Home » Services » Tax » Offer in Compromise

Offer in Compromise

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. Absent special circumstances, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement. In most cases, the IRS will not accept an OIC unless the amount offered by the taxpayer is equal to or greater than the reasonable collection potential (RCP). The RCP is how the IRS measures the taxpayer’s ability to pay and includes the value that can be realized from the taxpayer’s assets, such as real property, automobiles, bank accounts, and other property. The RCP also includes anticipated future income, less certain amounts allowed for basic living expenses.

Three Types of OICs

The IRS may accept an offer in compromise based on three grounds: 1.Doubt as to Collectibility – Doubt exists that the taxpayer could ever pay the full amount of tax liability owed within the remainder of the statutory period for collection. Example: A taxpayer owes $20,000 for unpaid tax liabilities and agrees that the tax she owes is correct. The taxpayer’s monthly income does not meet her necessary living expenses. She does not own any real property and does not have the ability to fully pay the liability now or through monthly installment payments. 2.Doubt as to Liability – A legitimate doubt exists that the assessed tax liability is correct. Possible reasons to submit a doubt as to liability offer include: (1) the examiner made a mistake interpreting the law, (2) the examiner failed to consider the taxpayer’s evidence, or (3) the taxpayer has new evidence. Example: The taxpayer was vice president of a corporation from 2004-2005. In 2006, the corporation accrued unpaid payroll taxes, and the taxpayer was assessed a trust fund recovery penalty as a responsible party of the corporation. The taxpayer was no longer a corporate officer and had resigned from the corporation on 12/31/2005.  Since the taxpayer had resigned prior to the payroll taxes accruing and was not contacted prior to the assessment, there is legitimate doubt that the assessed tax liability is correct. 3.Effective Tax Administration – There is no doubt that the tax is correct and there is potential to collect the full amount of the tax owed, but an exceptional circumstance exists that would allow the IRS to consider an OIC. To be eligible for compromise on this basis, a taxpayer must demonstrate that the collection of the tax would create an economic hardship or would be unfair and inequitable. Example: Mr. & Mrs. Taxpayer have assets sufficient to satisfy the tax liability and provide full-time care and assistance to a dependent child, who has a serious long-term illness. It is expected that Mr. and Mrs. Taxpayer will need to use the equity in assets to provide for adequate basic living expenses and medical care for the child. There is no doubt that the tax is correct.

OIC Payment Options

In general, a taxpayer must submit a $150 application fee and initial payment along with Form 656, Offer in Compromise.  Taxpayers may choose to pay their offer in compromise in one of three payment options: 1. Lump Sum Cash Offer – Payable in non-refundable installments, the offer amount must be paid in five or fewer installments upon written notice of acceptance.  A non-refundable payment of 20 percent of the offer amount along with the $150 application fee is due upon filing the Form 656. If the offer will be paid in 5 or fewer installments in 5 months or less, the offer amount must include the realizable value of assets plus the amount that could be collected over 48 months of payments or the time remaining on the statute, whichever is less. If the offer will be paid in 5 or fewer installments in more than 5 months and within 24 months, the offer amount must include the realizable value of assets plus the amount that could be collected over 60 months of payments, or the time remaining on the statute, whichever is less. If the offer will be paid in 5 or fewer installments in more than 24 months, the offer amount must include the realizable value of assets plus the amount that could be collected over the time remaining on the statute. 2. Short Term Periodic Payment Offer – Payable in non-refundable installments; the offer amount must be paid within 24 months of the date the IRS received the offer. The first payment and the $150 application fee are due upon filing the Form 656. Regular payments must be made during the offer investigation. The offer amount must include the realizable value of assets plus the total amount the IRS could collect over 60 months of payments or the remainder of the statutory period for collection, whichever is less. 3. Deferred Periodic Payment Offer – Payable in non-refundable installments; the offer amount must be paid over the remaining statutory period for collecting the tax. The first payment and the $150 application fee are due upon filing the Form 656. Regular payments must be made during the investigation. The offer amount must include the realizable value of assets plus the total amount the IRS could collect through monthly payments during the remaining life of the statutory period for collection. The IRS is not bound by either the offer amount or the terms proposed by the taxpayer.  The OIC investigator may negotiate a different offer amount and terms, when appropriate.  The investigator may determine that the proposed offer amount is too low or the payment terms are too protracted to recommend acceptance. In this situation, the OIC investigator may advise the taxpayer as to what larger amount or different terms would likely be recommended for acceptance.

Payments and Application Fees

When filing an offer in compromise, two separate remittance documents should be sent, one for the application fee and the other for the required offer payment.  All payments should be made by check or money order made payable to the United States Treasury.  Practitioners who file multiple OICs at the same time should not combine application fees for multiple clients. The Form 656-PPV, Offer in Compromise Payment Voucher, included in Form 656, should be completed and attached to any periodic payment(s) that becomes due. Failure to submit any required periodic payments, after the initial payment has been submitted, will result in the offer being declared withdrawn.  For offers originally sent to Holtsville, NY, send payments to:  P.O. Box 9011, Holtsville, NY 11742. For offers originally sent to Memphis, TN, send payments to AMC Stop 880, P.O. Box 30834, Memphis, TN 38130-0634. The OIC application fee reduces the assessed tax or other amounts due.  The application fee will be returned if the OIC is deemed not to be processable. Unless the offer in compromise has been submitted under doubt as to liability or a completed Form 656-A and Offer in Compromise Application Fee and Payment Worksheet is included with the Form 656, the $150 application fee must be included with the offer or the IRS will return the offer.

We can Help With an OIC

An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service that settles a taxpayer's tax liabilities for less than the full amount owed. Taxpayers who can fully pay the liabilities through an installment agreement or other means, generally won't qualify for an OIC in most cases.
Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Evalúe sus nuevos ahorros tributarios,Accountants in Miami,auditoría,profesional financiero,Evalúe sus nuevos ahorros tributarios,Haga una revisión de los cambios fiscales,Haga una revisión de los cambios fiscales,contador publico,contador,planificación fiscal de fin de año para pequeñas empresas

Planificación fiscal de fin de año para pequeñas empresas

Contador público en Miami demuestra su guía lo ayudará a planearlo todo, preparándolo para el éxito. Guía de Planificación Financiera de Pequeñas Empresas Para el Año Nuevo. Leyes fiscales para las pequeñas empresas para el próximo período. Consejos de planificación fiscal para pequeñas empresas de fin de año 2020. Pasos para constituir una empresa.

Read More »
accounting firms in Miami,LLP,LLC,Corporation,bookkeeper,accountants,accountant ,CPA,How to find an accountant,Raise Venture Capital,Write a Business Plan,accountant,bookkeeper in Miami,Starting a Business,Write a business plan,accountant in Miami,How to start a Business

How to start a Business

Conduct market research. Market research will tell you if there’s an opportunity to turn your idea into a successful business. Then hire an accountant in Miami. Write a business plan. Fund your business. Pick your business location. Choose a business structure. Choose your business name. Register your business. Get federal and state tax IDs.

Read More »
contabilidad financiera,preparación de impuestos,contadores Miami,comprar o arrendar un vehículo comercial,las implicaciones de contratar a un empleado en comparación con el uso de un contratista independiente,auditoría,SBA,estados financieros,contador en Miami,QuickBooks,El flujo de caja,CPA,Accountant,declaración de impuestos,preparación de impuestos,Contador Publico,contadores,contador,contable

5 temas contable sobre las que hablar con su contador

Probablemente sea una buena idea que la mayoría de los propietarios de pequeñas empresas se concentren en el núcleo de su negocio, como vender ropa o diseñar sitios web y utilizar expertos Contador Público para ayudarlos en asuntos financieros. Según el IRS, más del 90% de las pequeñas empresas utilizan contadores para preparar sus declaración de impuestos, algo de lo que puede estar muy consciente durante la temporada de impuestos. Pero la declaración de impuestos de impuestos no es la única razón para utilizar un contador (Accountant o CPA en Inglés)

Read More »
Accountant,Certified Public Accountant,capital gains,Accountants Can Help Key Performance Indicators,Accountants Strategy For Struggling Businesses,Accountant,Why You Should I Hire an Accountant For a Small Company?,Maximize Your Accountant Relationship,Financial Statement Footnotes,Financial Statement Disclosures or Footnotes,Cost of Sales,COGS ,Cost of Goods Sold ,Last in last out accounting,LIFO accounting,First in first out accounting,FIFO accounting,accounting methods ,income before taxes,income from operations,operating expenses,Multi-Step income statement,Single Step income statement,balance sheet,income statement represents a period of time,gross profit,net profit,net income,company’s financial statement,statement of operations,operating statement,earnings statement,statement of financial performance,revenue statement,profit and loss statement,Profit & Loss,P&L,Income statement,How to read a P&L,How to read an Income Statement

How to read an Income Statement

Income statement (also referred to as profit and loss statement (P&L), revenue statement, statement of financial performance, earnings statement, operating statement, or statement of operations) is a company’s financial statement that indicates how the revenue (money received from the sale of products and services before expenses are taken out, also known as the “top line”) is transformed into the net income (the result after all revenues and expenses have been accounted for, also known as Net Profit or the “bottom line”). It displays the revenues recognized for a specific period, and the cost and expenses charged against these revenues, including write-offs (e.g., depreciation and amortization of various assets) and taxes. The purpose of the income statement is to show managers and investors whether the company made or lost money during the period being reported.

Read More »
Plan de pagos Largo Plazo,contador en miami,Plan de pago a Corto Plazo,declaración de impuestos,contadores en miami,Solicitud para un Plan de Pagos a Plazos,planes de pagos a plazos,Cuáles son los costos y cargos administrativos del plan de pagos,Qué es un plan de pagos?,plan de pagos con el IRS,Planes de Pagos con el IRS proveídos ,Planes de Pagos con el IRS proveídos Por un Contador Público en Miami,Contador,Contador Público,Contador Público en Miami

Planes de Pagos con el IRS Proveidos Por un Contador Publico en Miami

Un plan de pagos es un acuerdo con el IRS para pagar los impuestos que adeuda dentro de un plazo de tiempo ampliado. Debe solicitar un plan de pagos si cree que no podrá pagar sus impuestos en su totalidad dentro del plazo de tiempo ampliado. Si califica para un plan de pagos a corto plazo, no será responsable de un cargo administrativo. El no pagar sus impuestos cuando se vencen puede causar la presentación de un aviso de gravamen por el impuesto federal y/o una acción de embargo del IRS. Consulta con Contador Publico en Miami.

Read More »
financial accounting accounting, balance sheet, statement of financial position, statement of financial condition, balance sheet, Accountant, Accountant in Miami, Accountants in Miami, small business accounting firms, WHAT IS A BALANCE SHEET, How to read a Balance Sheet, HOW TO READ & UNDERSTAND A BALANCE SHEET, The Purpose of the Balance Sheet, Miami accountants, accounting and tax, small business cpa, auditors, small business tax accountants

How to read a Balance Sheet

How to read a balance sheet In financial accounting, a balance sheet or statement of financial position or statement of financial condition is a summary compiled by the Accountant of the financial balances of an individual or organization, whether it be a sole proprietorship, a business partnership, a corporation, private limited company or other organization such as government or not-for-profit entity. Assets, liabilities, and ownership equity are listed as of a specific date, such as the end of its financial year. A balance sheet is often described as a “snapshot of a company’s financial condition”. Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time of a business’ calendar year.

Read More »
Newsletter

Share Page

Close
Scroll to Top