how can I FILE A compromise for the irs?
Wednesday, May 19th, 2010 at
7:49 pm
I owe 18000 in back taxes and I need to know if I can do it myself or hire a lawyer, I am going through bad times and I lost my business
Like this post? Subscribe to my RSS feed and get loads more!
You can try it yourself. All the forms needed, etc are at http://www.irs.gov
It depends on your confidence level preparing those, your current income and your projected (5 year out) income.
Helen, EA in PA
truthfully the IRS will reject over 98% of offer in compromise requests. The bottom line is if you are able bodied and earn income you will likely be denied. the best you can hope for is a payment plan or a deferral until your financial situation improves. Consult an EA to help you complete form 433
good luck
You need to know what you are doing.
An Offer in Compromise is a settlement with IRS where you pay less than 100 cents for every dollar you owe and IRS forgives the rest. It will do this if it determines you are offering as much or more as it could collect from you through monthly payments or seizing your property.
The amount you have to pay is, to use the IRS jargon, is "an amount that represents the reasonable collection potential of the account." This is a lump sum equal to what you could get from the equity in all your assets if they were sold at a quick sale, generally 80% plus 48 times what you could pay monthly on an installment agreement.
For example, if you had a car worth $10,000 and owed $5,000 on it and nothing else and IRS said you could make payments to IRS of $100 per month you would have to offer a lump sum of 80% of the $10,000 minus the $5,000 owed = $3,000 PLUS 48 times $100 = $4,800 for a total of $7,800 on whatever you actually owed. Your own affairs are likely to be more complicated.
You do not have to have a representative but the process can be pretty intimidating if you haven’t had any experience. You would pay professional fees to a representative to provide this. That decision is up to you.
I am an enrolled agent, licensed by the US Treasury Department who specializes in taxpayers who have large unpaid tax bills and prepare these for clients. I got an offer for a client who owed a quarter million dollar liability accepted at 1 cent on the dollar. Many other clients have not qualified. The average nationwide for accepted offers is closer to about 17 cents on the dollar. On a case by case basis, this figure is meaningless. Your case might also dictate an entirely different approach including getting the whole account put on ice for a few years or filing for bankruptcy or actually paying it in full over several years.
If you want to hire a professional representative–enrolled agent, CPA or attorney–stay away from the ones that advertise on cable TV. Their fees, about three times what I charge, can be heart stopping. If you want additional information outside this forum, you can email me through my profile.