I personally hate the sales pitch "Settle for Pennies on the Dollar" when it comes to the IRS Offer in Compromise program. The IRS itself even recommends caution when seeing this phrase.
Not that it is entirely inaccurate. I mean, you can actually settle your back taxes with the IRS for a small fraction of what you owe. . . IF YOU QUALIFY!
The results can be amazing. My firm recently finished an Offer in Compromise ("OIC") case for a client who owed $79,000.00 in back taxes for. . . (wait for it). . . $9. Yes, you read that correctly. Nine bucks!
Now that's a record for our firm and we've been doing this for years with over 10,000 clients in our database. Does this mean that every single client of ours will settle for $9? No way. But you see how one true story about settling with the IRS can be misleading. Many of these "Pennies on the Dollar" companies will make you believe that you will settle for $9 too if you hire them. So be careful!
So is it possible to "Settle for Pennies on the Dollar?" Sure it's possible. I guess I would be looking more at probability than possibility if it were me. If it is probable (i.e., you qualify for an OIC) then there is still the question of how many pennies on the dollar will you be settling for? You can settle for 97% of your tax debt (a 3% savings) and an unethical tax company can still say they settled for "Pennies on the Dollar." But I'll bet you weren't expecting to settle for 97 pennies on the dollar. Were you?
My point is you need to go through a very thorough investigation phase before you can know for sure what your options are with an Offer in Compromise or any tax resolution path for that matter. This investigation phase takes approximately 21 to 30 days. It's purpose is to go through every single IRS file and document as well as your information and evidence and analyze the real legal options that you have.
Any attorney worth his/her fee will DEMAND that you go through this phase because it's the only way he or she can truly guarantee the exact resolution for you and your situation.
So if you're looking to truly resolve your tax situation and want more than just "Pennies on the Dollar" promises from so-called "tax experts," make sure you ask them about their Phase One Investigation process. If they don't know what you're talking about or claim that you don't need it. . . RUN FAST!
Make sure that you get experienced representation if you are going to pay good money to have your IRS situation fixed. In a future post I will go step-by-step through the OIC process so you can see if it's something you want to tackle on your own.
Tuesday, July 15, 2008
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3 comments:
I like the concept of this blog. With any luck it might even gain some traction.
I've been scouring the web for hours looking for information on what happens after your Offer in Compromise is accepted -- if anything's out there I'm sure not finding it! Here's my situation:
I entered into an OIC last year (formally accepted July, 2007). I represented myself (perhaps naively but driven by poverty) and found the process pretty straightforward. My circumstances were dire, and the settlement (without going into specifics) wound up being 1% of a mid-six-figure liability PLUS a five-year Collateral Agreement that kicks in above $50,000/year earnings. That income number wasn't an issue for me in 2007 and isn't likely to be an issue this year either; next year may be a different story.
I have two questions:
1) When and how is the "extra" tax obligation from the C.A. collected? I won't know until the end of the tax year (or at the very earliest when I actually pass the earning threshold) if I hit the target or not, but if I withhold as if I'm going to make, say, $75,000 but wind up only making $50,000 (thus not owing any additional tax under the C.A.) the IRS will certainly keep the extra withholding. Am I in danger of defaulting the OIC if I earn $75,000 but don't have the C.A. obligation withheld? I understand the requirement fully and would attach a check to my 1040 on April 15th for the "extra" tax obligation, but would there be a penalty for doing it that way and not having the entire amount withheld?
2) I'm contemplating getting married, but we are concerned about the tax implications: namely, would her income count toward calculation of the obligation under the C.A., and what is her exposure (if any) to my OIC? As I explained above, I was single when the obligation was incurred and then resolved -- so the question is simply whether her assets (for instance, she owns a house) are at risk simply by marrying me before I've fully satisfied the terms of my OIC.
Before I give my full answer in a post, please tell me what state you live in? (It matters)!
Thanks for the comment.
Jack
http://taxhelpirs.blogspot.com/
Oops -- sorry! I understand completely (community property and all that fun stuff). I/we live in Illinois.
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