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Feb 7, 2014
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Successful Offer in Compromise | Flat Fee Tax Service | San Diego
Updated: Apr 24
Flat Fee Tax Service has a record of excellence regarding our IRS Offer in Compromise submissions. Currently, our IRS tax professionals have a 96% success rate because we only submit IRS settlement offers that are qualified and eligible for an IRS Fresh Start.
Although the IRS Offer in Compromise program has been around for decades, the IRS Fresh Start Initiative is relatively new. The IRS Offer in Compromise program serves the best interests of all concerned, enabling the government collect what it can from a financially struggling taxpayer and relieving the taxpayer of a tax burden he/she cannot pay. Previously, the offer in compromise program had become nothing better than a “drop dead department.”
In years past, the minimum offer the IRS would accept was the sum of the net realizable equity of the taxpayer’s assets (NRE) and the taxpayer’s reasonable collection potential (RCP). The starting point for determining RCP was the excess of the taxpayer’s monthly income over expenses. In the case of an individual taxpayer, the expenses were not the taxpayer’s actual expenses, but allowable expenses determined by applying collection financial standards. The difference was then multiplied by sixty (60). Sixty (60) was the number of months used by the IRS for payment agreements.
Collection financial standards consist of national standards for food, clothing, and other items; national standards for out-of-pocket health care items; local standards for housing and utilities; and local standards for transportation (comprised of public transportation costs, vehicle ownership costs, and vehicle operating costs).
EVERYONE’S FINANCIALS ARE DIFFERENT.
Flat Fee Tax Service has clients who have settled their IRS tax debt for as little as $100.00. We have had clients who settled their IRS income tax debt with $50 per month payments stretched out for 24 months. During our initial consultation, we can determine whether or not you are eligible and qualified for the Offer in Compromise program.
THE IRS HAS RELAXED AND EXPANDED THE OFFER IN COMPROMISE PROGRAM.
The Internal Revenue Manual now specifically provides, “Consideration should be given to the taxpayer’s overall general situation including such facts as age, health, marital status, number and age of dependents, level of education or occupational training, and work experience.”
a. Net realizable equity (NRE) in assets is defined as quick sale value (QSV), fewer amounts owed to secured lien holders with priority over the federal tax lien, if any, and applicable exemption amounts. QSV is defined as an estimate of the price a seller could get for the asset in a situation where financial pressures motivate the owner to sell in a short period of time, usually 90 calendar days or less. QSV is normally calculated at 80% of fair market value (FMV).
b. Funds held in your retirement or profit sharing plan are considered an asset and must be valued for settlement offer purposes. But if the plan may not be borrowed on or liquidated until separation from employment and the taxpayer has no ability to access the funds within the period of the offer, and the taxpayer is not eligible to retire until after the period being used to calculate future income (either 12 months or 24 months, under the new settlement program), then the taxpayer is considered to have no equity in the plan.
c. If the taxpayer uses a car for work, then $3,450 should be deducted from its QSV otherwise determined.
d. If the taxpayer is self-employed, i.e., not a wage earner, and the taxpayer’s income fluctuates, then the taxpayer may income average over the last three years in determining reasonable collection potential (RCP), if that is less than the taxpayer’s income for the most recent year.
If the taxpayer’s vehicle is more than six years old or has more than 75,000 miles on it, $200 should be added to the taxpayer’s monthly vehicle operating expense otherwise allowable.
The taxpayer may deduct expenses in excess of those allowed by the collection financial standards, by proving that they necessary for the health or welfare of the taxpayer or the taxpayer’s family, or for the production of income.
FLAT FEE TAX SERVICE RECOMMENDS USING
AN EXPERIENCED IRS TAX PROFESSIONALS.
The IRS will now accept an offer in compromise from an operating business which was once unheard of. The IRS cannot accept an offer in compromise from a business entity if there are trust fund taxes which need to be personally assessed against “responsible persons” with respect to the entity those who control the entity’s available cash, i.e. have the ability to prefer other creditors over the United States. “Trust fund taxes” are Social Security tax, Medicare tax, and federal income tax withheld from employees’ wages but not remitted to the IRS. An assessment of trust fund taxes against a responsible person is called a trust fund recovery penalty.
Before making an offer in compromise, a business entity should ascertain whether it has unpaid trust fund taxes. If your business does have unpaid trust fund taxes, it can still make a settlement offer, provided the amount it is offering is at least as much as its unpaid trust fund taxes, and it designates payments on the offer as against its unpaid trust fund taxes. This way, payments on the offer will also discharge the trust fund obligation with respect to the entity.
The new IRS Fresh Start Initiative offer in compromise program is of undetermined duration. What the IRS gives, the IRS can take away.
If you qualify for an IRS Fresh Start settlement, you should take advantage of the IRS program now.
Call for your free and confidential consultation: 1-866-747-7435