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Experience:  over 40 years experience in tax matters
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Tax question. I have filed an extenstion for 2011 federal taxes.

Resolved Question:

Tax question. I have filed an extenstion for 2011 federal taxes. I estimate that I owe about $30,000 for 2011. I do not have the money to pay these taxes. What would you suggest as far as hiring an attorney to negotiate these taxes down or is that even possible since I am only one year behind and if they are negotiable how much would the irs negotiate?
Submitted: 2 years ago.
Category: Tax
Expert:  Robin D. replied 2 years ago.

Robin D :

Hello and thank you for using Just Answer,
Unfortunatly, these taxes are not able to be "negotiated down" as you state. What you are suggesting is an Offer In Compromise.


An offer in compromise allows you to settle your tax debt for less than the full amount you owe. It may be a legitimate option if you can't pay your full tax liability, or doing so creates a financial hardship. The IRS connsiders your unique set of facts and circumstances:



  • Ability to pay;

  • Income;

  • Expenses; and

  • Asset equity.

    They generally approve an offer in compromise when the amount offered represents the most they can expect to collect within a reasonable period of time. An Installment agreement to pay the debt must first be looked to.

Robin D :

If the IRS thinks they can obtain the full amount and OIC is not allowed.

Robin D :

In most cases, the IRS will not accept an OIC unless the amount offered by the taxpayer is equal to or greater than the reasonable collection potential (the RCP). The RCP is how the IRS measures the taxpayer's ability to pay. The RCP includes the value that can be realized from the taxpayer's assets, such as real property, automobiles, bank accounts, and other property. In addition to property, the RCP also includes anticipated future income, less certain amounts allowed for basic living expenses.
Do not believe any claim of pennies on the dollar.



We have recently implemented a new rating and feedback system. Please be aware that you are rating my courtesy and service as a professional, and not necessarily whether you like the information that you are receiving.

Customer:

to vague

Robin D :

The answer may appear vague but everything hinges on your assets and income. Your potential to pay is what will be used to determine. There is no dollar amount or percentage that is the magic amount to offer .

Customer:

what is the best way to go about this process?

Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7870
Experience: 15years with H & R Block. Divisional leader, Instructor
Robin D. and other Tax Specialists are ready to help you
Expert:  CGCPA replied 2 years ago.

Welcome to Just Answer. I am here to help you resolve your tax and finance concerns. Please feel free to ask anytime you need extra help.

New expert here.

Here is how I would recommend that you proceed:

1.Recognizing that the IRS has a 10 year statute of limitations and that they will permit you to live at the preposterous income after they take from your earnings, 150% of the poverty level for your household size and region, determine how much that is. You will need to do a bit of research on the poverty level for your region.

2.Compare that allowable "living income" to your present income. We will call the remainder a "payable income" and this should be computed on a monthly basis. If this, over 10 years (120 months) will pay off the majority of the tax debt that is the minimum the IRS will accept for an Offer In Compromise. They do not care that you may need to make serious lifestyle changes. It is just not viewed as their problem.

3.Look at your assets. If the IRS determines there is a substantial net worth to be seized they will be willing to do this if other arrangements are not made.

4.Once the above review of your personal life has been made file the returns and begin the Offer In Compromise forms for submission. The IRS cannot compromise any tax debt until the returns are filed and the debt is recorded by them. I will provide a link to an IRS page about the Offer In Compromise program after my remarks.

Remember that a payment plan is better than an Offer In Compromise and that the shorter the period of the payment plan the better. You will also be asked to substantiate that you are taking steps to prevent this problem from happening again. As you go through the material and prepare the forms please feel free to return if you need additional assistance. My next post will include material on both payment plans and offers in compromise.

Expert:  CGCPA replied 2 years ago.









Payment Plans, Installment Agreements










You can make monthly payments through an installment agreement if you're not
financially able to pay
your tax debt immediately. However, you will reduce
or eliminate the amount of penalties and interest you pay and avoid the fee
associated with setting up an installment agreement if you pay your tax bill in
full. Before you apply:


  • File all required tax returns;
  • Consider other sources (loan or credit card) to pay your tax debt in full to
    save money;
  • Determine the largest monthly payment you can make ($25 minimum); and
  • Know that your future refunds will be applied to your tax debt until it is
    paid in full.

Avoid the fee for setting up an installment agreement


Pay the full amount you owe within 120 days to avoid the fee. You should
apply online to specify this option (or call if you owe more than $50,000). If
you cannot pay the full amount within 120 days, the fee for setting up an
agreement is:



  • $52 for a direct debit agreement;
  • $105 for a standard agreement or payroll deduction agreement; or
  • $43 if your income is below a certain level.

Apply for an installment agreement



Understand your agreement, avoid default


To keep your account in good standing:



  • Pay at least your minimum monthly payment when it's due (direct debit or
    payroll deductions make this easy);
  • Include your name, address, SSN, daytime phone number, tax year and return
    type on your payment;
  • File all required tax returns on time;
  • Pay all taxes you owe in full and on time (contact us to change your
    existing agreement if you cannot);
  • Continue to make all scheduled payments even if we apply your refund to your
    account balance; and
  • Ensure your statement is sent to the correct address, contact us if you move
    or complete and mail Form 8822, Change of
    Address
    (PDF).

If you don't receive your statement, send your payment to the address listed
in your agreement.


There may be a reinstatement fee if your agreement goes into default.
Penalties and interest continue to accrue until your balance is paid in full. If
you are in danger of defaulting on your payment agreement for any reason,
contact the IRS immediately. The IRS will generally not take enforced collection
actions
:



  • When an installment agreement is being considered;
  • While an agreement is in effect;
  • For 30 days after a request is rejected, or
  • During the period the IRS evaluates an appeal of a rejected or terminated
    agreement.


<< Make a
Payment


Get Help



Icon of cover of printed Publication 594

Pub. 594: IRS
Collection Process

Explains the actions IRS may take to
recover taxes owed. Download Pub. 594
(PDF)

Expert:  CGCPA replied 2 years ago.









Offer in Compromise










An offer in compromise allows you to settle your tax debt for less than the
full amount you owe. It may be a legitimate option if you can't pay your full
tax liability, or doing so creates a financial hardship. We consider your unique
set of facts and circumstances:


  • Ability to pay;
  • Income;
  • Expenses; and
  • Asset equity.

We generally approve an offer in compromise when the amount offered
represents the most we can expect to collect within a reasonable period of time.
Explore all other payment options before submitting an offer in compromise. The
Offer in Compromise program is not for everyone. If you hire a tax professional to
help you file an offer, be sure to check his or her qualifications.


Make sure you are eligible


Before we can consider your offer, you must be current with all filing and
payment requirements. You are not eligible if you are in an open bankruptcy
proceeding.


Submit your offer


You'll find step-by-step instructions and all the forms for submitting an
offer in the Offer in Compromise Booklet, Form
656-B
(PDF). You can also view the "Complete
Form 656" video
. Your completed offer package will include:



  • Form 433-A (OIC) (individuals) or 433-B (OIC) (businesses) and all required
    documentation as specified on the forms;
  • Form 656(s) - individual and business tax debt (Corporation/ LLC/
    Partnership) must be submitted on separate Form 656;
  • $150 application fee (non-refundable); and
  • Initial payment (non-refundable) for each Form 656.

Select a payment option


Your initial payment will vary based on your offer and the payment option you
choose:



  • Lump Sum Cash: Submit an initial payment of 20 percent of
    the total offer amount with your application. Wait for written acceptance, then
    pay the remaining balance of the offer in five or fewer payments.
  • Periodic Payment: Submit your initial payment with your
    application. Continue to pay the remaining balance in monthly installments while
    the IRS considers your offer. If accepted, continue to pay monthly until it is
    paid in full.

If you meet the Low Income Certification guidelines, you do not have to send
the application fee or the initial payment and you will not need to make monthly
installments during the evaluation of your offer. See your application package
for details.


Understand the process


While your offer is being evaluated:



  • Your non-refundable payments and fees will be applied to the tax liability
    (you may designate payments to a specific tax year and tax debt);
  • A Notice of Federal Tax Lien may be filed;
  • Other collection activities are suspended;
  • The legal assessment and collection period is extended;
  • Make all required payments associated with your offer;
  • You are not required to make payments on an existing installment agreement;
    and
  • Your offer is automatically accepted if the IRS does not make a
    determination within two years of the IRS receipt date.









If your
offer is accepted
If your
offer is rejected


  • You must meet all the Offer Terms listed in Section
    8
    of Form 656, including filing all required tax returns and making all
    payments;
  • Any refunds due within the calendar year in which your offer is accepted
    will be applied to your tax debt;
  • Federal tax liens are not released until your offer terms are satisfied; and

  • Certain offer information is available for public review at designated IRS
    offices
    .


  • You may appeal a rejection within 30 days using Request for Appeal of Offer
    in Compromise, Form 13711
CGCPA, CPA
Category: Tax
Satisfied Customers: 3742
Experience: over 40 years experience in tax matters
CGCPA and other Tax Specialists are ready to help you

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