help filing your 2018/2019 tax return and past due tax returns, you may want to partner with a reputable tax relief company who can help you get the max refund and reduce your chances for an IRS AUDIT.
Advance Tax Relief is headquartered in Houston, TX with a branch office in Los Angeles, CA. We help many individuals just like you solve a wide variety of IRS and State tax issues, including penalty waivers, wage garnishments, bank levy, tax audit representation, back tax return preparation, small business form 941 tax issues, the IRS Fresh Start Initiative, Offer In Compromise and much more. Our Top Tax Attorneys, Accountants and Tax Experts are standing by ready to help you resolve or settle your IRS back tax problems.
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