Reductions & Resolutions
The Shields Tax Consulting Group has the experience to help you with debt settlement, tax settlement, IRS tax assistance, tax form completion and other IRS issues.
Settlement – Offer in Compromise
An Offer in Compromise (OIC) is an agreement between a taxpayer (or company) and the Internal Revenue Service that settles the taxpayer’s tax liabilities for less than the full amount owed. Absent special circumstances, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through an Installment Agreement.
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 (RCP). The RCP is how the IRS measures the taxpayer’s ability to pay and includes the value that can be realized from the taxpayer’s assets, such as real property, automobiles, bank accounts, and other assets. The RCP also includes anticipated future income, less certain amounts allowed for basic living expenses.
Shields Tax Consulting CPAs are extremely versed in the requirements necessary to get you qualified for settlement under the IRS Offer in Compromise program. Because of the tens or hundreds of thousands of dollars that are at risk, it is critical to have your OIC prepared by a competent firm, such as Shields Tax Consulting. We will meticulously review your OIC Application (Form 865), your Collections Information Statement (Form 433 F), your Collection Information Statement for Wage Earners and Self-Employed Individuals (Form 433 A) and, if applicable your Collection Information Statement for Business (Form 433 B). These forms and applications represent 20 pages and hundreds of lines of information that can mean the difference between a successful “pennies on the dollar settlement” or a rejection of your Offer in Compromise application.
Contact a Shields Tax consultant to see what settlement number you qualify for.
Three Types of OICs
The IRS may accept an offer in compromise based on three conditions:
Doubt as to Collectability - Doubt exists that the taxpayer could ever pay the full amount of tax liability owed within the remainder of the statutory period for collection.
Doubt as to Liability - A legitimate doubt exists that the assessed tax liability is correct. Possible reasons to submit a doubt as to liability offer include: (1) the examiner made a mistake interpreting the law, (2) the examiner failed to consider the taxpayer’s evidence or (3) the taxpayer has new evidence.
Effective Tax Administration - There is no doubt that the tax is correct and there is potential to collect the full amount of the tax owed, but an exceptional circumstance exists that would allow the IRS to consider an OIC. To be eligible for compromise on this basis, a taxpayer must demonstrate that the collection of the tax would create an economic hardship or would be unfair and inequitable.
OIC Payment Options
Lump Sum Cash Offer - Payable in installments, the offer amount must be paid in five or fewer installments upon written notice of acceptance.
If the offer will be paid in 5 or fewer installments in 5 months or less, the offer amount must include the realizable value of assets plus the amount that could be collected over 48 months of payments or the time remaining on the statute, whichever is less.
If the offer will be paid in 5 or fewer installments in more than 5 months and within 24 months, the offer amount must include the realizable value of assets plus the amount that could be collected over 60 months of payments, or the time remaining on the statute, whichever is less.
If the offer will be paid in 5 or fewer installments in more than 24 months, the offer amount must include the realizable value of assets plus the amount that could be collected over the time remaining on the statute.
Short Term Periodic Payment Offer - Payable in installments; the offer amount must be paid within 24 months of the date the IRS received the offer. The offer amount must include the realizable value of assets plus the total amount the IRS could collect over 60 months of payments or the remainder of the statutory period for collection, whichever is less.
Deferred Periodic Payment Offer - Payable in installments; the offer amount must be paid over the remaining statutory period for collecting the tax.
The offer amount must include the realizable value of assets plus the total amount the IRS could collect through monthly payments during the remaining life of the statutory period for collection.
The IRS is not bound by either the offer amount or the terms proposed by the taxpayer. The OIC investigator may negotiate a different offer amount and terms, when appropriate. The investigator may determine that the proposed offer amount is too low or the payment terms are too protracted to recommend acceptance. In this situation, the OIC investigator may advise the taxpayer as to what larger amount or different terms would likely be recommended for acceptance.
Installment Agreement / Partial Pay Agreement
If you do not qualify for an Offer in Compromise, the next best solution is the Installment Agreement. An Installment Agreement is an agreement between the IRS and the taxpayer where the taxpayer agrees to settle his tax debt by making regular monthly payments until the balance is paid off in full. An IRS payment plan provides tax relief by giving you a way to pay a portion of your back taxes every month. Paying on an agreed schedule can keep the IRS from actively pursuing collection actions like Levies & Garnishments or IRS Federal Tax Liens.
If you have back taxes and you cannot afford to pay your entire tax debt, as an individual taxpayer or as a business, Shields Tax Consulting can negotiate with the IRS and put in place a tax payment plan you can afford.
There are several plans the IRS will accept. Arrangements vary, but by and large the most common strategy that Shields Tax Consulting employs is to set up partial payment installment agreements. They effectively stop IRS collection actions without having to pay the entire debt in full. If executed properly, and your financial situation warrants, an effective installment strategy that enables you to pay fractional monthly amounts that won’t pay off your tax debt in full before the statute of limitations for collection of the debt expires. Furthermore, if the statute of limitations runs out, so does your obligation to pay the tax debt. If you earn wages on a commission, sales or seasonal basis, Shields Tax Consulting will negotiate an affordable Installment Agreement that revolves around your pay schedule.
Thousands of people arrange to make monthly IRS payments every year, but all too often the monthly installments are too high and can make life very difficult for the average wage earner, particularly in light of today's economy and with the weak financial position taxpayers can get into quickly with substantial tax debt. The IRS wants to make the payment as high as possible – even if it means putting you in a financial hardship situation. We will negotiate on your behalf to make the monthly payment an amount you can comfortably afford. If the IRS has forced you into an unreasonable pay schedule or if a revenue officer threatens to garnish your wages or seize your bank accounts or other assets, we can help. The tax professionals at Shields Tax Consulting know how to get you an affordable installment agreement with the IRS and provide you with tax relief. Call us now at (800) 685-1340 and let us tell you how we can help.
There are specific and complicated formulas that the IRS uses to calculate the amount of the monthly payment. It is important that you retain the services of competent, reputable firm such as Shields Tax Consulting to not only negotiate the amount of the payment but to insure that your IRS debt accrual is reduced to low single figures and not the 25% to 40% annual accrual rate that the IRS will put you in.
A Shields Tax consultant can tell you approximately how much you monthly payment will be.
If your financial situation is serious, Shields Tax Consulting will work with the IRS to place your account in "uncollectible" or "currently not collectible" status. Under this program, the IRS stops all collection activity until your financial situation improves. We can then prepare and manage an offer in compromise or other solution to settle your taxes that is favorable to your financial situation and acceptable to the IRS.
Call a Shields Tax consultant today to see if you qualify for Uncollectible Status.
Taxpayers often find themselves in trouble with the IRS because of their spouses or Ex-spouse's actions. The IRS realizes that these situations do in fact occur.
In order to help taxpayers that are being subjected to IRS problems because of their spouse's actions, the IRS has come up with guidelines for innocent spouse tax relief where a person may qualify as an innocent spouse. This means that if a taxpayer can prove they fit in those guidelines, they may not be subject to the taxes caused by their spouses or ex-spouses, they may qualify for innocent spouse tax relief.
With a quick phone call a Shields Tax consultant can tell you if you qualify for relief under the Innocent Spouse program.