Offer In Compromise

[Janitor Bob]

OK...I humbly admit to knowing NOTHING about the OIC program...Never had reason. Before I dig into this at the request of a client, Can anybody tell me up front....is this something that can help a low income single taxpayer reduce their amount they owe IRS

Client quit her job early in 2012 to run away with "Mr. Right" who was going to take care of her and treat her like a princess. Surprise! That did not work out so well....So to get by, now-unemployed client withdrew a bunch of money from her 401k to live on....so now my still unemployed client owes several thousand to IRS (as well as state and local).

Is it worth looking into OIC for her?

[[email protected]]

I have filed several successful offers in Compromise cases. One can not be filed until the tax is assessed. Then all filings must be current. It can be helpful under the right circumstances, not sure that her scenario will fit the Explanation of Circumstances, which work really well with serious illness, casualty or disaster circumstances...loss of job may be an option, however, I would leave out the princess part..lol. If the tp does not have income, they will deem her uncollectible, but the debt will continue to accrue. So you may want to look at an offer down the road. The next 5 yrs must be current and if circumstances change, the issue may come up again, but I have not encountered that. Hope this helps

[Jerry W]

J B,

I assume you are talking about making an OIC on the basis of doubt as to collectibilty. From my experience, the best time to make an OIC on this basis is when the taxpayer has little or no assets or income and their future prospects are not very good. If you get a Collection Information Statement from the client, then read and follow the 656 instructions you can make an informed judgement about whether the OIC is viable and has a chance of being accepted. IRS recently came out with some guidance on "pre-qualifying" for OICs. Here's a link.

http://www.irs.gov/Individuals/Offer-in-Compromise-1

OICs can be time consuming. If after an analysis of the client's situation, they can tell you if they want to pursue the OIC.

If they do, make sure you get a retainer up front.

If the client has little or nothing, see if they can borrow from relatives to pay you and fund the OIC too.

Good Luck,

JerryW

[MsTabbyKats]

The last time I looked into this (maybe 3 years ago), the tp had to have real obligations to get an OIC (not things like cc debt or being unemployed). They evaluated the income...and assets...and debt (I think they allowed rent, mtge, child support, car payments)....and then allowed a small living expense.

If she's just "unemployed" they assume you will eventually get a job........

However, things may have changed.

Also...there was an application fee (plus my fee)....so after explaining all of this, my client didn't want to bother.

[Richcpaman]

And it can take two years to acceptance.

And the IRS wants 20% of the offer up front. (offer of $1,000, pay $200 with the application)

If taxpayer is young, the IRS will wait. They have 20 years.

And expect to send in a new 656 and 433 every six to 12 months till acceptance.

Rich

[GeneInAlabama]

>>If taxpayer is young, the IRS will wait. They have 20 years.<<

I thought it was 10 years. I may (probably) be wrong.

[Jerry W]

>>If taxpayer is young, the IRS will wait. They have 20 years.<<

I thought it was 10 years. I may (probably) be wrong.

You are correct, assuming nothing has been done to extend the statute.

[Richcpaman]

You are correct, assuming nothing has been done to extend the statute.

Yes, it is 10 years, but the IRS will extend it. They would be stupid not too...

Rich

[SCL]

OK...I humbly admit to knowing NOTHING about the OIC program...Never had reason. Before I dig into this at the request of a client, Can anybody tell me up front....is this something that can help a low income single taxpayer reduce their amount they owe IRS

Client quit her job early in 2012 to run away with "Mr. Right" who was going to take care of her and treat her like a princess. Surprise! That did not work out so well....So to get by, now-unemployed client withdrew a bunch of money from her 401k to live on....so now my still unemployed client owes several thousand to IRS (as well as state and local).

Is it worth looking into OIC for her?

it maybe/but probably not worth it to her...it is definately not worth it to you.

[joanmcq]

She's probably better off with an installment plan or just being put into currently non collectible status. Like mentioned earlier, if she's young or has assets, the IRS will assume she either can sell assets to pay the tax bill, or will eventually find another job and be able to pay it back.