Offer in Compromise Attorneys Can Help Taxpayers 
Tax Law

Offer in Compromise Attorneys Can Help Taxpayers 

Introduction

Offer in compromise attorneys are licensed legal professionals who specialize in helping taxpayers reach a settlement agreement with the IRS to pay less than they owe. An offer in compromise (OIC) allows federal tax debt to be settled for significantly less than the amount actually owed based on a taxpayer’s financial situation. Hiring an experienced offer in compromise attorney to prepare and negotiate an effective OIC can greatly increase the chances of approval by the IRS.

Key Reasons to Hire an Offer in Compromise Attorney

Here are the main benefits of having a professional offer in compromise attorney handle this complex process:

  • In-depth knowledge of IRS rules and regulations
  • Proven strategies for documenting financial hardship
  • Preparation of accurate, compliant OIC applications
  • Skilled negotiation of settlement terms with the IRS
  • Significantly higher OIC approval rates

According to recent reports from the Taxpayer Advocate Service, offer in compromise requests prepared and submitted with representation from an offer in compromise attorney had an average approval rate of 44%, compared to only 26% approval for pro se requests.

Determining Eligibility for an Offer in Compromise

The IRS considers several factors when evaluating a taxpayer’s eligibility for an offer in compromise, mostly focusing on their current and future financial situation. These factors include:

  • Income and expenses – Documentation must show household income versus living expenses, assets available to liquidate, and ability to make any OIC payments
  • Asset valuation – Documentation verifying the current market value of any real estate, vehicles, or investments
  • Tax compliance – Filers must be currently compliant with all tax filing and payment obligations

With strict eligibility criteria, the assistance of an experienced attorney is vital from the initial stages of determining whether a taxpayer qualifies for an offer based on their specific circumstances.

Also Read:

Tax Lien Lawyers – Your Guide to Handle

What is Actually Settled in an Offer in Compromise Agreement

An approved offer in compromise settlement with the IRS allows for tax debt elimination under certain conditions:

  • The offer includes payment of part or all tax debt across multiple years
  • The taxpayer adheres to all filing, payment, and other IRS obligations for the next 5 years
  • The IRS agrees not to collect on the remaining “uncollectible” portion of the debt
Tax Debt Covered Definition
Federal individual and business income tax Any amounts owed from IRS Form 1040 or related business tax forms
Trust fund payroll taxes Withheld employee payroll taxes not paid over to the IRS by employers
Penalties and interest Any additional amounts imposed by the IRS

So in summary, an accepted offer permanently settles a taxpayer’s debt with the IRS for payroll, income or other taxes owed.

The Offer in Compromise Process Timeline

Here is a basic timeline of the major steps when going through the offer submission and approval process with an experienced attorney:

  1. Initial consultation and eligibility assessment
  2. Preparation and filing of detailed OIC application
    • Can take an attorney 80-100 hours to complete accurately!
  3. Processing by the IRS
    • Typically takes 9-12 months
  4. Negotiation and revision of offer terms, if needed
  5. Acceptance and closing letter from IRS
    • Triggers legally binding agreement

The most intensive parts of the process are preparing the accurate application and properly negotiating the offer terms with the IRS. This complex process is where representation from an expert attorney proves invaluable for achieving a positive settlement.

Nuances in Calculating an Offer Amount

Determining an appropriate offer amount that the IRS may accept is incredibly complicated. There are subtle nuances in formulating this settlement offer calculation that include:

  • Documented allowable living expenses
  • Household size and income
  • The value of dissipated assets
  • Future income potential
  • Net realizable equity in assets
  • Disposable income over time

Attempting to navigate these variables without guidance is extremely difficult and rarely ends favorably for the taxpayer. An attorney has the experience to account for these technical details appropriately.

Why Offer in Compromise Attorneys Have Higher Success Rates

Hiring an attorney skilled in offer cases has a proven impact on outcomes based on their specialized knowledge of the process, error minimization, and skill in presenting the taxpayer’s situation accurately and persuasively to the IRS.

Attorneys invest significant time and effort into:

  • Compiling financial details
  • Analyzing technical eligibility factors
  • Developing compliant arguments
  • Strategically overcoming any IRS objections

This diligence leads to more approvals and mutually agreeable settlement terms in many instances.

Alternatives to Hiring an Attorney

Taxpayers do have options to attempt securing an offer in compromise other than retaining legal counsel including:

  • Using tax preparation chains that offer assistance
  • Enlisting enrolled agents (federally licensed tax practitioners)
  • Attempting the process on your own

However, these options present limitations for many taxpayers:

  • Chains rely on lesser trained, transient preparers
  • Enrolled agents lack specialized legal tax knowledge
  • DIY offers have very high denial rates

So paying for an attorney with OIC expertise remains the best path to achieve debt forgiveness.

Conclusion

For taxpayers facing large federal tax debts, attorneys skilled in offer in compromise cases can provide tremendous value. Their representation significantly improves the chances of securing approval for a mutually agreeable and legally binding settlement with the IRS. Focused expertise in presenting a taxpayer’s full financial situation and negotiating offer terms gives attorneys a clear advantage over other methods. With hundreds of billions in total federal tax debt outstanding currently, seeking competent legal help maximizes relief opportunities.

Offer in compromise attorneys enable taxpayers overwhelmed by taxes owed to resolve their debt in a strategic, compliant and cost-effective manner.

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