For the rest of you out there, sit back and read this post. Follow the rules herein, and you should do just fine. Well, actually, depending on the complexity of your case, you could be completely mess things up. Definitely give us a call BEFORE filing anything, lest you find yourself without a house, and #IRS smiling all the way to the bank. Better to spend a few shekels on legal advice BEFORE losing the house, then after. This advice often falls on deaf ears...but hey, I can't blame you. I fancy myself an auto-mechanic, too. Not good, not good!
Alright, humor aside, let's start at the beginning. To complete an offer in compromise, you will need a couple of things. First, you need a computer. As you are reading this, I'll assume you have access to the Internet. Go to: http://irs.treasury.gov/oic_pre_qualifier/. This website is the "pre-qualifier" for an offer in compromise. It won't actually store any privacy information, so have no fear completing the fields. It will, however, allow you to play around with the numbers, and get an idea of what will be required for your "compromise." I suppose now is a good time to explain what a compromise is.
A compromise is an offer, made by the taxpayer, to the Government, for full and final settlement of all tax debts. A #compromise must be actual money and it (or partial payment of the #compromise) must be sent to the IRS when the offer is filed.
Note that the fields you complete on the website are essentially the same as those you will completed on the 433A (individual) and the 656 (individual). A couple of cavaets. We are NOT talking about business debts. That's a different discussion, and you absolutely have to speak to us before swimming into business waters. We are NOT talking about a hardship waiver. This post presumes you have an amount you can, in fact, pay towards the tax debt. There does exist an opportunity to pay nothing, but that is almost never excepted without extreme hardship -- again, you will need an attorney to help with that.
Three areas are critical to a 656 -- and working on the website link above will help you gather this information.
- First, you need to have your three most recent paystubs.
- Secondly, you need your three most recent bank statements.
- Thirdly, you will need an itemized list of your household and personal expenses.
With these items in hand, you have covered 90% of the questions you'll need for all forms (and the website!). Note, that if you have investment accounts, life insurance, 401K or retirement funds, etc., you'll need that information, too. Obviously, if you receive an annuity, or you have some business income (aha! Business items again...run, run!), then you'll need to gather a bit more documentation. For most folks, though -- the three biggies will get you through the vast majority of tax questions on the 433, 656, and website.
Surprisingly, the IRS has made this process relatively pain free. Once you have completed the website entry, you will be presented with a proposed amount for a compromise. Now, if you remember, a #compromise is something you offer the government. However, the #IRS does not need to accept it. To wit, using the number the IRS proposes has an excellent chance of being accepted by the government -- a really handy method of testing the waters prior to filing. No guarantees, of course, but a good chance.
Completing the 433 is a painful process, largely focused on budgets and assets. Be sure to have the three items outlined above. The process of completing a 433, and the considerations attendant to the process, can be found in a separate blog article on this site. There are some confusing aspects regarding adding and subtracting certain values on the form. The only thing to remember is that your primary bank account recevies a $1000 deduction (reducing the asset value of the saved money -- read the form carefully), and your personal vehicle gets $3450 deducted from the value (if any -- can never be less than 0. Read the form carefully).
The 656 form is not difficult and is, in fact, very short. Remember, if you are completing a business filing, you need to get the help of an attorney. However, as an individual filer, just complete the boxes as described on the form. The compromise amount can be split across a 20% deposit and 5 equal payments. Note -- DO NOT exceed five payments, or the amount goes up considerably.
If you are represented by an attorney, be sure to complete a power of attorney form, also. That's form 2848.
One last reminder -- be sure to claim anything over the 20% initial payment as a deposit. Otherwise, if you do not, the IRS will keep the entire amount sent in, even the amount above the 20% initial payment, if the government decides NOT to accept your offer. Be careful!
Do you have a question about an offer in compromise, or other tax matter? Give us a ring! Your first call is free, and we're glad to chat with you about how to settle your tax issues. 1-800-579-9864 or email@example.com.
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|Sean R. Hanover, Esq.
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