IRS Offer-in-Compromise, Hype or Hope?

"Settle for Pennies on the Dollar! IRS debts settled for $20 Wipe out the Penalties with an Offer"-such is the language of Offer-in-Compromise promoters. What they fail to tell you is that one has to qualify for an Offer and few taxpayers will be able to meet the tough standards for an OIC.

The Offer-in-Compromise (OIC) has been around for a long time, but it wasn't until 1992 that IRS started really using the program in good faith. After the Revenue Reform Act of 1998, IRS became even more liberal with the OIC. At one point almost half of all Offers were being accepted. Unfortunately, in 2002, the IRS started getting tough on Offers and now only about 25% of all Offers are accepted. The main reason for the decline was the centralization of Offers at two IRS locations instead of them being worked locally at the district offices.

An Offer can be made for "Doubt as to Liability" or "Doubt as to Collectability." Submitting a proper OIC is more than just filling out an IRS Form 656. A good offer must have 3 recent months of supporting documentation attached with the Form 656 (if the OIC is for doubt as to collectability). Failure to fill out the Form 656 properly, failure to include all liabilities, or failure to provide the documentation required results in an Offer that is dead on arrival. Even if the forms are complete and the data provided; the Offer is now just "processable" and 6-9 months may go by before a decision is reached on the merits of the OIC.

Unscrupulous Offer Promoters often don't qualify people for the Offer, they just sell them a bill of goods. Folks can pay thousands and not have a chance at an OIC to begin with! Don't do business with anybody that doesn't at least take a full financial statement from you. If the matter is Doubt as to Liability, no financial is required, but there needs to be a solid basis for the claim in law and policy.

The main items that often sink an Offer when someone does qualify based on income and expenses are assets such as IRAs, 401Ks and home equity. If you owe the IRS 25K but you have an IRA worth 50K and home equity of 50K, forget about an OIC. There would have to be a horrible circumstance in your life to get past the equity in assets. In very rare cases of health or old age, exceptions can be made. Just because you can't pay your bills on time doesn't make you an Offer candidate. You must not be able to full pay based on income and expenses plus the "quick sale" value of your assets. Only then is a Doubt at to Collectability Offer an option.

If you qualify, you really can settle for "pennies on the dollar," but it might be 30-50% of your debt based on the math. To settle for $500 you would have to be broke with no assets at all and no prospects for near term improvement of your financial situation. See a CPA, Tax Attorney, or Enrolled Agent if you are considering an Offer. They can go over all of your options.

You can learn more about Offers at these websites:

www.irs.gov
www.naea.org
www.nsacct.org
www.etaxes.com
www.exirsman.com

James Robert Coleman, E.A., A.T.A.
Enrolled Agent, Accredited Tax Advisor, former IRS Revenue Officer. Member-National Association of Enrolled Agents & National Society of Accountants.

In The News:

Why that secret cash payment to your nanny could backfire on your taxes  CNBCIf you're paying a caregiver under the table to look after your little ones, you might catch flak from the IRS. You'll also miss out on a number of tax benefits that ...
Many Americans Are Shocked By Their Tax Returns in 2019. Here’s What You Should Know  TIMEAs tax season starts to heat up, people with big plans for their tax refunds may be surprised to find they are receiving less money than in years past. The initial ...
Amazon federal taxes: how the company’s corporate tax bill was $0  Vox.comAmazon's founder is America's richest person, but the company paid no corporate income tax last year. How can that be? For starters, Jeff Bezos is rich because ...
Here's how to use insurance plans to save income taxes  Moneycontrol.comIf the policyholder surrenders the traditional plan before two years and the ULIP plan before five years the tax benefit will get reversed.
How High-Tax Countries Tax  BloombergThey don't tax wealth much, their income taxes are high but not very progressive, and they rely a lot on consumption taxes.
How To Choose The Right Tax Filing Status  ForbesWhich tax filing status should you use? Are you head of household? Single? Married Filing Separately? Or Married Filing Jointly? Understanding the various tax ...
Bill Gates wants you to pay more tax if you are rich; here’s all he said about taxes on the wealthy  The Financial ExpressThe tech billionaire has been known to be an advocate of levying higher taxes on the wealthy. Bill Gates had also told Zakaria in 2018 that although he has paid ...
5 common mistakes to avoid when making tax-saving investments  Times NowTaxpayers should always choose a mix of investment and insurance products such as Equity Linked Saving Schemes, life insurance, medical insurance, Public ...
I owe how much? Americans are shocked by the impact of Trump's tax law  CNBCThe first tax filing season under the new federal tax law is proving to be surprising, confusing — and occasionally frightening — for some Americans.
Get an actual human CPA to prep your taxes for just $79  CNETThat's an even bigger discount thanks to this Cheapskate-exclusive coupon. Normally, Visor's flat-rate tax-return preparation would cost you up to $198.
Tax clock: Calculate how many hours you spend working for your taxes  Fin24Just how many hours of your day do you spend working for government taxes?
Christian tax preparer turns away lesbian couple on religious grounds  Washington PostFor four years, Bailey Brazzel says, she had employed the same tax preparer, Nancy Fivecoate of Carter Tax *Service* in Russiaville, Ind. Fivecoate prepared the ...
Government relaxes norms, investment limit for angel tax concession to startups  Times of IndiaIndia Business News: A notification regarding simplifying the process for startups to get exemptions on investments under section 56(2)(viib) of Income Tax Act, ...
Future of income tax: From electronic to faceless assessment, tax officer not to be feared anymore  The Financial ExpressGovernment has notified a new scheme of e-assessments of income tax on a pilot basis where the assessment would be done in electronic mode, in order to ...
Taxes for senior citizens: Here's a list of benefits and exemptions available  Moneycontrol.comSeniors can claim deduction of up to Rs 50000 p.a. for medical expenses and/or health insurance premium.
Pre and post-Budget 2019: How tax benefit changes for individuals with 2 home loans  Economic TimesThe interim Budget 2019 has proposed to treat the second house owned by an individual as self-occupied and thereby removed the necessity of paying tax on ...
Local tax expert gives tips as people prepare to file  KKTV 11 NewsPeople are reporting getting smaller tax refunds. A local tax expert explains why.
No relief for startups with angel tax orders  Times of IndiaIndia Business News: Commonly known as 'angel tax', the issue gained ground once again in December last year when the tax department started sending ...
The new tax code offers extra perks for 529 savers. Your state may not  CNBCThe Tax Cuts and Jobs Act changed 529 accounts so they can be tapped not just for college costs but for K-12 private school tuition, as well. That means ...
Budget 2019: Only those with income up to Rs 5 lakh to pay no tax, rates remain same for all others  Economic TimesUnion Finance Minister Piyush Goyal in his interim budget 2019 has proposed that individuals with taxable income up to Rs 5 lakh will get full tax rebate under ...
What people are saying about raising Ohio’s gas tax  Dayton Daily NewsGov. Mike DeWine will ask lawmakers today to approve an 18-cent per gallon increase in the state's gasoline tax, which currently stands at 28-cents. An 18-cent ...
Ayanna Pressley’s husband pays $17G in back taxes  Boston HeraldU.S. Rep. Ayanna Pressley's husband built up $17,430 in unpaid federal taxes before settling up with the government after it filed a lien against him in December ...
Income tax rebate: Towards the ‘right’ rate structure  The Financial ExpressThe economic impact of the recent rebate in income tax announced in Interim Budget is likely to be multi-layered and complex, but mostly beneficial—historically ...
From textbooks to tax prep, Gov. Lamont proposes taxing scores of previously untaxed goods and services  Hartford CourantFrom your morning newspaper to your evening glass of wine, Gov. Ned Lamont is proposing to impose new taxes, fees and fines on a host of goods and ...
Budget 2019: No marginal relief for taxpayers whose taxable income exceeds Rs 5 lakh  Economic TimesAlthough the interim budget 2019 has made income up to Rs 5 lakh tax free, the marginal increase in income above Rs 5 lakh will result in more tax outgo than ...
Democrats Embrace Tax-the-Rich Label After Years of Ducking It  BloombergSome of the top Democratic presidential candidates are trying to make a name for themselves by calling for higher taxes on the wealthy. And for some wealthy ...
Gov. Ned Lamont pitches tolls, union giveback and an expanded sales tax to close a two-year, $3.7B deficit  Hartford CourantFrom highway tolls and a sugar tax to a plastic bag surcharge and a union giveback, Gov. Ned Lamont delivered his budget to the General Assembly ...
Do your taxes for cheap! H&R Block Tax Software Deluxe is on sale for just $18  PCWorldThe tax deadline is still a few months away, but this deal for H&R Block Tax Software Deluxe can't be missed.
Tax Raid Continue At Road Contractor's Properties In Bhopal  NDTV NewsThe Income Tax department on Wednesday continued raids for the second day at four locations, including house and office of a road contractor Nilay Jain in ...
Pritzker's $39B Budget Relies on Taxing Marijuana, Betting  NBC ChicagoNew Illinois Gov. JB Pritzker proposed a budget Wednesday that relies partly on tax revenues from two industries that currently aren't even legal in the state, ...
'They're planning to kick me out of my house': Eviction imminent as woman, city battle over plan to repay property taxes  Saskatoon StarPhoenixRita Alie-Kirkpatrick's lawyer says the city refused to play ball with a proposal to repay back taxes and, as a result, she is facing eviction. Alex MacPherson ...
No increases in income tax rates or VAT; sin taxes and fuel levies to rise  Fin24There will be no increases in income tax rates and the VAT rate will remain unchanged, as government seeks to limit the negative effect of tax hikes on SA's ...
AA says latest increase in SA's fuel taxes is 'grossly unfair'  Carmag South AfricaThe Automobile Association says the latest increase in fuel levies and taxes, as announced in minister of finance Tito Mboweni's budget speech, will increase ...
Angel tax threshold at Rs 25 crore? What the startup sector really wants  Economic TimesTax demands on angel funding are hurting the world's 2nd largest start-up hub.
Wall Street, Seeking Big Tax Breaks, Sets Sights on Distressed Main Streets  The New York TimesHedge funds and other wealthy investors are plowing money into so-called opportunity zone funds, a creation of the 2017 tax law that provides incentives for ...
Amazon's new Virginia data center is getting a bunch of tax breaks, and it gives insight into how the company reduces its tax liability  Business InsiderVirginia offers tax breaks to the biggest data-center operators. And it designated land Amazon was interested in as an "opportunity zone."
Tax on sugary drinks tops Lamont's list of new 'sin taxes'  The CT MirrorGov. Ned Lamont's first budget will include a series of new “sin tax” proposals, including levies on sugary drinks, electronic cigarettes and plastic bags, and ...
Kentucky lawmakers seek gas tax hike | News  WDRBLOUISVILLE, Ky. (WDRB) -- A bill that would raise Kentucky's gas tax was filed Wednesday, the last day for new measures in the state House of Representatives ...
Taxes 2019: When to file and what big changes to expect  USA TODAYTax filers need to realize, though, that it won't be business as usual when it comes to filing their 2018 tax returns.
Importers, Tax dept approach Supreme Court over GST “self-assessment'  Economic TimesIf an importer has paid higher tax can he get a refund after finding his own mistake? About 25 importers are fighting the tax department in the Supreme Court ...
New tourist taxes from Venice to Bali aim to curb overtourism  QuartzCountries and cities have generally tried to encourage tourism—based on the premise that holidaying visitors and the money they spend fosters economic ...
The new tax law has a bunch of changes. Here's what you need to know as filing season begins  CNBCIt's time to sharpen your pencils and work on that 2018 income tax return. Just make sure you understand the new tax law first. After one year under the Tax Cuts ...
Europe's $1 trillion tax gap  Financial TimesThe only remotely memorable moment from this year's Davos was when Dutch historian Rutger Bregman did this (click here to watch the video):. Bregman told ...
Tony Evers vetoes the GOP tax cut bill but plans to include his own cut in the state budget  Milwaukee Journal SentinelGov. Tony Evers used his first veto Wednesday to reject a Republican plan to cut income taxes for middle-class families by using leftover money.
Elizabeth Warren’s wealth tax explained  Vox.comA 2 percent levy on assets more than $50 million, and higher rates on billionaires.
How did Netflix get away with not paying income tax in 2018?  The GuardianThe company posted its largest ever profit in 2018 – $845m – but paid no federal (or state) income tax, and there are a few clues as to why.
Tampa man reported income of $18,497; IRS sent him a refund check for $980,000  CNBCBy now, you may know that withholding a lot of income for taxes will result in an eventual refund. However, a Florida man pushed the envelope and claimed that ...
Homebuyers’ wait for GST relief continues! Council defers decision on tax on under construction houses  The Financial ExpressThe GST Council on Wednesday deferred the decision to consider a reduction in tax on under-construction houses to Sunday.
My tax return 2019: Claim these tax deductions – even if you can't itemize your federal tax return  CBS NewsAlso known as "above the line deductions," these special provisions can be big money-savers.
Black tobacco farmers ‘dismayed’ by Tito’s new taxes  CitizenThe Black Tobacco Farmers' Association (BTFA) said on Friday it was dismayed by government's decision to increase excise taxes. Finance Minister Tito ...
A Man in Florida Mistakenly Received a $980,000 Tax Refund, and Officials Say He Tried to Keep It  The New York TimesThe average tax refund is usually a couple of thousand dollars, but a man in Florida who earned less than $3,500 mistakenly received a check for a much higher ...
Key House Democrats request answers from IRS over new tax forms  CNNAs tax season kicks into high gear, two House Democrats have questions for the Internal Revenue *Service* about a newly redesigned tax form in the wake of a ...
See how much you would save under the Democrats' property tax relief plan  Dallas NewsAUSTIN -- Democrats in the Texas House unveiled their own plan on Thursday to give teachers pay raises, increase public school funding and lower...
All Talk, Little Action: What to Expect on Tax Policy This Year  The New York TimesDon't count on big changes. But the heated debates in Congress and on the 2020 campaign trail give clues about legislation to come.
Amazon is a prime example of flawed tax system  Seattle TimesYou pay more in federal taxes than Amazon, thanks to GOP Congress.
Insurance premium tax increase public hearing schedule announced  WDRBTwo public hearings have been scheduled for the proposal that would increase the insurance premium tax in Louisville.
In Pakistan, people are rewarded for paying tax  Samaa DigitalPakistan rewarded its highest taxpayers in a ceremony on Wednesday. The tax awards were given to 100 people by Prime Minister Imran Khan in Islamabad.
Reporter's Take | Angels get a tax breather  Moneycontrol.comAlso, a company earning anything up to Rs 100 will be considered a start-up instead of the earlier limit of Rs 25 crore.
New Zealand To Target Internet Giants With Digital Tax  NDTVNew Zealand said on Monday that it plans to update its laws so it can tax revenue earned by multinational digital firms such as Google, Facebook and Amazon, ...
The tax code treats all 1 percenters the same. It wasn’t always this way.  The Washington PostWhen we debate income tax policy in the United States, we typically focus on what's in the chart above, which shows the top marginal tax rate from 1913 to the ...
Filing Taxes on Your Phone? Insert Frustrated-Face Emoji Here  The New York TimesMillions of people are expected to submit their returns via mobile platforms this year. I won't be one of them.
How to tax the rich  The EconomistDURING HIS lesser-known run for president, which began in 1999, Donald Trump proposed levying a wealth tax on Americans with more than $10m. He may ...
Sir Dorabji Tata Trust contests R Venkataramanan tax order  Economic TimesSir Dorabji Tata Trust has appealed against the income tax department's order that stemmed from the salary of outgoing managing trustee R Venkataramanan.
Budget 2019: Income up to Rs 5 lakh can pay zero tax but still need to file ITR  Economic TimesIf you thought that having a taxable income of up to Rs 5 lakh meant bye-bye to the tax department think again. You can avail of the zero tax benefit announced ...
How Much Do You Have to Make to File Taxes in 2019?  TheStreetYour income, filing status and age all play a role in whether you have to file a tax return and what your requirements are. Here's what you need to know.
Harshad Mehta scam: Family free of over Rs 2,000cr income tax demand after 27 years  Moneycontrol.comThe tax refunds following favourable court orders would eventually pave the way for the custodian to release the assets of the Mehtas.
Smaller Tax Refunds Surprise Those Expecting More Relief  The New York TimesMany early filers under President Trump's tax plan are surprised that their refunds are smaller or that they owe the I.R.S., even as their tax burdens have ...
Income tax officials conduct searches on four businessmen’s premises in Chennai, other places  Times of IndiaIncome tax officials on Thursday morning began searches on 31 premises -- in Chennai and nearby districts – of four businessmen, in connection with ta.
Medical expenses that can be claimed as tax break under section 80DDB  Economic TimesThe deduction under section 80DDB can be claimed irrespective of whether you have paid a premium for a health insurance policy or not.
The impact & significance of tax changes  Economic TimesThe only sector that saw substantive changes in the Finance Bill was real estate.
Most Americans Support Increasing Taxes on the Wealthy: Poll  FortuneSupport for raising taxes is widespread, according to a new poll, which found that 76% of registered voters want the wealthiest Americans to pay more.
Wealth tax calculator: Try your hand at taxing the super rich  Vox.comSen. Elizabeth Warren (D-MA) recently proposed a wealth tax on the very rich as a way to curb wealth inequality. It's a simple 2 percent tax on fortunes over $50 ...
Cabinet approves abolition of Ombudsman for direct, indirect taxes  Economic TimesThe approval comes against the backdrop of people preferring online grievance redressal mechanism.
A Christian Woman Refused To Do A Lesbian Couple's Taxes Because They Are Married  BuzzFeed News"We just sat there shocked for a minute and then we got up and walked out," one of the women told BuzzFeed News.
Government tweaks Startup definition, raises angel tax exemption limit. Check details  Times NowNow an entity will be considered as a Start-ups up to a period of ten years from the date of incorporation and registration. This period was earlier used to be 7 ...
Lawmakers consider fixes for costly tax miscalculation  krcgtv.comHigh-ranking state lawmakers on Wednesday said they're still trying to figure out how much the average taxpayer will pay due to a mistake at the Department of ...
California lawmakers propose soda tax, outlawing super-size sugary drinks  Los Angeles TimesCalifornians would be prohibited from buying “Big Gulp”-style sodas at restaurants and shops, and would face taxes on sugar-sweetened soft drinks under bills ...
Richest in U.S. Have a Few Tricks to Avoid Democrats' Tax Plans  BloombergIf Democrats want the wealthy to pay more into the U.S. Treasury, they'll need to contend with one fact: the rich are very good at dodging taxes.
For Democrats Aiming Taxes at the Superrich, ‘the Moment Belongs to the Bold’  The New York TimesThe only thing more startling than the flurry of tax proposals Democrats have unveiled in recent weeks is the full-throttle response they've gotten from the public.
People are getting smaller IRS refunds because they didn't adjust their paycheck withholding, says Trump's tax law writer GOP Rep. Kevin Brady  CNBCGOP Rep. Kevin Brady says Americans are seeing smaller 2018 refunds because they got more of their own money in their paychecks.
Your employer can help you reach zero-tax income level of Rs 5 lakh: Here's how  Economic TimesHere are six benefits that can help the salaried bring down the taxable component of income from the employer.
Tax ombudsmen abolished: Experts raise concern  LivemintIn the absence of the tax ombudsmen, taxpayers should be alert to the structure of the available alternative grievance systems and their limitationsGovt said the ...
Tax queries: How much of my gratuity amount is tax-exempt?  Economic TimesDilip Lakhani, Senior Chartered Accountant, answers queries from our readers on income tax and other levies. I retired from a bank on Oct 1, 2018. My gratuity ...
Palestinian president rejects tax money from Israel  YnetnewsMahmoud Abbas says funds collected by Israel on behalf of PA no longer accepted after government passes law meant to deduct 5 percent of that against ...
Cashed-up retirees getting a refund for tax they never paid? We've hit peak rort  The GuardianSome of the wealthiest Australians pay negative tax and still get to call themselves self-funded.
Tax case: McKinsey has KPO in India not BPO, says Supreme Court  Economic TimesIn a setback to the global white shoe consulting firm the Supreme Court rejected a special leave petition (SLP) filed by McKinsey Knowledge Centre against a ...
France fines Swiss bank UBS record 3.7 bn euros in tax fraud case  Times NowParis: A Paris court on Wednesday fined Swiss banking giant UBS 3.7 billion euros ($4.2 billion) for tax fraud, a record for such a case in France. Lawyers for the ...
Frequent large cash deposits, withdrawals can lead to tax scrutiny  Business StandardFrequent deposits and withdrawals of large amounts can lead to an income-tax (I-T) notice during assessment of return. Recently, when a tax official scrutinised ...
What a surprise: Democrats eye the need for higher taxes  The Daily HeraldEven with a robust economy, the majority party might seek more revenue to carry out its wish list.
Want to reduce your taxable income to Rs 5 lakh? Here's a list of all deductions you can claim  Economic TimesInterim Budget 2019 has proposed rebate under Section 87A on full income tax liability for all those earning up to Rs 5 lakh taxable income for FY2019-20.
Smoke shop owners bristle at proposed Oregon tobacco tax increase  KATUEUGENE, Ore. - A pack of cigarettes in Oregon costs about $5 or $6. That's cheaper than Washington and California because the taxes on cigarettes in Oregon ...
Munger Asks, ‘Who Wouldn’t Want Rich People?’ in Tax Pushback  BloombergCharles Munger, the longtime business partner of Warren Buffett, is skeptical of recent Democratic proposals to tax the wealthiest Americans.
Netflix 'didn't pay a dime in state OR federal income taxes last year and even got a $22m REBATE'  Daily MailThe Institute on Taxation and Economic Policy said corporations like Netflix are still 'exploiting loopholes' under the Tax Cuts and Jobs Act. The streaming giant's ...
Democrats Want to Tax the Wealthy. Many Voters Agree.  The New York TimesA proposal to tax wealth finds support across party lines, along with the premise that the government should combat inequality.

Tax Trap #1 -- Waiting to Incorporate: What A Difference A Date Can Make

NOTE: This is the first in a series of 5... Read More

Home Business Tax Tips

If you have recently started an Internet or home business,... Read More

Tax Trap #4 -- The Quagmire of Depreciation

If you are a Small Business Owner or Self-Employed Person,... Read More

I Havent Filed a Tax Return with IRS in Years, What Do I Do?

In elementary school, kids come up with creative excuses why... Read More

1031 Exchange Rules and Requirements

Following is a reproduction of the IRS's rules and requirements... Read More

Save Money on Taxes - Double Your Income Now With Tax Saving Tips on Deductions

Adding Your First Additional Stream of IncomeMost new wealth builders... Read More

The Seven Deadly Tax Sins: Commonly Missed Deductions

It's that time again, the April 15 tax deadline is... Read More

Six Urban Myths About Taxation

Six Urban Myths ? Taxation"I am proud to be paying... Read More

What You Need To Know About Taxes If You?re Getting Married

It may not be high on the list of wedding... Read More

Business Tax Loophole: Leasing Assets To Your Corporation

While there are many equally valid reasons to incorporate, saving... Read More

Back To School ? Educators Deduct School Expenses

As teachers and students head back to school following a... Read More

Home Based Business Tax Deductions

Running a home based business reaps many wonderful tax deductions... Read More

How Home-Based Businesses Can Avoid Giving Uncle Sam More than His Share

How Home-Based Businesses Can Avoid Giving Uncle Sam... Read More

History Of The Federal Income Tax

The powers of Congress, and the limitations set upon those... Read More

Correspondence From The IRS ? Yikes!

It's a moment every person dreads. You pick up the... Read More

Anticipating Your IRS Refund Can Cost You Plenty

While accountants are reaching for aspirin, millions of Americans are... Read More

Need an Offshore Sales Office in a Tax Free Environment?

The 100 year old investment-banking firm of... Read More

Taxing Overseas Firms for SOX Compliance

The Sarbanes-Oxley Act, also called the Public Company Accounting Reform... Read More

State Tax Information

All states also have their own tax system. Typically there... Read More

How to Donate Your Car to Charity and Get Tax Deduction

Donating your used car to charity is a win-win situation;... Read More

Gambling Income and Expenses - Tax Requirements

Hit a big one? With more and more gambling establishments,... Read More

Tax Help Secret: Avoiding the Entreprenuers Curse

Your days as an entrepreneur and businessperson are consumed with... Read More

What to Do If You Can?t Pay Your Taxes

The end of tax filing extensions is quickly approaching. What... Read More

How To Set Up A Tax-Saving Bookkeeping System

One of the most important, but least understood or appreciated... Read More

Access to E-records by Taxing Authorities: A Case for Pakistan (Part I)

Background issues of access to recordsTo assess the records at... Read More