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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29558
Experience:  Taxes, Immigration, Labor Relations
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Do you know if the IRS will let me make an offer in compromise

Customer Question

Do you know if the IRS will let me make an offer in compromise on penalites and interest owed on 941 taxes. The trust fund part has been paid. Also, if 941 returns were filed incorrectly can a payment arrangement or offer in compromise be made to cover these back taxes that were filed incorrectly?
Submitted: 4 years ago.
Category: Tax
Expert:  Lev replied 4 years ago.

LEV :

Hi and welcome to Just Answer!
It is possible to get OIC on trust fund liability, but that is VERY low possibility that the IRS will approve an OIC for an employer that is still in business and has ongoing payroll.
In additional - if you owe taxes, penalty and interest - any payment is applied to the interest, then to penalties - and whatever left will be applied to actual tax liability. So you may not pay tax liability without paying penalties and interest.

LEV :

Nevertheless - that is possible and an offer in compromise can be done on ANY tax liability, including payroll taxes. There are 3 types of OIC - (1)doubt of collectibility; (2)doubt of liability; and (3)effective tax administration. Most OIC are filed because of the doubt as to collectibility.
You may want to review this IRS document Control No: SBSE-05-0108-011

LEV :

The best path forward might be to ask the IRS to abate penalties, however it would be very unlikely that interest charges are abated. File a form 843 -http://www.irs.gov/pub/irs-pdf/f843.pdf
to request the "accuracy related penalty" be abate based on reasonable cause. If you provide the reason like "I forgot" - I do not think it will be considered as reasonable - so be careful when prepare an abatement request. Because your father had health issues - he has a good chance to provide a reasonable cause.
Here are instructions - http://www.irs.gov/pub/irs-pdf/i843.pdf
If the IRS accepts your reasons as reasonable - and agrees to abate penalties - at least part of the issue would be resolved.

Expert:  Lev replied 4 years ago.
Just in case you were not able to use the chat - I am switching to Q&A mode and porting the answer below.
Please feel free to communicate if you need any clarification or have other tax related issues.


Hi and welcome to Just Answer!
It is possible to get OIC on trust fund liability, but that is VERY low possibility that the IRS will approve an OIC for an employer that is still in business and has ongoing payroll.
In additional - if you owe taxes, penalty and interest - any payment is applied to the interest, then to penalties - and whatever left will be applied to actual tax liability. So you may not pay tax liability without paying penalties and interest.
Nevertheless - that is possible and an offer in compromise can be done on ANY tax liability, including payroll taxes. There are 3 types of OIC - (1)doubt of collectibility; (2)doubt of liability; and (3)effective tax administration. Most OIC are filed because of the doubt as to collectibility.
You may want to review this IRS document Control No: SBSE-05-0108-011
The best path forward might be to ask the IRS to abate penalties, however it would be very unlikely that interest charges are abated. File a form 843 -http://www.irs.gov/pub/irs-pdf/f843.pdf
to request the "accuracy related penalty" be abate based on reasonable cause. If you provide the reason like "I forgot" - I do not think it will be considered as reasonable - so be careful when prepare an abatement request. Because your father had health issues - he has a good chance to provide a reasonable cause.
Here are instructions - http://www.irs.gov/pub/irs-pdf/i843.pdf
If the IRS accepts your reasons as reasonable - and agrees to abate penalties - at least part of the issue would be resolved.