OIC/Collections Fee Question

[JohnSpadaEA]

I don't like posting fee questions, but I need some insight. Working in a small office I sometimes I lose the feel of the current market prices. What are the CPA/EA's here charging per hour for OIC and collections work?

Thanks

John

[DTS]

Oic

John,

Some months ago, a friend and I were talking one night about this very thing. I told her what my fee was for this and what a major pain they are. She told me "way to low". She, also, told me the going rate for many offices was approximately, $2,000-3,000. I think that by the time you're done with one of these, you'll agree that this range may seem too low!

I have done some OICs that were fairly easy to handle. In this case, I may lower my fee a quite a bit and be OK with this. If I see one is going to be a "pain", I will quote this range or higher without batting an eyelash!

I think this is your call as you know what your clientele will bear. Just remember, this will eat up a fair amount of your time.

Hope this helps a little. Dennis

[jainen]

Retainer

I start with a retainer to cover the initial review of financial statements and first strategy conference (about five hours work). Often that is all they need because it is obvious some other approach is more appropriate, like BK, payment plan, or ignoring the bill.

[JohnSpadaEA]

Thanks

Thanks for your input. I handle several of these cases each year and they always seem to take more time than I budget for. I reason for my post is I had a guy look at me like I had two heads because I asked for a $800 deposit on an OIC case.

John

[DTS]

Oic

John,

Did this person pay your deposit or walk?

One more suggestion, if I may. I would get the balance of the bill (if you know at this point) before you submit the OIC. I think once it's submitted, he may decide your bill is too high or whatever! It's amazing how quick they are to have you do the work and string you along with the promise of payment. Don't submit one paper until paid in full or almost in full! I'm not nagging on you, just passing on some personal experience, hopefully.

Good luck,

Dennis

[jainen]

I've never had

I agree with the pre-payment, but I never did an OIC where even 2/3 of the work was completed by the time it was submitted. That's because I've never had (and hope I never will have) an offer that the IRS gladly accepts. They always come back for more, and you have to negotiate and substantiate the offer. Then you have to deal with the client, who just refinanced his home to buy a new car and his wife got a job and doesn't want her future income to pay for his past failures and they're going to miss August 15th too.

[Lance Emerson]

This is great. I haven't done any OIC's in my own practice, sending those cases to another person. Maybe I can learn from you folks and start doing them myself. Can I pick your brains?

How often is an OIC accepted? 50%? 75%?

I saw a comment about the IRS coming back for more information. Is there a particular common point of contention?

Is the outcome based more on the actual facts and circumstances, or is there a lot of leeway depending on the mood or personality of the person you're dealing with at the IRS?

Isn't the default rate sky high for OIC clients when you don't get money up front? It would seem the folks doing OIC haven't been really good at paying their bills, and if you become just another debt on the list, how reliable is payment?

I feel like a kid in a candy shop with all you smart folks to ask these questions.

[jainen]

The problem

The problem is that IRS considers OIC to be a net-worth matter. They want the offer to include everything they could seize in current assets and future income over five years. Then they want something extra from funds they can't otherwise reach, like a loan from family members.

---We, on the other hand, want IRS to subtract out the cost of fighting us and to consider the higher tax revenue a successful fresh start can generate. We want them to waive penalties as a reward for being so honest and helpful. We want them to feel sorry for the courageous businessman dealing with dishonest employees and unfair competition and stop fussing about all the cash receipts he obviously skimmed.

I don't know what the latest stats on OIC are. I think experience has taught us to only submit workable offers and go with alternatives for clients who, for example, don't want to give up their vacation home. The math guidelines are much tighter now so you have to put together very good numbers as well as have a great storyline.

[taxfun]

According to Nina Olsen, IRS National Taxpayer Advocate, the "disposal rate" for submitted OIC's is 41%. Once appealed, the approval rate is 38% of the 58% rejected cases. There are said to be hundred of thousands of OIC cases in the line waiting for processing.

Don't even think of submitting a case unless it has a chance of approval.

[DTS]

Oic

First, a correction on the fees to charge for preparing an OIC. $3,000-5,000, not $2-3,000 that I mentioned yesterday.

Jainen and taxfun give a very good posts about what to expect from these. They will drag on and on, 2-3 years, countless requests for the same info that was previously submitted, more requests for current bank statements (to see if a financial situation now makes it possible for the TP to now pay the bill, etc.) They want to see ALL current assets at any given time.

In the cases I've seen, the most successful ones have been due to bad advice given to a
TP by someone, a professional, and they acted on this advice. Or devastating circumstances beyond ones control, such as bankruptcy.

Submitted OICs that will be doomed, I believe, are the ones where TP simply doesn't want to pay the tax bill that is due and they submit some lame excuse why they don't owe the tax. We all know this conversation!

Hope this helps a little.

Dennis

[Snow White]

From everyone's experience...

What is the average amount owed when a taxpayer starts an OIC?

[JON]

Ironic

OIC's are very math oriented from the IRS point of view. I am surprised the success rate is as high as quoted. Early 90s they wanted to get rid of cases. Then came the changes and formula related review. Slow process and taxpayer has better not be able to afford his moderate life style. The years owed are past and the current and future earnings are way down. Corresponding living expenses are right in line with those allowed in their(IRS) calculation.

Once into collections I have had better success there. Although I have not been involved in one for 4 years.

Ironic we could make $2,000-$5,000 on an offer that the taxpayer can not afford to pay his/her taxes.

[JohnSpadaEA]

Follow UP

The guy never called me back. I guess $800 was too much money in his viewpoint to start an OIC case. At this point I don't want to deal with this guy. What if I end spending 30 hours on the case. Which leads to another question, what hourly rate are you using for tax rep work? I aim to bill all my work at $100 hour, but that seems low from the some of the posts I see on here.

[S T]

Hourly

In Calif, the fees have a broad range. I know the OIC here are somewhere between $3,000 - $5,000, I don't know what that breaks down to hourly.

For other Rep work outside of tax preparation I charge $100 - $125 per hour, plus mileage, parking, etc.

Hope this helps.

Sandy