Offer In Compromise (OIC Settlements)

The Offer in Compromise program is administered by the IRS and various state agencies in order to assist the tax collection agencies in the reasonable administration and collection of tax debts that may never be settled.  

What is an Offer in Compromise? 

An offer is essentially an agreement that settles outstanding tax liabilities for a fractional amount of the actual liability that is owed. The acceptance of offers is completely at the discretion of the taxation agency, which will not accept them unless the amount offered by the taxpayer is larger than or equal to their collection potential over the time the agency has to collect the tax. The taxing entities look at the taxpayer’s assets, current and future income and earning potential when calculating a taxpayer’s collection potential.  Special exceptions are made for taxpayers with severe financial hardship or other extenuating circumstances. However, in tough economic times, offers are often difficult to get accepted without the assistance of counsel – the last statistics published suggest that the offer acceptance rate was less than twenty percent.  

Be wary.  There are many scams associated with the Offer in Compromise Program that are promoted by third parties. Many national tax agencies will offer to settle your tax debt for pennies on the dollar and will quote an affordable price for preparation. However, this fee does not include many of the hidden extras associated with the offer process. Most national tax agencies only prepare the tax forms associated with an offer in compromise and will not pre-screen offers for acceptance, review substantiation documents, negotiate with the IRS after the initial determination, or guide you through the appeals process should your offer not be accepted. We have encountered a number of these scams in our daily practice and encourage taxpayers to be vigilant when choosing tax counsel to represent them in the Offer in Compromise process. For more information, please see our current bulletin on National Tax Agencies.  

Filing and negotiating an offer requires an extensive background in Federal Tax Procedure. Your tax professional must know the laws and Internal Revenue Manual guidelines for the various methods that the IRS uses to evaluate reasonable collection potential such as dissipated assets and for offer acceptance itself.   

Upon retaining us, all potential offer candidates go through a rigorous financial analysis to determine if an Offer in Compromise is right for you. We work intimately with our clients to draft an offer that is carefully tailored to your individual situation and we will also help you gather the necessary supporting documentation. Once the federal or state government has processed your offer, our skilled negotiating team will work diligently to get you the best possible resolution. Because we only file quality offers and are extremely experienced in preparing them, we have a high success rate with both federal and state tax authorities. Let our reputation and our record work for you. Please call our office today to schedule a free consultation and to find out if you are a candidate for an Offer in Compromise.  

Tips

• Do your due diligence on who you have representing you: We have found that many individuals will select representation due to an advertisement that the saw either on television or in print. It is dangerous to rely on advertising without knowing the history of the firm that you are dealing with. One of the best ways to examine tax relief services is through the Better Business Bureau (www.bbb.org) or by examining the principal attorney’s credentials and complaint history through your state bar association’s website.

• Be sure you know who you are speaking with: Make sure the person you are dealing with is an attorney or someone qualified to offer tax advice or solutions to your tax problems. Many national firms operate under the “supervision” of an attorney or enrolled agent, but callers are often routed to sales people who are responsible for “making the sale” and getting their client to deposit a retainer. These individuals, often untrained in tax law, will make promises they are not able to keep or will say just about anything to get your business (many operate on commission). Get the person’s name and their position with the firm. Ask to speak to an attorney when discussing your tax problems. Remember only conversations with an attorney, who is providing legal advice, are protected by the confidentiality of attorney client privilege.

• Be extremely wary of flat fees quoted over the phone without gathering more detailed information: The first step in providing someone with quality tax advice in an IRS Collections matter is to analyze their entire tax history with the IRS. Determining whether or not a taxpayer is current, what years they have outstanding liabilities for, and how much they owe in total are important facts that need to be understood. Agencies who fail to ask these questions before quoting a client a flat fee may often overlook critical steps in the collections process. These mistakes will often cost you money or can create unnecessary steps in what may be a fairly simple process.   

• Do not retain someone for an Offer in Compromise without determining if you prequalify: One of the more egregious abuses of by national tax agencies is submitting Offer in Compromises that have no hope of acceptance by the IRS. The IRS has gotten extremely rigid its offer screening process and applies a very formulaic method to determine if your offer is valid. Although true that you may be able to settle your outstanding tax liability for pennies on the dollar, these individuals are subject to strict limitations with respect to their assets and their monthly income and expenses. Responsible tax practitioners will usually screen prospective clients to determine whether they qualify before accepting a retainer or submitting an Offer in Compromise on their behalf. National tax agencies will often take the retainer first without any regard to your chances of acceptance.

Questions to ask your tax representative: 

• Who will be handling my IRS Collections matter on my behalf? How can I get in touch with this person?
• If this person is not an attorney: Who is the supervising attorney? Where are they certified? You should check their record bar and do other research on this individual before hiring the firm.
• How many tax attorneys do they have on staff? How many active cases are they currently handling?
• What is your success rate?
• How do you evaluate Offers in Compromise before they are submitted?
• Do you have all information that you need for my matter (have they performed an analysis)?
• How does your pricing structure work? What is the rationale behind it?
• What are examples of results have you achieved? Can you give me an example of someone you have helped with a similar asset/income/tax liability profile as mine?