Why An Offer In Compromise May Not Be Your Best Solution For Tax Settlements

When we meet with an incoming client who is facing collection actions by the IRS or the State and the State, it's not unusual to discover clients who have been trying to find a solution to their tax debt for a long time. Clients who are new to us often tell us what they have heard from the IRS as well as other tax settlement companies have advised them. We've heard from clients that they've heard that different tax organizations possess "special contact" with the IRS and that they can use those contacts to help other firms claim that they can resolve tax debts at a fraction of the amount due. These claims are sure to make us nervous. While there are occasions where taxpayers are able to resolve their tax debt by paying a small fraction of the amount they owe but it's not available to all taxpayers and it's almost impossible to determine whether taxpayers are eligible for this benefit after a brief phone call.

To determine which tax resolution program is appropriate for a particular person an experienced tax resolution expert should first be able to gain an understanding of the client's debt and financial circumstances to suggest a suitable settlement plan. A tax resolution professional will only suggest an option for tax settlement after getting this knowledge and confirming that the tax obligation owed by IRS or State Tax agency is correct. IRS as well as the State Tax agency is correct.

A few months later, having hired a nationwide tax settlement company one of our clients contacted us. There was no way to resolve the client's unpaid tax debts had been settled after the firm had paid thousands of dollars. The other firm that was tax settlement demanded an additional service fee that was almost three times the initial service fee. After a brief discussion and a tense client accepted to work with us for only a fraction of the cost that the other company would cost.

Our team quickly discovered it was the case that tax due due according to the tax agency of the state was correct. We approached the tax department of the state to inform them that we were representing the client. We assured them we had a strategy to settle the tax debt and we were able to convince the State was able to stop attempts to collect the debt for us to have time to come up with the tax resolution plan.

The client owed an amount of around $12,000 to the state. the majority of which was due to late filing and penalties for late payment. In this instance we found that the best option was to one) submit an offer to compromise 2.) establish an installment agreement, or) agree to a different kind of arrangement for payment.

Each option offers pros and pros and. An installment agreement can be made, however the balance would accrue interest until the balance is paid in complete. This could cost the customer a lot more over a longer period. A compromise offer could be made, however it's unlikely that it will be approved since the taxpayer is paid a substantial six-figure salary. In addition, depending on the state in where the client was liable for taxes, process of determining the value offered in compromise may be as long as six months.

In this instance, we decided to discuss a different payment plan. We supplied the financial details of the client's to the State collector assigned on the bank account. This helped us prove that, despite the taxpayer's income of six figures there was not much available income once allowable living expenses were taken into consideration. This would make it almost impossible for the customer to make installment payments. After some negotiation and persuasive we were able convince the collector it would be in the interests of the state to reduce the penalty owed in exchange for immediate payment of the tax and interest accrued.

We were able get the penalty of more than $3,000 waived without the effort and expense of making an offer in compromise. The client is now able to go on with his life and avoid the long-term commitment of regular payments and will not have to sit and wait whether or when his compromise offer is accepted.

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