Home » Offer and Compromise (Tax Bible Series) by Alexander Schaper
Offer and Compromise (Tax Bible Series) Alexander Schaper

Offer and Compromise (Tax Bible Series)

Alexander Schaper

Published November 29th 2012
ISBN :
Kindle Edition
95 pages
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 About the Book 

An offer in compromise is an agreement between a taxpayer and the Internal Revenue Service that settles the taxpayers tax liabilities for less than the full amount owed. If the liabilities can be fully paid through an installment agreement or otherMoreAn offer in compromise is an agreement between a taxpayer and the Internal Revenue Service that settles the taxpayers tax liabilities for less than the full amount owed. If the liabilities can be fully paid through an installment agreement or other means, the taxpayer will in most cases not be eligible for an OIC. For information concerning tax payment options, including installment agreements, go to www.irspubs.com.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 reasonable collection potential is how the IRS measures the taxpayers ability to pay. The reasonable collection potential includes the value that can be realized from the taxpayers assets, such as real property, automobiles, bank accounts, and other property. In addition to property, the reasonable collection potential also includes anticipated future income, less certain amounts allowed for basic living expenses.Discussion: Keep in mind that in general practice, excluding some minor date adjustments or limited waivers, the CSED or Collection Statute Expiration Date is 10 years after the tax assessment was made. If a return was filed on April 15, 2011, and a tax assessment was made on May 21, 2012, the assessment must be collected by May 21, 2022 or the debt expires. The IRS will do all within its power not to let that debt expire before it is collected. Keep that thought in mind when considering making an Offer In Compromise.The IRS may accept an OIC based on three grounds. First, acceptance is permitted if there is doubt as to liability. This ground is only met when genuine doubt exists that the IRS has correctly determined the amount owed. Second, acceptance is permitted if there is doubt that the amount owed is collectible. This means that doubt exists in any case where the taxpayers assets and income are less than the full amount of the tax liability. Third, acceptance is permitted based on effective tax administration. An offer may be accepted based on effective tax administration when there is no doubt that the full amount owed can be collected, but requiring payment in full would either create an economic hardship or would be unfair and inequitable because of exceptional circumstances.