Offers in Compromise

[Jesse]

I don't mean to be stupid, but I've never worked on and OIC and am wondering what is so time consuming?
Is it the actual forms that need to be filled out?
Is it getting the information from the client that is necessary to fill out the proper forms?
The actual negotiating with the IRS?

I have a client that has not filed since 1999 and I have finally just finished all tax returns thru 2006. She is a single person that basically has next to no assets - just piddled her monies away. SE and income tax are in excess of $80,000 not including any penalties or interest. She will also have a balance due for 2007 so she is behind on her estimated payments as well so can't do an OIC at this moment.

What would one suggest whether I do the OIC or someone else does:
Send in all returns now, file 2007 ASAP and wait until accounts actually go into collection and then start OIC?
Wait until 2007 returns are completed, then send in all returns and start OIC immediately?
Other suggestions?

Would this be a good candidate for one of the pennies on a dollar people?

[joanmcq]

What is so time consuming is the records you are required to compile. 3months reciepts of ALL household expenses...3months of gas bills, electric bills, health insurance, doctor bills, prescriptions, rent or mortgage, auto insurance, auto payments, research what the FMV of the auto is, get loan balances. last tax returns, if SE, also need a last 3 months P&L from the time filed. Bank statements. Etc, etc, etc. If the client is a laggard and gets some of the stuff, and then dogs you for a few months, you've got to start all over, since its 3 months previous to the time you file the offer. If your client throws all this stuff out, then it takes at least 3 months for them to compile the required docs. This takes hours and hours and hours to compile. Then there are a lot of calls to the officer assigned to the OIC. And since your client is a deadbeat to begin with, you need to be paid up front, although if you do rudimentary calcs and determine there is no way it will get through, you can return any unused retainer, which the 'pennies on the dollars' guys won't do. If she 'piddled' her dollars away, but without piddling will have the resources to pay, she will have to pay.

[DaveO]

Another Factor

The 433a and 433b forms totally lay bare the taxpayers situtation. A level of honesty is required beyond that of tax prep. I tell my clients upfront there will be no hiding of assets or fudging on the worth of things. I have discovered that a client lied in the early phases of preparation and just sent them packing. Even if everything is current when sent in it will be 2 or 3 months before it's processed at which time the IRS may ask for updates. If it goes to appeals it's updates all over again. Our charge is comparable to the "pennies on the dollar" guys. Start to finish we will be at least $2000 maybe much more if it's complex involving several years. However no one is out more than $50 before I tell them they won't qualify.

[ED SMITH]

I'm quite surprised with the acceptance rate. It seems to be much higher than I remember a few years ago, and I thought the OIC rules were actually much "tighter". It'd be interesting to see the details, wouldn't it of actual cases accepted/rejected.

You have to be compare apples to apples as this is a good example of how to lie with statistics.

TOTAL number of offers submitted is 81926, if the number of accepted offers of 14,754, is divided by the total offers, it comes to 18%, or a failure rate of 82%.

[Black Bart]

Apples, oranges, and watermelons

Here are the figures/results per IRS on their FY 2006 OIC program:

Accepted offers - 14,734
Rejected offers - 14,945

Returned offers - 12,350
Withdrawn/terminated - 5,407

Processable offers - 47,436
Non-processable offers - 16,733

Acceptance rate - 49.6%
Returned offers - 26.0%

Acceptance rate of all processable offers disposed - 31.1%

I have to admit that Ed and Zee have a point. Also puzzled by these numbers, I thought maybe I was just too (to quote Tim Robbins) obtuse, or was looking at it the wrong way and the boardfolk might understand it.

I don't have any problem with the source -- these stats are quoted verbatim from our tax seminar's 2007 University of Illinois Federal Tax Workbook. It's a very good book and has proven to be very reliable over the years. No case details are given (sorry, Zee), but I'm fairly sure they're authenic IRS numbers (who else would have exact figures?).

The report seems overcomplicated and begs the question "Why so detailed?" Why not just subtract offers declined from offers received and that's the acceptance rate.

At first glance the opening stats of "Accepted-14,734/Rejected-13945" sounds good (50% acceptance), but it's not 50% of total offers received. Then they quote 31% acceptance in the last line, but the 31% is right only if you divide "Accepted offers" (14,734) by "Total processable offers" (47,436), which is not the same as Total offers, period.

Apparently, in order to present the thing in a favorable light, they toss out all the crumby offers first and then the acceptance rate is a percentage of the "good" offers. This, as Ed said, is a lyin' statistic.

Just last year our local post office began "upselling" -- the trendy term for the trendy practice of asking customers "Do you want fries with that?" The "old hands" didn't do it, but they hired a new clerk and every time I went in he'd say "Do you need stamped envelopes today?" At first, I thought he was just a nut (it's hard to get used to our government institutions actin' like flim-flammers) until one day something clicked/sunk in and I realized he was givin' me the McDonald's routine.

What next?

[JohnH]

Upselling

What next?
Oh, I don't know.
Maybe "Would you like a RAL for that nice tax refund?"