Processing an Offer in Compromise/Addressing Back Taxes with the IRS

Time Critical: Processing an Offer in Compromise/Addressing Back Taxes with the IRS

Usually one of the main issues that causes an Offer in Compromise is a taxpayer not filing and paying their taxes on a timely basis, in essence, their inability/lack of desire to address their tax obligations and filings as they become due. Thus, one of the biggest obstacles for the CPA/Tax Advocate is to help the taxpayer to get motivated. To this end, most all tax representation work requires the CPA to help the taxpayer change their paradigm going forward and to address all strategic tax issues before they become problematic and even more expensive resulting in undue fines and penalties, levies and garnishments. To this end I help taxpayers understand both the specifics and the applications as they relate to them and the generalities of the process as detailed at http://www.hiscpa.com/irs-representation.html

Frequently however taxpayers get intimidated by the process in spite of the process as the details often confuse and frustrate even the most ardent and fervent taxpayer. It is critical that all steps of an Offer Process be carefully delineated and listed, such as the below, to assist taxpayers in knowing both their rights and responsibilities and the nuances and critical and important steps of submitting a successful Offer in Compromise:

Determination of the Amount Owed. Confirming by year of the amounts originally due as detailed by the original return and what the IRS believes is presently due per the latest tax notice. Care at this stage is also given to get copies of all of the returns to ensure that the original tax liability is correct and that all appropriate tax deductions have been claimed.

Amending Income Tax Returns. For all tax returns that need to be and that can legally be amended are done so to correct any overstatement in the true amount of tax due, while keeping in mind that only tax returns less than three years from their original filing/assessed date can be amended.

Tax Offer Forms. By going to the IRS web-site and complete Form 433A and Form 433B (if you have a business) and print it out. Please be sure to complete all information ASAP after you get it done and the above to me we will get together and go over the forms. All lines of the tax forms need to be completed. The Form 433A and Form 433B is the form the IRS to collect required data to list all of a individual and business income and expenses respectively detailing account names, locations, banking institutions, debts, detailing essentially all important financial information about you and your business. If your tax year is just over and your company's tax return has been completed, then Form 433 B can be completed using this information. Otherwise, it is essential to get your current year to date financial information available and to utilize this to compete the business form accordingly.

The Offer. You should not submit and Offer in Compromise unless your CPA has reviewed all of the above information and has determined that they feel you are an candidate to submit an process-able Offer in Compromise. The Offer itself is submitted with the actual amount of an Offer as well as the processing fee. The form the IRS uses to for this is Form 656.

Complete all Returns. The IRS requires that taxpayers submitting an Offer in Compromise are current on all of their tax filings and payments. If for example you are submitting a personal Offer and also have a business, you are required prior to submitting an Offer to file all of your open payroll tax returns including Form 941, Form 940 and all corporate income tax returns including Form 1120, 1120S and Form 1065.

Payment of all Open and Current Taxes Due. The IRS requires that taxpayers submitting an Offer in Compromise are current in their payments on all of their current tax filings. If for example you are submitting a personal Offer and also have a business, you are required prior to submitting an Offer to file all of your open payroll tax returns including Form 941, Form 940 and all corporate income tax returns including Form 1120, 1120S and Form 1065 for the current year and any required current estimated tax payments should be paid.

Strategic Issues. ASAP after you have done the above payments/filing and current tax planning, you need to ASAP retain a payroll service (if you own a business) to handle all of your payroll processing needs.

Power of Attorney. Getting ASAP a Power of Attorney signed and forwarded to your CPA ensuring that all open tax years, tax returns, and Offer in Compromise tax forms are listed.

Reasonable Salary. Tax Law requires all active employee owners of an S Corporation to pay a fair and reasonable salary given position and profit. If you have not yet done so I suggest you retain a payroll company ASAP and ensure that you enough withholding to cover your estimated tax liability.

Future Compliance. Please be reminded that as an condition of the acceptance by the IRS of an Offer of Compromise that IRS tax rules require that all of your tax filings and payments be currently filed and currently being paid for the five years after the date of acceptance. Failure to do so can legally result in the IRS voiding the offer adding penalties and interest and resuming enforced collection efforts.
Representing yourself before the IRS is a recipe for disaster and is analogous to the saying that "He who represents himself has a fool for a client. As Believers we are called to surround ourselves with wise counsel and failing to do so will add folly, toil, and additional financial drain, helping our "financial ship" sink faster still.

To learn more about IRS/Tax Representation Issues and an Offer in Compromise visit http://www.hiscpa.com/irs-representation.html

John Dillard is an Christian Speaker/Author and Certified Public Accountant. To See how he takes Christ along with him to work visit http://www.hiscpa.com/ and for his latest book Overcoming Life's 9/11's: Job's Journey visit http://www.john-dillard.com/
Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!