Offers in Compromise

[erchess]

What is the software and what does it cost??

There is good, professional software available to help you with OIC and lots of literature available. I looked into this a service some time ago, learning everything I could, purchased the software, etc. But, I determined there was too much time involved (short and long-term) and marketing would be extremely difficult for a sole proprietor and especially a CPA that is prohibited from contingent fees. JK Harris does a reasonable job. I visited their headquarters as a prospective employee. They wanted to open a processing office in PA at the time. They charge a large upfront fee that folks would be reluctant to pay to a sole proprietor. My suggestion? It isn't worth the trouble and learning curve for one client.

and can you post or PM to me a link to it?

[Zee]

There is good, professional software available to help you with OIC and lots of literature available. I looked into this a service some time ago, learning everything I could, purchased the software, etc. But, I determined there was too much time involved (short and long-term) and marketing would be extremely difficult for a sole proprietor and especially a CPA that is prohibited from contingent fees. JK Harris does a reasonable job. I visited their headquarters as a prospective employee. They wanted to open a processing office in PA at the time. They charge a large upfront fee that folks would be reluctant to pay to a sole proprietor. My suggestion? It isn't worth the trouble and learning curve for one client.

[snowbird]

CPE for OIC?

Does anyone know of some good CPE material or attended a seminar on OIC? This is an area that may be good part-time work. My non-tax background includes a lot of negotiations … my previous employer sent me through Karrass, etc. I discussed this idea with a couple of CPA’s and they were surprised that I would want to do it. They said most of the people are not their clients, it’s time consuming, and inconvenient … sounds perfect for a retiree that has more time than an IRS agent.

PS: I know Glooge provides a ton of CPE opportunites on OIC, but I asking for personal experience.

[JoshinNC]

Here's the formula, as best I understand it

This topic is not really "taxation" so much as it is "dealing with the IRS."

A friend (not a client) has approached me about assistance in trying to favorably settle a $50,000 debt with IRS. The first thing I did was examine the last 3 years returns in an attempt to reduce the tax by filing amended returns. The original returns were self-prepared on TurboTax. I refiled two years and have reduced the debt to under $40,000.

She talked with IRS collection people and they sent her IRS literature about Offers in Compromise. There are all manner of misconceptions fostered by this. Firstly, sending the literature leaves the impression that the IRS routinely reduces indebtedness. Secondly, the impression with this woman is that can protect assets and get away with paying less than she owes. Additionally, she has been watching TV commercials where certain tax offices can get the IRS to settle for "pennies on the dollar."

Is there a good website I can visit to get pointers? (Not an IRS website -- but one who deals in real-life terms and experiences) Specifically, are there ANY assets (such as her home) that they exempt from seizure or attachment?

I only know this because I was able to befriend a revenue officer who used to work OIC's. Basically they have you document all of the client's income/expenses to determine the "net amount available" each month. Then you figure all of the client's assets at lesser of tax value or FMV, minus 20% (quick sale value). If this value exceeds the liability against the asset that amount is deemed collectible. You then add this value to the monthly "net amount available" multiplied by 48 months and that is the minimum amount they will accept.

Example:

Client clears $2000 after taxes per month with monthly expenses of $1800. Client also owns property with a tax value of $100,000, FMV of $120,000 and liabilities of $75,000. 80% of tax value is $80,000, which exceeds liability by $5000. Client's monthly disposable income is $200, which is $9600 when multiplied by 48 months. Lowest offer they will accept is $14,600 ($5000 + $9600).

If the client doesn't have any equity in thier property and is running paycheck to paycheck they will offer to put her in "uncollectible status" and will review in 18-36 months to see if the situation has changed. If there are collectible assets and no chance that income/equity levels will substantially change any time soon you have a candidate for the OIC.

My suggestion is to find out who is assigned to the case from your local IRS office and contact them directly. Set up a face to face meeting and bring as much income/expense documentation as you can get. And DON'T let the taxpayer go with you (assumes you're an EA or CPA).

Good luck!

[Jiggers]

OIC's

Don't try this one on your own if you have never done one. Seek competent advise from an EA or CPA that has vast experience in this area.

Don't use those OIC mills that advertise on TV. They take your fee and really don't help you.

An OIC requires extensive documentation.

If there are any assets, including the home, the IRS wants you to either sell or mortgage to obtain the funds to pay off the debt. If there are too many assets, no OIC.

If there is a lot of income, no OIC.

Don't forget that a large down payment is required, and if the OIC is denied, which it will be, the IRS will get to keep the down payment.

[Golden Rocket]

This topic is not really "taxation" so much as it is "dealing with the IRS."

A friend (not a client) has approached me about assistance in trying to favorably settle a $50,000 debt with IRS. The first thing I did was examine the last 3 years returns in an attempt to reduce the tax by filing amended returns. The original returns were self-prepared on TurboTax. I refiled two years and have reduced the debt to under $40,000.

She talked with IRS collection people and they sent her IRS literature about Offers in Compromise. There are all manner of misconceptions fostered by this. Firstly, sending the literature leaves the impression that the IRS routinely reduces indebtedness. Secondly, the impression with this woman is that can protect assets and get away with paying less than she owes. Additionally, she has been watching TV commercials where certain tax offices can get the IRS to settle for "pennies on the dollar."

Is there a good website I can visit to get pointers? (Not an IRS website -- but one who deals in real-life terms and experiences) Specifically, are there ANY assets (such as her home) that they exempt from seizure or attachment?