When the assets and income of a taxpayer are not enough to pay off a tax debt in full, the IRS has the authority to settle for less than the full amount owed. This is called an offer in Compromise. Most Offer in Compromise’s are rejected because they are reviewed for proper format, yet are not processed due to being formatted wrong. Offers that make it past this point at the IRS must choose the proper type of Offer.
The most common type of Offer in Compromise is Doubt as to Collectability. Because of your income and assets, a real Doubt exists that you could ever pay the tax debt in full. Doubt as to Liability is the second type of Offer. It is only used for incorrect assessments of tax. If the tax assessment can be proven to be wrong, this might be a solution to the tax debt. The third type of Offer is Effective Tax Administration. This type of Offer has been around the shortest period of time. This is used for cases of economic hardship.
Whenever a taxpayer looks at an Offer in Compromise as a solution to a tax debt, the first question should be, Is another solution available? Because of TV Commercials, many past TV commercials were done by companies put out of business by Regulatory Agencies; too many taxpayers get “tunnel vision” thinking that an Offer is the only way to go. We had a client in Georgia who believed, based on a conversation with another company that Offer in Compromise was the way to go. Turns out, he didn’t qualify for an Offer. Yet, by re-filing his returns, we were able to save him nearly $38,000 on a tax debt of $78,000!!!
After looking over a taxpayer’s situation, if the Offer in Compromise is the way to go, the first thing we do is to file a 2848 Power of Attorney. This allows us to obtain copies of all IRS Notices the IRS sends to our client. Since Federal Tax Resolution works with clients in all 50 States, we have obtained a knowledge of nationwide practices, which allows us to monitor the Offer process for any errors. Many differences of opinion of the valuation of assets in Offer negotiations happen. We use precedent to our advantage, which serves our clients well. This way your Tax Resolution proceeds forward with no hitches.