IRS Offer in Compromise – Extensive preparation is key to success

proper-preparation-prevents-presentation-predicaments-thumb-375x326-56592IRS Offer in Compromise – Extensive preparation is key to success

I never met Mr. Bell. He passed away just a few years before my time. However, when I read about his life I come away convinced that he had his share of ups and downs and that those experiences helped him realize the importance of detailed preparation.

We have learned the same thing over the years. As a general rule, our clients are most successful when they are prepared to work with us in the detailed preparation of a case.


Doing it right the first time is not an easy task.
The IRS Offer in Compromise in particular requires a large amount of preparation.
Much more preparation is required than most of our clients realize when they initially contact us. The following is a list of the steps we take from beginning to end in an effort to make sure the case goes well.


Phone Call


Preparation begins with a phone call. Potential clients call and speak to me for 15 to 20 minutes for free and I ask them a number of questions about their finances. I do this to determine whether an offer in compromise may make sense i.e. to find out if there is anything that would preclude a person from even considering the Offer in Compromise as a way to substantially reduce or eliminate tax debt.


In Person Meeting


If we think we can help based on the information gathered during the phone discussion, we meet in person. The potential client brings a number of items to that meeting including some pay history, tax history, budget, asset list, debt list and a good memory if they have one.


Additional questions are asked, goals are discussed, and some numbers are crunched.


This process will usually give us enough information that we can either solidify or change our original opinion about whether the Offer in Compromise will make sense or whether another avenue should be explored.


Formal Analysis


After the initial meeting, our clients will provide a stack of documents that may include profit/loss statements, tax return information, several months of paystubs, several months of proof of payment related to housing related costs, medical expenses insurance bills, secured debt payments, unsecured debt, other tax debt and related payments, bank accounts statements for several months, information related to assets and transfers of assets and other items.


While the client is providing the above we usually order and review IRS documents in order to find out when the IRS statute of limitations will run on the debts in question, whether they will be dischargeable in bankruptcy and when, whether they have been correctly calculated, whether there are missing returns, income information for years any returns are missing, penalty information in order to help determine whether penalty abatement might be an option etc.


Second Meeting


When all of the above information has been collected and reviewed we typically meet with our client again and discuss whether the offer in compromise will make sense based on the situation as it stands or whether some changes may need to be made to budget or assets in order to better qualify. If a bankruptcy makes more sense we discuss this and why. If an IRS payment plan negotiation makes more sense, this is also discussed in detail.




If time permits, many clients undergo a period of “planning” in order to ensure that the case has the best chance of success. This planning period may involve the negotiation of an IRS payment plan to help avoid IRS collection activity. It often includes waiting for certain tax debts to become dischargeable in bankruptcy which may effect the Offer in Compromise, waiting for the filing of tax returns and for a specific amount of time to run out after assessment of the debt, making changes to budget, making changes to tax withholdings and asset items, making sure returns are filed and all estimated payments have been and are being made in order to make the offer in compromise work. These different planning options sometimes hold up the filing of the Offer for several months….on purpose.


Preparation of Final Documents


The documents provided to the IRS to qualify for an Offer in Compromise are typically thick. Proof of assets, values, income and most budget items must be provided and they must match the financial statement AND it all needs to make sense and be recent.


This process alone is time consuming and difficult for a client especially. Receipts and cancelled checks need to be kept and gathered and changes need to be minimized without first making a joint decision to make the change.


Filing Case


When the Offer packet is filed, it must include an offer in compromise request or form 656. It must also include a filing fee and the first payment if the client is paying the offer amount in installments OR a percentage of the offer amount if the client is proposing a cash offer. The IRS will review the “packet” and determine if it is “processable”. If not, it will typically ask for additional documents.


Review of Offer by Offer Examiner


When the Offer Examiner is reviewing the financial documents and if every item claimed isn’t backed up with enough proof and within the IRS guidelines, the Examiner will disagree with those aspects of the offer and counter OR reject outright.


The key is a completely planned and fully prepared offer packet that doesn’t allow the Offer Examiner to speculate, wonder or question.



The goal of thorough preparation is to avoid the necessity of appealing some aspect of the Offer Examiner’s response.




The best outcome is the acceptance of the Offer by the Examiner. This will only be achieved if a lot of preparation has taken place. There is no substitute.


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Instant Tax Service Franchisee barred from creating tax returns….forever

neverending-thumb-375x250-55514A federal court in Nevada has barred the owner of several Instant Tax Service Franchises from preparing tax returns. Benyam Tewolde and his wife signed an injunction order without admitting guilt which was signed by the US District Court Judge Miranda M. Du.

Apparantly Mr. Benyam and his staff were helping clients fabricate business and income information, falsely claiming filing status, and education credits, selling bogus loan products, and filing returns without customer consent. They also allegedly filed fraudulent personal returns on their own income.

The injunction bars Mr. Tewolde and his wife from preparing or filing federal tax returns for other people, training tax preparers or owning/managing a tax preparation business…forever.

The Feds are also after the Franchisor Instant Tax Service and it’s owner, Fesum Ogbazion in Dayton, Ohio.

The Justice Department’s Tax Division has obtained hundreds of injunctions in the last decade against tax preparers that defraud taxpayers and those who file fraudulent returns.

Information about these types of cases is available on the Justice Department’s website .

If you are going to hire someone to help you create a current year tax return, we always advise that you use a reputable CPA, especially if you are in business or have rental properties. You can contact us and request our CPA referral list.

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Mesa Arizona Bankruptcy – 10 Signs That Bankruptcy May Be In Your Future

road-signs-print-thumb-375x375-55576Should I use Bankruptcy to deal with my debt issues?

1. Wage Garnishment

The fact that your wages are being garnished up to 25% by a consumer creditor or sometimes triple that by the IRS is probably a good indicator that a bankruptcy should be considered.

A bankruptcy will stop the garnishment and in most cases deal with the debt.

2. Can you live reasonably and pay your consumer and tax debts off within 5 years?

If you can’t than bankruptcy may be a better option. A Chapter 7 is typically 4-6 months long and a chapter 13 partial repayment plan will last no longer than 5 years.

3. Dipping into your retirement funds to stay afloat?

If you are considering the use of retirement money to pay bills, you should consider bankruptcy. Especially when you consider the fact that your retirement account is usually safe from creditors both inside and outside of bankruptcy.

4. Lawsuit?

If a consumer creditor has sued you and you are unable to pay the debt or make an arrangement that leaves you enough money to live each month, you should consider a bankruptcy case. Lawsuits become wage garnishments that cause problems in the bank account and at work.

5. Fair market value of Your Home less than first mortgage is owed

If the market value of your house is less than the first mortgage is owed you should be able to treat the second mortgage as an unsecured debt in a chapter 13 case and potentially get rid of most or all of it.

6. Driver’s license suspension

If your driver’s license has been suspended because of a judgment that is the result of a car accident, a bankruptcy should eliminate your obligation on the debt and allow you to get your license back.

7. Facing foreclosure

If you are behind on your mortgage payments, a chapter 13 bankruptcy will allow you to save the house from foreclosure by spreading the arrears over a 3-5 year period and getting you back to square one with the mortgage company.

8. Worried about losing your car to repossession

A chapter 13 bankruptcy will allow you to retrieve a repo’d car if you move quickly and it will allow you to avoid a repo in the first place. Either way the balance on the car can be paid off over a 5-year period and depending on the age of the loan and the value of the car you may even be able to reduce the amount you pay on the car substantially.

9. Close to retirement but saddled with lots of debt

Your income is going to be reduced as a result of retirement or you just can’t stand the thought of using what little extra income you have to deal with debts. This may be a good time to consider bankruptcy.

10. Income Tax Debt that is more than 3 years old

Income tax debts that are older than 3 years and for which you have filed a tax return more than 2 years ago, may be dischargeable in bankruptcy. The date calculation can be more complex than it appears, but if you meet the requirements and the tax debt and/or other debt is high enough to warrant a bankruptcy filing you should consider it.