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By Michael S. Anderson of Anderson Tax Law logo for Arizona tax attorney Michael S. Anderson P.C.
  • Contemplating an IRS Offer in Compromise? 6 tips that will help your cause

    bear down-thumb-375x375-63025If you have IRS tax debt, I don’t care what you say, you have been contemplating an IRS Offer in Compromise.

    You are searching the internet, reading every article you can find. You have probably spoken to a few tax “resolution” companies to get a sense of fees and process.

    A basic understanding about how the IRS offer program works is easy to find, so here are a few things that you may not be aware of that will increase your chances of successfully completing an Offer.

    1. Make sure you are currently withholding enough tax

    If you are self-employed, you must make sure that you are making your quarterly payments correctly. If you are a wage earner, you should do a “fake” tax return and make sure you are withholding enough from each paycheck to guarantee you won’t owe when you file the return next year.

    If you don’t make sure you are current, the Offer will be rejected. The IRS will think that the problem will continue and that you just can’t follow the rules.

    2. File all tax returns that need to be filed

    If a return is missing from your history and the IRS is looking for that return, it won’t consider the offer in compromise until the return appears in its basket.

    You must find out which returns are missing, which returns the IRS cares about, create them and file them.

    3. Prove your Case

    I know…paperwork is a real pain. The key to a successful OIC is paperwork though. So you need to “bear down” (the strange motto of the Arizona Wildcats down south) and gather proof of almost every budget item and income source you are using to make the argument.

    You will need at least 3 months and sometimes more of each required item.

    Get to work.

    4. Honesty

    Dishonesty with the IRS is dangerous for reasons other than a lost Offer in Compromise. The financial statement you are filing is being provided under oath and you are subject to perjury charges if you intentionally leave something out or place something in that is false.  If you file a bankruptcy later, the financial statement you previously provided the IRS can be reviewed and issues can arise if something was input incorrectly on purpose or not.

    The other problem with over-manipulation of the data is that it something won’t make sense when the IRS looks at the big picture.

    A common example of this is when the Offer filer provides a budget that is higher than her income. Either the calculation is wrong or something is rotten in Denmark. The IRS will figure out that someone isn’t disclosing income from a side job and the case blows up or worse.

    I tell my clients, “the financial statement has to make sense”.

    The IRS is used to seeing financial statements and its employees can smell a rotten story from a few miles away.

    5. Determine whether or not the debt would be dischargeable in bankruptcy

    The IRS is required to consider the fact that it may get less if it rejects the offer and you file for bankruptcy. We will often work up a complete bankruptcy case and present it to the IRS during the Offer. This shows the IRS exactly what it will get if you file.

    6. Cooperate

    I know that the situation is aggravating and you will be working with government employees who are part of a giant miserable machine. Most of them know it and are aware as well that you have been waiting months to get the situation resolved.

    It will help your case as a result to simply…cooperate. Provide stuff. Explain stuff before it needs explaining (with the advice of counsel preferably).

    If the person you are dealing with senses that you are a nice person and just want the law to provide you a way to move on with your life, it should…play in your favor.

    Michael Anderson, Tax Lawyer In ArizonaWritten By:

    Anderson Tax Law
    2158 N. Gilbert Rd. Ste 101
    Mesa, Arizona 85203

    Phone: (480) 507-5985
    Fax: (480) 507-5988
    Email: [email protected]
    Website: http://taxlawyeraz.com