How Does an Audit Reconsideration Differ from an Audit Appeal?

You might have found yourself in a situation where you don’t quite agree with the IRS’s decision to audit your taxes. While your first reaction might be terror, there’s likely nothing to be afraid of.

As long as you respond politely with the requested documentation in the requested time frame, you’re working well within your rights as a tax payer. Of course, this may not be the time where you want to go it alone, so requesting the assistance of an experienced tax attorney may be very helpful.

The Primary Difference

An audit reconsideration and an audit appeal are two fairly similar processes with one primary distinction: audit reconsiderations are more informal and can be resolved without a court appearance, while audit appeals are more structured and may require a court appearance.

Now that you know the primary difference between these two processes, take some time to learn a little more about each as an individual.

Audit Reconsideration

This is the more informal of the two processes. You may request an audit reconsideration
if:

• You disagree with the result of an IRS tax audit you received
• You were required to file a tax return, but did not, and the IRS created one for you

To maximize the chances of having your audit reconsideration approved, you will need to submit new information affecting the amount of tax owed, if you were not allowed to take certain credits you believe you should have received, if you believe the IRS made errors preparing your assessment, or if you filed a tax return prior to the IRS creating one for you.

To begin the audit reconsideration process, you need to file a tax return if you haven’t already, write a letter stating the changes you would like the IRS to reconsider, include as much documentation as you possible to support your argument, submit an examination report (typically a form 4549), include your contact information, and finally you must mail all of this to the IRS campus indicated on your examination report.

Once the process is finished, the IRS will contact you and request more information or provide you with your new tax liability, if it changes.

If you disagree with the results, it’s now time to file an Audit Appeal.

How to File an Audit Appeal

Attached to your results will be a letter containing instructions on how to begin the IRS appeals process. Typically, you have to fill out form 12203, which is a Request for Appeals Review, and mail it to the appropriate address indicated.

If you owe more than $25,000, you have to write a Formal Written Protest.

Eventually, your appeal request will be granted, and you are given an appointment with an appeals officer. You can represent yourself if you’d like, but you can also use the help of a tax professional, or ideally, a tax attorney.

Be sure to bring documentation and witnesses to support your case. The appeals officer will make a determination regarding your case. If you would like to dispute the results of your case, it is now time to take the case to court.

Seek the Help of a Competent Tax Attorney

This process becomes quite complicated, and while it is possible for you to fight the IRS on your own, you have the best chance of obtaining the results you desire by using the assistance of an experienced tax attorney.

Related posts:

1. What to Do When You Need to Appeal
2. The Tax Audit Process and IRS Audit Selection Method

We’re interviewing Tax Attorney Jeff Fouts in order to uncover the real deal behind IRS rules, procedures and penalties. Today’s audio edition talks about a little known fact that could save you up to 25% in IRS tax penalties. The interview is approximately 7 minutes long and includes a transcript below.

Originally recorded November 2011

MALE SPEAKER: Great. So we’re talking with Jeff Fouts, tax attorney, and we’re talking about IRS penalty abatement or removing tax penalties. Are you there, Jeff?

JEFF FOUTS: Yes, I am.

MALE SPEAKER: So why don’t you start off by just giving us an overview of what this looks like at the IRS.

JEFF FOUTS: Sure. As time has gone on, the IRS has created more and more penalties. Every time there is a new tax legislation that appears, there is an additional penalty added. The stated reason for the imposition of penalties is to help taxpayers understand that their noncompliant behavior is wrong and to emphasize that their compliant behavior is right.

So of course it’s my opinion that tax payers don’t need a penalty to tell them what’s right or wrong, that they have to pay their tax or file their tax return. And supposedly, according to the IRS, the purpose of the penalties is to deter or stop noncompliance by imposing a cost on that activity.

Well, that sounds good on paper, but their real…very real problem is most people don’t even know that the penalties really exist or how much they are or that they’re tied to compliance. They kind of have some nebulous idea, but they don’t understand it, okay? And so what’s the use of hitting someone if your hitting them doesn’t benefit anybody? As a matter of fact, the penalties increase the likelihood of further noncompliance because the tax liability grows to a point where the taxpayer can’t pay it and the IRS can’t collect it. And actually, that was the whole reason for the creation of the Offer in Compromise Program.

Congress saw that the tax liabilities on the books were increasing exponentially and that the IRS wasn’t able to collect it. And so they agreed to allow the taxpayers to have a potential option to settle their taxes for less than they owed. Well, the – you know, the IRS does its job too well. If you’re wanting to give someone pain, well now you’ve given them so much pain because of their non filing or nonpaying, that they potentially will never be able to pay; and now you’ve created so much fear in them that now they don’t want to file the next year and the next year and the next year. Serial noncompliance.

MALE SPEAKER: Right.

JEFF FOUTS: So there are two penalties that most taxpayers will come in contact with:

One is failure to pay their tax on time in full; the second is failure to file your tax return on time in full. The second, is failure to file your tax return on time.  The good news is that if you don’t have a liability on your tax return, then there’s no penalty because the penalty is on the – calculated on the tax itself. So if you don’t owe anything but you don’t file for three years, you’re not going to have a failure-to-file penalty because there’s no tax liability to calculate it on.

MALE SPEAKER: Okay.

JEFF FOUTS: There’s also not going to be a failure-to-pay penalty either. That’s good news.

MALE SPEAKER: Yeah, that is good news. So does that every happen anyway? Does that happen ever?

JEFF FOUTS: Oh, it happens a lot. It happens – well, I shouldn’t say a lot, but it happens on a very regular basis that taxpayers haven’t filed, but they end up not owing anything.

MALE SPEAKER: Right. But in the meantime, they’ve paid the penalty?

JEFF FOUTS: No, there’s no penalty. They just live in fear. Now, they may – we’re getting a little off topic, but let’s just say, for example, the IRS sees on its records that you did not file a return. And so they create a dummy return for you, but they don’t give you credit for an exemptions, deductions, and they file you as if you were single. They don’t give any mortgage interest deduction, charitable deduction or anything like that. And so it will look like you have a tax liability, and there will be interest and penalties on that. But if you – once you file a correct return, that return, if it shows there’s no liability, the tax goes away, and the interest and penalties go away.

MALE SPEAKER: Okay.

JEFF FOUTS: Now, let’s talk about the failure-to-file penalty. As a general rule, even if you don’t have enough money to pay the tax, you should always file the tax return. Why is that? Because the failure-to-file penalty can be up to a 25 percent penalty on the tax, but the – and another issue with it is it accrues so fast. In a moment, you’ll understand what I mean. It’s a 5 percent penalty per month for each month you’re late.

MALE SPEAKER: Okay.

JEFF FOUTS: Up to 25 percent. So after five months, you’ve accrued the whole 25 percent penalty. That’s fast.

MALE SPEAKER: Um-hmm.

JEFF FOUTS: And then interest accrues on the penalty amount as well.

MALE SPEAKER: Okay. And do they have a set rate for that?

JEFF FOUTS: It varies. They set it periodically based upon – I don’t know what it’s based on. It may be the federal funds rate. I don’t remember what it’s set on. I don’t remember. But they change it…I don’t remember if it’s monthly or quarterly. But now it’s actually pretty low.

Now, contrast that with – contrast that. A failure-to-file penalty is 5 percent penalty per month up to – but over five months, it accrues up to a maximum of 25 percent. So you’re in hurting status, the hurt locker as they say, fast. Contrast that with the failure-to-pay penalty. It’s one half of 1 percent per month up to 25 percent.

MALE SPEAKER: Wow.

JEFF FOUTS: So they really, really want you to file that tax return.

MALE SPEAKER: Um-hmm.

JEFF FOUTS: But people don’t know. I mean, do they know that they’re going to…

MALE SPEAKER: That’s right.

JEFF FOUTS: And the time starts when the tax return was due. So if you’ve asked for a legitimate extension, it counts from the extension time.

MALE SPEAKER: So that’s a way of saving some money if you know to do that.

JEFF FOUTS: Right.

MALE SPEAKER: Is that right?

JEFF FOUTS: Yes. If you file that tax return, you save yourself a lot of money.

MALE SPEAKER: Yeah. So, I mean, if you had a pretty average amount…let’s say you owe $10,000. After five months, you’re talking about $2500 in fees, right?

JEFF FOUTS: Yes.

MALE SPEAKER: So, yeah, big difference. Versus $250 I believe because you said half a percent would be if it was the…failure to pay is half a percent?

JEFF FOUTS: Right.

MALE SPEAKER: We’re good. Anything else?

JEFF FOUTS: Do you have time? Oh, I’ve got tons more, but, I mean, is this enough for today?

MALE SPEAKER: It is enough for today, absolutely. So thanks, and we’ll talk to you next week.

JEFF FOUTS: Thank you. Bye.

Note: Because we ran out of time, we plan to have a future audio interview where we get Jeff’s insight on removing tax penalties (this is called penalty abatement).

No related posts.

Some of my former competitors that have had major legal and business problems with this practice include tax attorneys JK Harris, Roni Lynn Deutch and more recently TaxMasters.

In the case of JK Harris, they have a record of run-ins with State Attorney Generals in many states and most recently they settled a million dollar lawsuit in Texas for misleading sales practices. This month the JK Harris tax law firm filed for bankruptcy. Not exactly what you want in the team representing you before the IRS. The video below discusses the case, has statements from former clients, and the Texas State Attorney General.

This news is close on the heels of TV Lawyer Roni Lynn Deutch shutting down her national firm in California after continued pressure from the California State Attorney General for what amounts to poor business practices and broken promises. She surrendered her license to practice law and resigned from the state bar in May 2011

TaxMasters, another ‘big’ firm with TV advertising, is facing pressure of their own from State Attorney Generals for the same kinds of misleading advertising and sales practices where clients are promised a successful offer in compromise.

These tax firms all have something in common.

• Poor BBB Ratings (Better Business Bureau)
• News stories from reputable mainstream media citing repeated consumer issues with the company
• Large numbers of complaints to State Attorney Generals about alleged illegal business practices

It’s often difficult for businesses to stay true to their original vision and ethics when they grow too fast or seemingly get greedy. I take a different approach with my tax law practice. That’s probably why we’re in our 18th year of service. We work hard for our clients and we fight the IRS even harder.

I have a small but tireless staff that are very experienced. Here’s an example. Dale is my Special Assistant and he’s one of the people you’ll speak with when you first contact my office. Dale’s been with my firm a long time, he knows your issues, he’s patient and understanding. He doesn’t make promises that I can’t keep and he follows up promptly to all your issues.

Pennies on the dollar

Pennies on the dollar is possible, but not because of some legal voodoo. Basically, the IRS determines what percentage of your outstanding tax liability it can reasonably collect in the next 2 years. This is called your “reasonable collection potential” and it’s why pennies on the dollar cases happen. Think about your ability to pay if you presently have a high income vs. if you’ve been out of work for six months and haven’t found a new job.

What we do here at my firm is a proper analysis of your case facts and history. My special assistant Dale will tell you that we can’t make any promises on your case, and can’t assess your chances of a successful offer in compromise case until I’ve completely reviewed your case facts. Even then, we don’t promise success. What I can do is promise that everyone on my team will do our best. With 18 years experience and and A+ rating with the BBB I’d encourage you to call us and find out if we can help you.

Until next time,

Jeff Fouts, Tax Attorney

Here’s a bio of sorts. I’m happily married with two kids. I’m a real small town tax lawyer, (Ellijay, pop. 1,584) not some fictional marketing character. I’ve represented tax clients against the IRS in all 50 states, and in 21 foreign countries. I have 18 years experience, thousands of satisfied clients, about 8 critics at last count, and an A+ BBB Rating.

I’m a member in good standing of the bar and have active memberships in courts from Georgia to Washington D.C., including the U.S. Supreme Court. My competitors covet my Google ranking but my clients covet my sound legal counsel. I deal directly with my clients and have a small, tireless staff of tax specialists.

You can put off your tax problem, or put us to work for you.

No related posts.

How Does an Offer in Compromise Work?

Basically, the IRS determines what percentage of your outstanding tax liability it can reasonably collect in the next 2 years. This is termed the “reasonable collection potential.” In order to qualify and successfully retain an IRS Offer in Compromise, you agree to:

• Pay the full amount of the proposed offer stated in the Offer in Compromise.
• File and pay your taxes on time for the next 5 years.
• Allow the IRS to keep any payments, refunds, and credits that were applied to your tax debts prior to the submission of your Offer in Compromise.
• Allow the IRS to keep any and all tax refunds you would have received during the calendar year your Offer in Compromise is approved.

Can I Prepare My Own Offer in Compromise?

Yes you can. This is not recommended, however. In my 18 years as a tax lawyer my experience is that the IRS is a gigantic bureaucracy that is unafraid to use its power when necessary. The amount of documentation required is extensive, and the experience of how and what information to submit is critical. That’s where a proven CPA and Tax Attorney is a worthy investment. However, if you do you want to file an OIC yourself, please do the following in order to maximize your chances of approval:

• Prepare IRS Form 433A and Form 656.
• Prepare Form 433B in addition to Forms 433A and 656 if you are self-employed.
• Prepare a document detailing the reasons you feel an Offer in Compromise is necessary.
• Carefully prepare all materials
• Present your materials and back-up information in a clear and logical format

An Offer in Compromise takes one to two years to complete, and even the slightest deviation in paperwork can delay the process even further. Additionally, the officer assigned to your case may request additional documentation in order to make an accurate determination regarding your request.

The Harsh Realities of Having Your Offer in Compromise Approved

Many companies make exaggerated, and sometimes just downright false, claims that they can help you settle your tax liability for just a few cents on the dollar. While this is technically possible, the chances of actually having your self submitted Offer in Compromise approved are pretty low. The IRS approved 16% of the total offers it received in 2004, accounting for a total of 19,546 offers. During the first five months of 2010, the IRS accepted 24% of all offers. In order to maximize the chance of approval, the assistance of a Tax Attorney with an extensive track record of successful IRS compromise offers is recommended.

Until next time,

Jeff Fouts, Tax Attorney

Here’s a bio: I’m happily married with two kids. I’m a real small town tax lawyer, (Ellijay, pop. 1,584) not some fictional marketing character. I’ve represented tax clients against the IRS in all 50 states, and in 21 foreign countries. I have 18 years experience, thousands of satisfied clients, about 8 critics at last count, and an A+ BBB Rating.

I’m a member in good standing of the bar and have active memberships in courts from Georgia to Washington D.C., including the U.S. Supreme Court. I deal directly with my clients and have a small, tireless staff of tax specialists.

You can put off your tax problem, or put us to work.

Related posts:

1. IRS Offer in Compromise Tax Settlement Help by Tax Attorney
2. IRS Tax Problems: Jail or Offer in Compromise?

Note: This audio content was created by a third-party and is provided here for informational purposes. A link to any original content is included at the end of this article.

This is a podcast from the IRS Case Resolution Alternatives Collection Policy. This is a reenactment of the presentation the National OIC Program manager delivered for the IRS’s National Phone Forum. The phone forum is titled “IRS Collection Process: What are your options?”. This segment will cover offers in compromise.

What is an offers in compromise, or OIC

An OIC is an agreement between the taxpayer and the IRS that settles the taxpayer’s tax debt for less than the full amount owed.

Internal Revenue Code section 7122 grants the IRS broad authority to accept an offer in compromise. Also, IRS Policy Statement P-5-100 says the IRS will accept an offer in compromise if payment of the taxes in full is unlikely and the amount of the offer reasonably reflects collection potential.

The IRS recognizes that it is both sound business practice and good tax policy to settle some cases for less than the total amount due. An offer in compromise is the administrative mechanism for reaching such a settlement.

Next, I’ll discuss who qualifies for an offer in compromise. Generally, taxpayers who are unable to fully pay their liability in a lump sum, or through a payment agreement, qualify for an offer in compromise. The key is the taxpayer’s ability to pay. If the taxpayer has the ability to full pay through a lump sum payment or through an installment agreement, they generally will not qualify for an offer in compromise.

Unless special circumstances are present, the IRS won’t accept an OIC for less than the taxpayer’s reasonable collection potential. Reasonable collection potential is defined as the taxpayer’s total realizable value in assets plus the value of their future income.

The objectives of the OIC program

Achieve a resolution that is in the best interest of both the individual taxpayer and the government;
Provide the taxpayer a fresh start toward future voluntary compliance with all filing and payment requirements;
Effect collection of what can reasonably be collected at the earliest possible time and at the least cost to the government; and to Secure revenue that may not be collected through any other means.

There are three reasons a taxpayer may submit an OIC:

The first reason is doubt as to collectibility. Doubt as to collectibility occurs when doubt exists that the taxpayer could ever pay the full amount of tax owed over the life of the collection statute. This is the most common basis of submission of an OIC.

The second: doubt as to liability, which occurs when doubt exists that the tax assessed is correct.

The third and final reason is effective tax administration or ETA. Under ETA, there is no doubt that the tax is correct and no doubt that the amount owed could be collected in full.

However, exceptional circumstances exist such that collection of the full amount would create economic hardship or compelling public policy or equity considerations which would cause the general public to question whether the collection of the tax liability is fair and/or equitable. The taxpayer bears the burden of proof to show their OIC qualifies for ETA consideration.

The keys to successfully navigating the OIC process

Explore all collection options before deciding to submit an offer in compromise; Avoid omissions and mistakes by carefully completing the financial statements and the Form 656; Complete the processability checklist, which is included with the OIC Booklet, to determine eligibility; Ensure that the taxpayer is current with all filing and paying requirements; Include all required fees and payments; and Respond promptly to requests for additional information in order to avoid the offer being returned.

The IRS recently released Form 656-B, Offer in Compromise Booklet. The new Form 656-B contains all of the worksheets, forms, applications and instructions necessary to file an OIC. The Form 656, Offer in Compromise, is included in the Form 656-B, but it is also now available as a separate four-page PDF document on IRS.gov.

Some features of Form 656-B include

The current Form 433-A, Collection Information Statement for Wage Earners and Self Employed Individuals, revision January 2008;
Form 433-B, Collection Information Statement for Businesses, revision January 2008;
Revised IRS Offer in Compromise Low Income Guidelines table based on the 2009 U.S. Department of Health and Human Services standards; Revised Form 656-A, Income Certification for Offer in Compromise Application Fee and Payment; and a Revised Worksheet to Calculate an Offer Amount. The worksheet was revised to be used with the new Form 433-A.

Next, I’ll cover the new OIC economic challenge initiatives and related procedures.

In response to the economic challenges that many taxpayers are facing, the OIC program now includes some changes.

The first procedure is an additional review of real property valuations. In some cases, the equity taxpayers have in real property can be a barrier to an OIC being accepted. With the uncertainty in the housing market, the IRS recognizes that the real-estate valuations used to determine ability to pay may vary. Therefore, in cases where the accuracy of a real-estate valuation is in question, the case will be forwarded to the Non-Economic Hardship – Effective Tax Administration, or NEH-ETA, group in Austin, Texas, for a second look at the value of the property.

The NEH-ETA group will investigate the property value and continue negotiation with the taxpayer to attempt to achieve an agreeable offer, if appropriate. The process is an internal process; taxpayers do not elect to use it.

The second procedure involves the prevention of accepted OIC defaults. Taxpayers who are unable to meet the terms of their offer agreement and who are in potential default of an accepted OIC now receive a letter advising them of their options. This process allows the taxpayer to renegotiate the terms of the original offer or adjust the original amount of the offer to ensure we agree to a compromise that is in the best interest of both the taxpayer and the government.

The IRS OIC Program has experienced many improvements

The first is increased OIC receipts. Offer receipts for fiscal year 2008 totaled 43,989. OIC receipts as compared to the same period last year are up 14 percent. Additionally, OICs received with the Form 656-A (low income waiver) represent 33 percent of total receipts.

The IRS has also seen continued improvement in the processing time of OIC cases. For example, 92 percent of offers processed by our Centralized Offer in Compromise sites are currently closed within six months or less. And, 72 percent of offers worked in our field groups are currently closed in nine months or less (this is up from 59 percent in 2005).

Another improvement is the “not-processable” rate of return, which is currently 10 percent. In 2006, the non-processable rate of return was 26 percent. Keep in mind, there are only three reasons an OIC can be returned as not-processable.

1. The taxpayer is in bankruptcy.
2. The $150 application fee or a completed Form 656-A is missing
3. The required TIPRA payment or a completed Form 656-A is missing.

More OIC resources are available at IRS.gov, including Form 656-B, Offer in Compromise Booklet and by using the Search term, OIC.

This is an audio webinar explaining the IRS Collection Process. If you have more questions please contact us to learn how we can help you file an IRS offer in compromise.

Original source material is from the IRS website.

Related posts:

1. IRS Offer in Compromise Tax Settlement Help by Tax Attorney
2. IRS Tax Problems: Jail or Offer in Compromise?

Do you ever wonder if the comments on Ripoffreport.com or sites like complaintsboard.com are true?

I never did until I read comments about my own business and wondered who all the anonymous comments were from that I didn’t recognize. I’m a small business and the problems that my clients have actually had with me or my staff over the years are few and far between. And when I do have a problem, I hear about it and try to resolve it.

That’s why I started to wonder who would make up negative things about me, despite my 18 year track record as an ethical and effective tax attorney (with an A+ rating on the Better Business Bureau) and scores of positive testimonials and reviews.

One answer keeps popping up.

Competitors.

A little research on Google suggests that a new practice of targeted Internet defamation is getting more common.

I encourage all my prospective clients to check with authoritative sources about my reputation as a tax attorney with the state attorney general, BBB or another trusted media source (for example, your local newspaper). These organizations have gone to the trouble of researching and validating anonymous negative reviews and comments.

When a company gets in hot water with consumers by systematically making claims that they can’t back up (or simply unfair business practices) it doesn’t just generate a few negative comments, it generates a lot of them. That in turn gets the attention of  consumer watch dogs and authorities. For example, in an April 2011 article The Houston Chronicle reported on a recent example of this that involves the State of Texas and JK Harris.

It’s not an easy problem for any business owner to address but here are some of my suggestions on how to find real scams, con artists, or businesses who simply don’t care about their clients.

What can you do to avoid being suckered by bogus negative comments and reviews?

1. Check trusted sources like your state attorney general’s office or trusted media for stories of fraud or bad business, marketing or sales practices for the company or firm you are considering.
2. Check the BBB (Better Business Bureau) rating for the business you’re investigating
3. Talk to the business about what you’ve heard or read about them

What about online reviews?

While I do recommend you look up online reviews of businesses and products beware that it has become common for people or businesses to make up or pay for both positive and negative reviews. In the case of negative reviews, competitors have been known to systematically target their competitors in an attempt to discredit the company they are competing for business with. That’s why we recommend that you check reputable sources that have properly sourced and verified the claims made against the company.

Until next time,

Jeff Fouts, Tax Attorney

Here’s a bio of sorts. I’m happily married with two kids. I’m a real small town tax lawyer, (Ellijay, pop. 1,584) not some fictional marketing character. I’ve represented tax clients against the IRS in all 50 states, and in 21 foreign countries. I have 18 years experience, thousands of satisfied clients, about 8 critics at last count, and an A+ BBB Rating.

I’m a member in good standing of the bar and have active memberships in courts from Georgia to Washington D.C., including the U.S. Supreme Court. My competitors covet my Google ranking but my clients covet my sound legal counsel. I deal directly with my clients and have a small, tireless staff of tax specialists.

You can put off your tax problem, or put us to work for you.

Related posts:

1. Jeff Fouts, Tax Attorney responds to Complaints, Negative Reviews – Part Two
2. Tax Attorney Jeff Fouts Responds to Complaints, Negative Reviews – Part One
3. Tax Audits – 10 Must Read Articles from Attorney Jeff Fouts

If you have a tax problem, you don’t have to repeat this mistake. Many people don’t realize that you can often negotiate a lower tax bill with the IRS using what is called an IRS Offer In Compromise or OIC. With an IRS offer in compromise, you can lower your overall tax debt and make monthly payments that let you not only avoid jail time, but wage garnishments and IRS levy’s as well.

Here’s an example of what not to do and more on the IRS Offer in Compromise:

(KMOV) Channel 4 St. Louis, MO August 21, 2011 — The United States Attorney’s Office announced today that Marilyn Francel pled guilty to tax evasion involving joint income tax returns filed with her husband for the years 2003-2006. In papers filed with the court, Francel agreed that she was the practice manager of her husband’s plastic surgery medical practice – Thomas J. Francel M.D. Plastic Surgery P.C.

The practice offered discounts for non-insured cosmetic surgeries when the patient paid by cash or cashier’s check. These discounted payments were recorded in a green ledger book maintained by the office business manager and not in the normal financial records of the practice.

Francel agreed that these receipts were not deposited into the business bank account for the practice. Each count carries a maximum penalty of five years in prison and/or fines up to $250,000. In determining the actual sentences, a judge is required to consider the U.S. Sentencing Guidelines, which provide recommended sentencing ranges. The parties recommended to the court a range under the Sentencing Guidelines in which a sentence of up to 12 months in prison could be imposed.

Link to full article

Following is a summary of an IRS Offer in Compromise

The IRS’ Offer in Compromise program allows taxpayers to settle their tax debt

• It settles your tax liability for less than the full amount owed.
• It is possible to pay "Pennies on the Dollar Owed' in taxes (but don’t be suckered in by tax services that promise the moon, especially the firms that may suggest an OIC amount before even reviewing your case in detail!).
• In order to properly submit an Offer in Compromise you must first complete several special IRS forms.

You must be careful

• To increase the chances of a successful IRS ruling you should hire a tax attorney with extensive knowledge of the IRS’ procedures.
• Why? Because the key is to determine the least amount that the IRS will accept from you.
• Let a tax professional prepare the documents for you – quickly and affordably.
• If your Offer is not submitted correctly it will be rejected, or you may be required to pay more than is necessary.

View settlements I’ve obtained for my clients over the last 18 years.

With an IRS offer in compromise, you not only get a fresh start with the IRS, it’s one of the best ways to avoid jail time.

Until Next Time,

Jeff Fouts, Tax Attorney

Here’s a bio of sorts. I’m happily married with two kids. I’m a real small town tax lawyer, (Ellijay, pop. 1,584) not some fictional marketing character. I’ve represented tax clients against the IRS in all 50 states, and in 21 foreign countries. I have 18 years experience, thousands of satisfied clients, about 8 critics at last count, and an A+ BBB Rating.

I’m a member in good standing of the bar and have active memberships in courts from Georgia to Washington D.C., including the U.S. Supreme Court. My competitors covet my Google ranking but my clients covet my sound legal counsel. I deal directly with my clients and have a small, tireless staff of tax specialists.

You can put off your tax problem, or put us to work for you.

Related posts:

1. IRS Offer in Compromise Tax Settlement Help by Tax Attorney

According to the Treasury Inspector General for Tax Administration Audit Report, between 2004 and 2008, the IRS tracked more than 8,000 potential noncompliance issues among their employees and found that action was warranted one-third of the time. The most common suspected offense was failing to file at all, which is hard to imagine for an IRS employee.

The TIGTA report also identified 133 additional employees in tax years 2006 and 2007 who were noncompliant with their tax obligations but weren’t identified by the computer match.

You have to wonder what the most powerful collection agency in the world is doing when they aren’t obeying the same rules they’re forcing the rest of us to live by. It would be galling to know that the Revenue Agent auditing you was not filing their own tax return or paying their tax liabilities. This finding has implications that extend beyond tax fraud.

“The IRS risks an erosion of public confidence in the American voluntary tax system if it does not appropriately address employees who are not complying with their tax obligations,” – Treasury Inspector General for Tax Administration audit report

There are additional facts and related links you may want to read here on Ashlea Ebeling’s Forbes article – IRS Employees In Tax Trouble.

Until next time,

Jeff Fouts, Tax Attorney
You can put off your tax problem, or put us to work.

Here’s a bio of sorts. I’m happily married with two kids. I’m a real small town tax lawyer, (Ellijay, pop. 1,584) not some fictional marketing character. I’ve represented tax clients against the IRS in all 50 states, and in 21 foreign countries. I have 18 years experience, thousands of satisfied clients, about 8 critics at last count, and an A+ BBB Rating.

I’m a member in good standing of the bar and have active memberships in courts from Georgia to Washington D.C., including the U.S. Supreme Court. My competitors covet my Google ranking but my clients covet my sound legal counsel. I deal directly with my clients and have a small, tireless staff. You can put off your tax problem, or put us to work.

Related posts:

1. Tax Problem Procrastination and Failing To File Income Taxes

Get the facts about an IRS Offer in Compromise

This is a guest post from Regina King

You may have heard that in an IRS Offer in Compromise you can “settle your IRS tax debt for pennies on the dollar” (an Offer in Compromise should not to be confused with general debt relief). This is true in some cases but be wary of any firm that over emphasizes your potential savings without having thoroughly reviewed your case. A review includes reviewing all your tax records.

Here are some facts about an IRS Offer in Compromise.

• As of the 2010 Fiscal year the IRS approved 24% of all Offer in Compromise submissions (source: National Taxpayer Advocate Report to Congress Fiscal Year 2011 Objectives).
• To qualify you must meet strict qualifications.
• You have to make an offer to the IRS to settle your debt. After this, the IRS will assess your financial situation and will take into consideration your assets, liabilities and disposable income. After reviewing these factors they issue their ruling.

The aim behind an Offer in Compromise, sometimes abbreviated as OIC, is to increase tax receipts (money coming in to the IRS) by making it easier to you to come forward to the IRS and pay what you can afford.

Offer in Compromise Requirements and Guidelines as stated by the IRS

According to the IRS, you may submit an Offer in Compromise if you meet one of the following requirements.

• Doubt as to Liability – You can show doubt that the assessed tax amount is correct.

• Doubt as to Collectibility – You must show there is no possibility that you can pay the amount due, or that you are willing to offer the amount of money your financial data shows you should be able to pay. This is the most common method followed by people when filing for an Offer in Compromise. The calculation methods are quite tricky, and could mean the difference between a settlement Offer which is accepted and one that’s rejected.

• Effective Tax Administration – The debtor may have the potential to pay back the full amount of taxes owed but exceptional circumstances prevent them from doing so and would create a financial hardship (such as with the disabled or elderly who can’t generate money).

Filing For an Offer in Compromise Settlement

To file an Offer in Compromise settlement, you need to submit a number of forms that vary with your particular situation, such as:

• IRS Form 656 – Offer in Compromise – Using this form the taxpayer offers the IRS a settlement amount money in exchange for the IRS not pursuing the remainder of the tax debt.

• IRS Form 656-A – Income Certification for Offer in Compromise Application Fee and Payment- If you have a low level of income you may not be required to submit an application fee for the OIC .

• IRS Form 433-A – Collection Information Statement for Wage Earners and Self-Employed This form will help the IRS understand your financial situation more closely and allows the IRS to determine if they can collect back taxes from you. This is one of the most important documents in a settlement case. The Form 433-A, along with the complete settlement packet and proposal we create for our clients, is the foundation of your case, and if done incorrectly it can torpedo any chances you had of getting your settlement offer accepted.

• IRS Form 443-B – Collection Information Statement for Businesses – This form is similar to form 433-A, but for businesses. You are required to file this form if you want to include your business taxes in an OIC. The same comments apply to the 433-B that I mentioned for the 433-A, except more so. The settlement packet and proposal for a client who has a business or who owes business taxes is very, very sensitive and must be done right the first time. Business financial statements and proposals are best not left to folks who aren’t well-versed in them.

Other things to know about submitting an offer in compromise

• There is a $150 application fee to submit your offer
• In a lump sum payment offer you must pay the IRS back in five payments or less
• In a short term periodic payment offer you can take up to 24 months to pay the offered amount.
• In a deferred periodic payment offer you must pay over the remaining statutory period for collecting the tax.

Why You Should Use a licensed tax professional for an Offer in Compromise

The IRS rejected 76% of all Offer in Compromise submissions during the last fiscal year. Those are tough odds. An experienced tax attorney can offer you the protection of attorney-client privilege, plus years of experience in working with the IRS. They use tools to avoid errors that can harm your chances, and their knowhow to maximizes the chances of your Offer in Compromise being accepted. This includes understanding changes to rules and procedures that the IRS makes from year-to-year, or even month-to-month sometimes. The reality is you need true legal expertise to help you with your IRS problem just as you need a medical specialist to help you if you have a heart problem.

The good news is even if you can’t qualify for a reduced tax bill with an Offer in Compromise, many people still qualify for other good options, like affordable monthly IRS payments. The goal is to allow you to resolve your tax issues and move on with your life.

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This is the profile of someone who creates a tax problem:

• Knowingly or unknowingly violates tax laws.
• Poor or no financial planning.
• Makes errors on tax return (self, or tax preparer).
• Lack of money to pay taxes.

This is the profile of a ‘problem’ tax personality:

• Procrastination.
• Anxiety.
• Fear of the unknown.
• Not taking responsibility.
• All of the above.

All of these keep the person from taking action to fix their IRS problem so they can get on with their life. They’re “stuck” right where they’re at, and their life will not progress in this area until they take action to seek help with their IRS problem.

When you put the profiles together you get tax problems. For a small number of people, these behaviors and traits seem to completely define them. They complain about anything. Someone else is always at fault. While this extreme is the exception, procrastination is the norm for my clients. I’m proud of my clients because they’ve taken the step in getting professional tax help in dealing with this difficult problem in their life. In that sense they are being very brave.

The fuel of procrastination is the desire to avoid the real or perceived pain of their IRS problem. They also often have a lack of knowledge which causes their fear or anxiety. Some of my clients have gone years worrying about their tax problems before finally picking up the phone and calling me. When they do, many are elated to hear that their tax problems are common, and that there’s a way to fix things with the IRS.

My best advice for dealing with tax problem procrastination is to take one thing at a time.

First step, get educated right? No, not for procrastinators. You just get stuck in an endless loop of passive Internet research. Instead, write down a small goal for today and do it. Make it really simple at first and something you can accomplish on your own. This will get the ball rolling. Something like, ‘write down 5 things I’ll enjoy when I fix my tax problem.’

A good next step is to contact someone who can help. I’d suggest you call because it’s a more active form of action than an email. But, if a call feels daunting then use email. The IRS Tax Advocate is an example of someone you can call. You can also call an experienced tax attorney to take advantage of both their expertise and the protection of attorney-client privilege.

I’m not going to tell you things are easy. Dealing with an IRS case is not fun. When I work with clients I must ask them to give me a lot of financial information and documentation. If they are non-filers, they must begin filing certain tax returns. If they are non-payers, they must begin paying current estimated taxes or correct tax withholdings. But people can deal with this when things are spread out on a monthly payment. Even if the news is not what you want to hear, you’ve taken the first step. And procrastinators know that once you begin anything, it’s easier to take the next step.

For many, their tax problems are far less severe than they have imagined. I can’t tell you how many people have minor tax issues and imagine that they’re going to jail! Don’t do this to yourself. Believe it or not, reality can be your best friend, not the monster we often make it out to be.

I also want to encourage people to see these characteristics for what they are, a series of past behaviors and traits. Current or past behavior need not define us or our future situation. While a character trait like procrastination may be your go-to response under pressure, people have proven just as able to change once they become conscious of their own responses and actions.

I’m not trying to be your new psychologist or motivational coach, but I am saying that I’ve seen people turn their financial situation around completely once they found the courage to act.

For my clients it’s about fixing their tax problems. And the major cause of that change wasn’t a tax lawyer like me, but an individual just like you.

Until next time,

Jeffrey I. Fouts, Tax Attorney
You can put off your tax problem, or put us to work.

Here’s a bio of sorts. I’m happily married with two kids. I’m a real small town tax lawyer (Ellijay, pop. 1,584) not some fictional marketing character. I’ve represented tax clients against the IRS in all 50 states, and in 21 foreign countries. I have 18 years experience, thousands of satisfied clients, about 8 critics at last count, and an A+ BBB Rating.

I’m a member in good standing of the bar and have active memberships in courts from Georgia to Washington D.C., including the U.S. Supreme Court. My competitors covet my Google ranking but my clients covet my sound legal counsel. I deal directly with my clients and have a small, tireless staff. You can put off your tax problem, or put us to work.

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