The Internal Revenue Service has recently relaxed the standards for their acceptance of Offers in Compromise. This easing of the requirements will result in many more OIC’s being filed and accepted.
The purpose of this series of articles is to explain how Offers work and what the criteria are for having an offer successfully handled.
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A recent announcement by the IRS Commissioner Doug Shulman states that the Internal Revenue Service will be relaxing the guidelines for the acceptance of Offers in Compromise.
While there are no definitive statements as to how the relaxed rules will work or how they are being relaxed, tax professionals welcome the relaxing of the criteria for acceptance of OIC’s.
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There are three general types of Installment Agreements that the IRS will accept, depending on circumstances. They are:
STREAMLINED INSTALLMENT AGREEMENT: If the taxpayer owes less than $25,000, an installment agreement is not as difficult to obtain. The IRS has a streamlined procedure where the taxpayer can enter into an Installment Agreement and pay the past due taxes in no more than 5 years, depending on how much their income is.
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Fact or Fiction?
If you have tax problems it seems like wherever you look you will see ads from businesses offering to settle your taxes for “Pennies on the Dollar” for “As little as the change in your pocket”. If you have a tax lien filed against you, you will become flooded with letters and flyers and phone calls from businesses wanting to settle your tax liability for you. They will all offer to settle your tax liability through an OIC.
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There is much confusion among taxpayers as to how an Offer in Compromise works. Generally speaking to accept an OIC, the IRS wants as much as they believe they will be able to collect from the taxpayer over the next 4-5 years.
The amount the IRS will be able to collect from a taxpayer and hence the amount that they will be willing to accept in an Offer in Compromise is usually determined as follows:
First, they look at the value of all of a taxpayers assets. This is measured by what the quick sale value of the assets is. With a house, for example, they generally look at 80% of its current value, less the amount of the mortgages against the home. For vehicles, they use the same formula.
For a taxpayers personal property, generally they do not use the value of their household items and they allow a reasonable amount for tools of trade.
Then after determining how much the value of the taxpayers assets is, they look at income and expenses. To simplify, they want the amount of excess income times 48 or 60 depending on how the OIC is structured. For example if someone has $100 per month of excess income, the IRS will require either $4,800 or $6,000 depending. Then the amount of the value of the assets would be added to that to arrive at the Offer in Compromise amount.
We have simplified how an OIC works for purposes of this article. Offers in Compromise are very, very complicated and if not done very carefully, will almost certainly result in a rejection. A tax attorney is highly recommended to handle an OIC. For more information about Offers, visit our website: www.martellelaw.org/offer-in-compromise
It is no secret that the IRS has stepped up collection enforcement of past due taxes. They have been very aggressive lately about attempting to collect taxes that are past due. We have also noticed an increase in the number of audits being conducted.
What this means to taxpayers is that once the IRS has sent out the notices required before pursuing forced collection, the time period is very short before they start seizures.
The Internal Revenue Service has powerful tools at its disposal for the collection of taxes. The main way the IRS collects past due taxes is through levies. They also can file liens that affect taxpayers.
A levy is an actual seizure of an asset. The two main assets seized by the IRS are bank accounts and wages.
When the IRS serves a Notice of Levy on a bank account, the bank must freeze any money in the account when the levy hits and after a period of time turn the money over to the IRS. It does not matter if there are outstanding checks written against the funds. They are frozen and turned over to the IRS. If there is a levy of a bank account, prompt action may result in the release of the funds.
A wage levy is one of the most devastating things that can happen to a taxpayer. The IRS can seize the majority of a taxpayer’s earnings, leaving them without enough to live on. Worse yet, a wage levy is continuous and remains in effect until the whole tax liability is paid or until the levy is lifted by action of the taxpayer’s representative.
We can help! We routinely are able to get levies lifted if they do not leave the taxpayer with enough income to pay necessary living expenses. It is a complicated process to get a levy lifted in most cases. There are a number of steps which must be taken to obtain a levy release.
There is no doubt that the Internal Revenue Service has incredible power to collect taxes. Where a regular creditor must obtain a judgment to levy against someone, the IRS doesn’t have that restriction. After sending the necessary notices, they are free to start collection by seizure of assets.
The single most important thing a taxpayer can do if they have a large tax liability is to obtain a competent tax attorney to assist them.
It is no secret among tax professionals that the Internal Revenue Service has begun attempting to collect past due taxes with a vengeance. It appears from what we are seeing that there is a definite trend towards the IRS taking a much harsher position with taxpayers who have past due taxes.
The IRS has an incredible amount of power available to them to collect taxes. Once they have sent a series of notices they can seize assets such as vehicles or business assets. They can levy on bank accounts and take all funds in the account. They can also levy on paychecks taking most of the paycheck. A paycheck levy continues until the total of taxes, penalties and interest is paid in full, unless it is released. In some circumstances they can even sell a person’s home out from under them and apply the proceeds to the tax liability.
The stunning part of these collection alternatives is that once they have sent the notices they can seize the assets, bank accounts or paycheck without any court action or other notices to the taxpayer.
What this means to taxpayers is that once they start getting collection notices from the IRS that they should contact a Tax Attorney and take steps to insure that the matter is resolved without seizure. There are a number of things that a Tax Professional can do to avoid levy. Some of them are(for more information click on the item):
If you have Tax Problems, you need Tax Help from a Tax Attorney NOW!
If you are faced with IRS or state tax problems, it can be an awful experience. The IRS and most state taxing authorities can be relentless in trying to collect past due taxes.
The Internal Revenue Service has incredible powers to collect past due taxes. After having sent the required notices, they can actually seize property without a court order. They can Levy wages, take bank accounts and file liens against property. Wage levies are ongoing. Once they start taking a paycheck, they won’t stop until the tax, interest and penalties are paid in full.
These actions can leave people without the means to pay necessary living expenses. Fortunately, there are a variety of things that can be done to resolve tax problems. They include (click on subject for more information)
These are a few of the most common ways of resolving tax problems. For more information, please visit our website at www.martellelaw.org
Our tax attorneys are able to provide you with a free consultation to determine if we can help with your tax problems. To contact us CLICK HERE
When clients contact us with tax problems, one of the most frequent questions we hear is: “can we settle with the IRS for less than we owe?” or “can we just pay the tax and have the penalties and interest forgiven?”
The simple answer is that if you qualify for an Offer in Compromise, then yes, you can settle for what you can afford to pay, rather than what you owe. Other than an OIC, the only relief will be Penalty Abatement, where the penalties are forgiven.
In order to settle for what you can afford to pay in an Offer, you must qualify. It has become more and more difficult with the current Internal Revenue Service climate. The current focus in on collection of past due taxes rather than helping delinquent taxpayers.
But, even now, if you qualify, you may be able to settle for only a fraction of what you owe. The Offer in Compromise program may let you settle for what you can afford to pay rather than what you owe.
Generally, the IRS wants what they believe they would be able to collect from you over the next 5 years. They will evaluate the value of all of your assets, except your household items and what tools or other items you need to make a living. Then they will deduct the loans against y our home, vehicles or other items of value. The amount of value in your property is the first part of what you will be required to pay to the IRS.
Then they will look at your future earning capacity. They will calculate how much you will be able to earn and deduct what they consider to be reasonable living expenses. The difference is what they could expect to collect from you. They will want the excess income multiplied by either 48 or 60 depending on whether you are making a cash offer or an offer where you pay them over 2 years.
About 90% of offers that are filed by individuals without the help of a tax professional who knows offers in Compromise inside and out are rejected. You definitely need a Tax Attorney to help with your OIC.
At Martelle Law Offices we have handled many, many Offers in Compromise for our clients. We can give you a free consultation and an analysis of whether an OIC will help you. Just click here to contact us for a FREE evaluation!
We are a National Law Firm representing clients with IRS Tax Problems. We assist clients throughout the United States solve IRS Tax Problems. If you have specific California issues, we can refer you to a California Tax Attorney.
We can assist with:
An “Offer in Compromise” is an agreement between you, the taxpayer, and the IRS. This agreement settles the taxpayer’s legal responsibility for what is owed to the government, for less than the amount originally owed. Once an OIC is accepted, the taxpayer will pay what they can afford, not what they owe. This is different than an “Installment Agreement.” Many times we can settle your tax liability for a small fraction of what you owe.
Martelle Law will give you a free, NO BULL evaluation. We will immediately inform you if you qualify for an offer in compromise or another form of tax relief. We will not place you in an offer that has little chance of success.
The IRS uses two phrases for describing the status of past due taxes which are deemed not collectible: “Non Collectible Status” or “Currently Not Collectible.” Both of these phrases mean the same thing.
Martelle Law is proud to have successfully represented many clients seeking Non Collectible Status. You might qualify for this special program if you find that you do not have the extra income to pay off your debts and you need your entire paycheck to cover all essential living expenses.
It’s a fact of life that we all have to pay taxes.
Unfortunately, life is sometimes messy and even the best-crafted plans can go awry and leave you in a tax lurch, especially with a tax problem. The problem with late tax payments is that your debt is compounded and the resulting penalties and interest can add up to a staggering tax bill. The IRS also has enormous collection powers when it comes to getting its money. IRS officials can seize bank accounts, take paychecks and sell your assets.
If you owe the IRS, you have to take steps to deal with the agency. One of the ways you could do this is through an IRS Installment Agreement or Payment Plan.
You might qualify for a Non Collectible Status if you aren’t able to make the current payments and don’t have enough money left over to provide for basic life necessities. If you do qualify for Non Collectible Status, the IRS will suspend your payments for a length of time.
Our tax attorneys have created a program to help our clients at every step of this process so that our clients can receive a comfortable Installment Agreement or qualify for Non Collectible Status.
When a levy is placed, the IRS will seize the taxpayer’s assets, including the monies in a bank account or a persons paychecks. When a levy is placed on a paycheck, it remains in effect until a levy release is granted. A lien works differently. When a lien is filed against your home or your business, it affects your personal property or the title to your real estate.
As experienced levy attorneys, we are aware of something that you possibly don’t know: there IS a method to getting a levy released.
We have discovered that, if you are incapable of paying your basic, everyday living expenses such as a home mortgage, rent, utilities or car payment, we can take the proper steps to obtain the levy release that you need.
IRS Penalty Abatement is a program allowing you to have your penalties reduced or removed from your tax liability.
In order to be considered, you must qualify. And in order to qualify, you must prove why you could not or did not file the tax returns. You must prove, with good reason, why you did not pay the amount due on the tax or file the return.
We have an IRS Tax Help and Penalty Abatement program that is custom-designed to help you accomplish every individual step necessary to qualify for tax penalty relief.
Our Tax Attorneys are very well versed in all aspects of representing clients with Tax Problems. We provide aggressive and competent Tax Help.
California Tax Information:
California IRS Offices in major locations
| City | Street Address |
| Bakersfield | 4825 Coffee Rd., Bakersfield, CA 93308 |
| Camarillo | 751 Daily Dr. Camarillo, CA 93010 |
| Chico | 1395 Ridgewood Dr. Chico, CA 95973 |
| El Centro | 2345 S. Second St. El Centro, CA 92243 |
| Fresno | 5104 N. Blythe Ave. Fresno, CA 93722 |
| Long Beach | 501 W. Ocean Blvd. Long Beach, CA 90802 |
| Los Angeles | 300 N. Los Angeles St. Los Angeles, CA 90012 |
| Modesto | 1533 Lakewood Ave. Modesto, CA 95355 |
| Oakland | 1301 Clay St. Oakland, CA 94612 |
| Redding | 850 Industrial St. Redding, CA 96002 |
| Sacramento | 4330 Watt Ave. Sacramento, CA 95821 |
| San Bernardino | 290 N. D St. San Bernardino, CA 92401 |
| San Diego | 880 Front St. San Diego, CA 92101 |
| San Francisco | 450 Golden Gate Ave. San Francisco, CA 94102 |
| San Jose | 55 S. Market St. San Jose, CA 95113 |
| Santa Ana | 801 Civic Center Drive W. Santa Ana, CA 92701 |
| Santa Barbara | 1332 Anacapa St. Santa Barbara, CA 93101 |
| Santa Maria | 2384 Professional Parkway Santa Maria, CA 93455 |
| Santa Rosa | 777 Sonoma Ave. Santa Rosa, CA 95404 |
| Van Nuys | 6230 Van Nuys Blvd. Van Nuys, CA 91401 |
| Visalia | 627 N. Akers St. Visalia, CA 93291 |
CALIFORNIA FRANCHISE TAX BOARD
Franchise Tax Board
PO Box 942840
Sacramento, CA
94240-0002
