Tax Settlement Companies – Offer in Compromise
How can you tell a great Tax Settlement Company?
Look at us, AZ Tax Agents. We are one of the true authorities on Offer in Compromise. We are affordable, friendly and accessible.
We are comprised of Board Certified Tax Attorneys, CPA’s and Former IRS Agents, Former IRS Instructors and Former IRS Managers. We have a combined 60 years of direct IRS working experience in the local, district and regional offices of the IRS.
We taught Tax Law at the IRS and also taught the Offer in Compromise Program. (Tax Settlements) We have successfully worked thousands of cases since 1982 and we are “A” rated by the Better Business Bureau.
Beware: There are many tax scam tax settlement companies that exist on the internet. Many of these companies sign you up then sell your information to the highest bidder. These salespeople have no or little if any professional knowledge about offers in compromise. Companies like J.K. Harris, Ron Duetche, and Tax Master have all been closed the Attorney Generals office.
Make sure you are dealing with a reputable company. Check out their professional credentials, check the firm bio page for their skill level and experience and lastly check the tax settlement companies BBB Rating.
What is a Tax Settlement or an Offer in Compromise?
An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service that settles the taxpayer’s tax liabilities for less than the full amount owed. If the liabilities can be fully paid through an installment agreement or other means, the taxpayer will in not be eligible for an OIC or tax settlement.
The IRS will not accept an OIC unless the amount offered by the taxpayer is equal to or greater than the reasonable collection potential (the RCP).
The Reasonable Collection Potential is how the IRS measures the taxpayer’s ability to pay. The RCP includes the value that can be realized from the taxpayer’s assets, such as real property, automobiles, bank accounts, and other property. In addition to property, the RCP also includes anticipated future income.
The IRS may accept an OIC based on three grounds:
acceptance is permitted if there is doubt as to liability. This ground is only met when genuine doubt exists that the IRS has correctly determined the amount owed.
acceptance is permitted if there is a doubt that the amount owed is collectible. This means that doubt exists in any case where the taxpayer’s assets and income are less than the full amount of the tax liability.
acceptance is permitted based on effective tax administration. An offer may be accepted based on effective tax administration when there is no doubt that the full amount owed can be collected, but requiring payment in full would either create an economic hardship or would be unfair and inequitable because of exceptional circumstances.
A solid tax settlement company will always evaluate your case before taking your money.
The New Fresh Start Program:
The “Fresh Start” initiative is offering more flexible terms to its Offer in Compromise (OIC) program that will enable financially distressed taxpayers to clear up their tax situation more faster than in the past.
The financial analysis used to determine which taxpayers qualify for an Offer in Compromise. This enables some taxpayers to resolve their tax problems in as little as two years compared to four or five years in the past.
The changes announced include:
1. Revising the calculation for the taxpayer’s future income.
2. Allowing taxpayers to repay their student loans.
3. Allowing taxpayers to pay state and local delinquent taxes.
4. Expanding the Allowable Living Expense allowance category and amount.
When the IRS calculates a taxpayer’s reasonable collection potential, it will now look at only one year of future income for offers paid in five or fewer months, down from four years, and two years of future income for offers paid in six to 24 months, down from five years. All offers must be fully paid within 24 months of the date the offer is accepted. The Form 656-B, Offer in Compromise Booklet, and Form 656, Offer in Compromise, has been revised to reflect the changes.
Other changes to the program include narrowed parameters and clarification of when a dissipated asset will be included in the calculation of reasonable collection potential. In addition, equity in income producing assets generally will not be included in the calculation of reasonable collection potential for on-going businesses.