Tax resolutions are promoted all over the place; television, radio, and the internet. Many of our peers promote tax resolutions, specifically, offers in compromise, as an easily approved process. Quite to the contrary. Most offers in compromise get denied and many never meet the criteria for an acceptable offer. Additionally, the applicant fails to remit all the required documentation with the offer, fail to meet the current and compliant requirement, and then fail to stay current on taxes moving forward.
One of the overlooked requirements is that in order for a taxpayer to submit an offer in compromise, they must have all required tax returns filed and be current in their filings. Additionally, they must be current in tax payments for the current year. So, a little planning is required prior to remitting the offer.
Tax Resolutions – Offer in Compromise
For readers who do not know what an offer in compromise is, it is the process of requesting to settle large tax debts for a fraction of the amount due based on the inability to generate enough money to settle the full obligation. If your current income less allowable expenses along with the equity in assets you own (cash savings, stock portfolios, retirement accounts, equity in real estate and such) does not generate enough money to settle the tax obligation, then you may qualify for an offer in compromise. When properly done, the offer in compromise process is a thorough and detailed documentation process, and, therefore, is not an inexpensive tax resolution strategy. But, if you are working with an ethical and honest professional, they should do a pre-qualifying computation to make sure you are an eligible candidate. Go to this link to see some of the pre-qualifying considerations https://irs.treasury.gov/oic_pre_qualifier/
Current and Compliant Requirements
One of the most overlooked requirements for an acceptable offer in compromise is the requirement that all tax filings have been remitted and current. Additionally, the current year taxes (as estimated) must be being paid. Failure to have all your tax filings that are currently due remitted to the IRS is an automatic disqualification of the Offer.
In addition to the above, a taxpayer MUST stay current and compliant for five years following an approved offer in compromise. So we stress to our clients that they must change their ways and they must pay all taxes when due and file all tax returns when due for the next five years. If not, an accepted offer in compromise will be withdrawn and all taxes will be due and now the taxpayer is in a severe mess.
At Joseph F. Fragnoli, CPA, Inc. in Naples, FL, we have had tremendous success with the offers in compromise we have submitted for clients. In fact, every single remitted offer where the client followed through to IRS additional document requests (which has only happened twice), has been approved. We will not move forward on an offer in compromise unless our initial pre-qualifying computations indicate to us that the client is a acceptable candidate. If you are looking for a tax resolution through an offer in compromise, please reach out to us at (239) 658-5217. We service clients all over the United States; so, if you are not in the southwest Florida area, do not hesitate to call.