Frequently Asked Questions
What are the requirements to represent me before the IRS?
Generally, only a tax attorney, CPA, or Enrolled Agent can represent taxpayers
before the IRS. But only tax attorneys are accountable to a Bar Association in which the "highest ethical standards" are enforced. If you are represented by someone other than a tax attorney, that person can be forced to testify against you in court if the IRS brings a criminal action against you. Only a tax attorney can protect you by claiming the attorney-client privilege. Enrolled agents have neither Bar Association accountability nor are they required to maintain a confidential relationship with a tax client.
What can you do that I can't do for myself?
First, you may always represent yourself before the IRS, but many taxpayers find dealing with the IRS too frustrating and time-consuming. Further, a qualified tax attorney can recommend planning steps that can legally and ethically reduce the amount of an acceptable offer (settlement). Additionally, the national Offer in Compromise acceptance rate, without professional representation, is 18%. Ours is nearly 5 times higher!
Is the IRS required to give me a payment plan?
If you owe the IRS less than $10,000 of tax and it can be paid in 5 years, you have the legal right to a payment plan. The IRS also has a streamlined plan that can be arranged if you owe a total of less than $25,000 including penalty and interest, and if it can be repaid in 5 years. This is not a legal right, but it is IRS policy.
How is the amount of the offer calculated in an Offer in Compromise?
There are two parts to the formula. The first is the equity in assets you own, the second is based on the income you have available each month after paying for allowable expenses, multiplied by a factor of 48 or 60.
How many different types of Offers in Compromise are there?
There are basically 3 types: doubt as to liability; doubt as to collectibility; and effective tax administration. The most common type is the doubt as to collectibility.
Are there any other solutions to tax problems other than an Offer in Compromise?
There are numerous other solutions. For example, Installment Agreements, Bankruptcy, Innocent Spouse Relief, Penalty Abatement, Currently Uncollectible Status, and Statute of Limitations review. There is always a way to resolve a tax problem.
How long does it take for an Offer in Compromise to be decided by the IRS?
Generally, you must allow 6-12 months. If we take it to Appeals, it could take longer. But, no matter how long it takes, the IRS normally suspends all collection activities while the offer is pending..
I have not filed returns for a number of years. Is it too late to reach a settlement and get a fresh start?
NO. All legally required returns must be filed to do either an Offer in Compromise or an Installment Agreement Plan. We will advise you in how to bring your tax filings current and formulate a strategy to resolve your tax debt permanently. For many taxpayers, this typically leads to an Offer in Compromise, Tax Bankruptcy, Monthly Installment Payment Plan, or a request for the Abatement of Penalties.
People have told me, that once approved, the Offer in Compromise is a legal binding contract. What does that mean?
The IRS can revoke your approved Offer in Compromise if you fail to timely file and pay your taxes for five years after the offer is approved. This is why some people choose a Tax Bankruptcy which results in a federal court order discharging their back taxes. The IRS cannot revoke a federal court order.
Will an Offer in Compromise show up on my Credit Report?
NO. Unlike a bankruptcy or credit card charge off, an Offer in Compromise does not get reported to the credit reporting agencies. An offer in compromise will not negatively affect your credit score. However, ignoring the problem will cause the IRS to file a notice of federal Tax Lien, with your county recorder, which WILL show up on your credit report.
Even though I am presently making installment payments can I still do an Offer in Compromise?
YES! And in most cases the installment agreement can be suspended while the IRS is evaluating your Offer in Compromise. Our experience in dealing with this issue has been that generally taxpayers are persuaded by the IRS to enter into payment plans they simply can't afford anyway. We analyze our client's financial situation, and in many cases, have them classified, by the IRS, as "currently not collectible", and therefore they are no longer required to make monthly payments, prior to the submission of the Offer.