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OFFER IN COMPROMISE OFFERS
STATE
AND IRS GROUNDS FOR
FEES
AND WAIVERS
An
accepted offer in compromise is essentially a payment plan that
settles State and IRS personal, payroll and other
business related taxes for less than the full amount
of accumulated IRS or State back taxes, late
penalties and interest.
-
By
establishing that you have become overwhelmed,
beyond your capacity to pay the full amount of
your State or IRS tax liability (doubt as to
collectibility).
-
By
establishing that you do not owe the back taxes,
based on a provision of law (doubt as to
liability).
-
When
collection potential is greater than the
liability, but there are innocent spouse issues
or other public policy considerations that would
deem collection, as unfair (effective tax
administration).
This
article will define offer in compromise then explain
in general terms the eligibility requirements,
constraints, fees, forms and formulas associated with
a State or IRS compromise offer before providing detailed
instructions to help complete the forms and formulas.
Contents:
Introduction, Essentials, Net Realizable Equities,
Net Income, Future Income, Reasonable Collection
Potential, Process, Consumer Protection Message,
Compromise Help, Table of Contents, IRS Manual.
IRS
Form 656 contains the forms and formulas used to
calculate net realizable equities, net income,
future income and reasonable collection potential to
determine eligibility and the amount that must be
offered. Form 433A is to be completed using
tax authority imposed collection financial
standards. If you have an
ownership interest in a business and actively
participate as a manager you must also complete Form
433B and integrate the results into Form
433A.
If
you do not meet the requirements to waive the
application fee it must be remitted with the offer
at the time of submission or the proposal will be
rejected as not processable and the application fee
will be refunded. When offers are submitted
and deemed as processable the application fee is not
refundable and will be applied to the delinquent
liability.
The
offer is submitted based solely on "doubt as to
liability"
OR
A
taxpayer's total monthly income falls at or below
Department of Health and Human services poverty
standards.
When
you submit an offer you must pay a $150.00 IRS
imposed application fee except in the following two
circumstances.
There are a number of
statutory constraints associated with
the submission of an offer in compromise, that include the
following:
IRS
and State revenue agents are authorized to accept an
offer for less than the full amount of taxes owed,
based on one of three grounds.
-
Foremost:
All personal back tax
returns, employer payroll
tax and other business returns must be filed to
establish the total delinquent liability before
you can submit a processable offer.
-
When
an offer is accepted you are agreeing to comply
with several IRS contractual
terms.
-
An
offer will not be accepted based on doubt as to
collectibility when the taxpayer has the ability
to pay the total delinquent liability, unless
effective tax administrative policy exceptions
apply.
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