When the Internal Revenue Service (IRS) comes looking to collect taxes, it can feel like an overwhelming problem. However, every tax problem has a solution. One possible solution may be an offer in compromise (OIC), which can help resolve your tax controversy.
The team of Miami tax law professionals at Frost & Associates, LLC provide effective solutions to personal and corporate tax controversies. If you are facing problems related to federal or state tax issues, we can help you explore your options.
Finding a Basis for a Valid Offer in Compromise
An offer in compromise is simply an agreement formed between a taxpayer and the IRS that will settle any taxes that are owed for less than the full amount of the tax liability. There are three valid bases under which you may pursue an offer in compromise:
- Doubt as to collecting full payment: This occurs when there is doubt that a taxpayer will be able to pay the full amount of tax, penalties and interest that is owed within a reasonable period of time. An OIC will not be accepted under this basis if the IRS believes that the taxpayer can pay off the full amount, either in a lump sum or as part of an installment agreement. In addition, the IRS will usually only accept an OIC on this basis if the amount offered by the taxpayer is greater than or equal to the reasonable collection potential (RCP). The RCP is determined by the taxpayer’s ability to pay, as well as the value of any assets and potential future income, minus certain living expenses.
- Doubt as to liability: The IRS is not always right. If there is doubt concerning the assessed tax liability, an OIC may be in order. This typically occurs when penalties are assessed, even though the taxpayer meets the criteria for non-assertion of penalties. It may also occur if an examiner fails to consider taxpayer evidence during an IRS audit or if the taxpayer has no evidence to offer to bolster his or her position on a tax return.
- Effective tax administration: This basis for an OIC may still be available even though the amount assessed is correct and the IRS believes that the taxpayer has the ability to pay the full amount owed. This option can be pursued if the taxpayer can show that collection of the amount owed would constitute a financial hardship, violate public policy, or create an inequitable or unfair result.
Dedicated Representation in OIC Negotiations
When an OIC is initially filed, the IRS is not bound by the offer amount or the terms proposed by the taxpayer. A final agreement only comes about through negotiations between the IRS and the taxpayer or his or her representative. We have extensive experience negotiating with the IRS and will work hard to protect your valuable interests in OIC negotiations.
Contact Our Miami Tax Settlement Attorneys
We are prepared to assist you with all of your tax debt help needs. Contact our Florida tax lawyers online or call 305-363-6176 to schedule an appointment to discuss your situation.