Tax Law Services, Inc.



The Offer In Compromise Program

SETTLING YOUR TAX LIABILITY:
Taxpayers now have a greater opportunity to settle their accounts with the IRS with a recent revision of the IRS's compromise policy. To facilitate the process under the new program, IRS personnel are instructed to initiate discussions of compromise and actually solicit offers when circumstances suggest that settlement of an account is warranted.

Previously, the IRS can compromise a tax debt only when there is a doubt as to liability and/or doubt as to collectibility. The new regulations allows for a compromise where:

  1. collection of the liability would create economic hardship; or
  2. exceptional circumstances exist such that collection would be detrimental to voluntary compliance; and
  3. compromise based on these hardship factors would not undermine voluntary compliance.

Factors that support a determination of economic hardship include:

  • The taxpayer is unable to earn a living because of chronic illness, medical condition, or disability, and it is reasonably foreseeable that his financial resources will be exhausted providing for care and support during the course of the condition.

  • Liquidation of the taxpayer's assets would leave him unable to meet basic living expenses.

  • The taxpayer is unable to borrow against his assets and their seizure or sale would have sufficiently adverse consequences to make enforced collection unlikely.

Other changes relate to standards for basic living expenses, offers from low-income taxpayers, administrative review of rejected offers, stays of collection activity, the dollar criteria for requiring the opinion of Chief Counsel in accepted offers, and waivers and suspensions of the statute of limitations.

The offer is submitted to the IRS on Form 656. This form should be accompanied by a completed Form 433-A or 433-B. Care must be given in making complete and accurate disclosure of the taxpayer's current financial position on the financial statement. The IRS will conduct independent verification of the information that is disclosed. If this form contains incomplete, incorrect, or inconsistent information, then the chance of getting the offer accepted by the IRS may be in jeopardy.

An offer can be paid by a cash payment, a short-term deferred payment, or a deferred payment of more than two years. If you would like a fresh start to voluntarily comply with tax laws, our firm provides assistance and guidance in settling both federal and state tax liability through the Offer in Compromise program. If you would like to meet with our attorney and/or CPA to discuss your tax and financial situation, please call our office to make an appointment at your convenience.

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