Getting behind in your tax filing requirements and tax payments happens to many taxpayers. Many people approach me about settling their tax liabilities, often after they have heard radio or television ads for reducing tax payments or paying only a mere portion of their outstanding tax liability. This is an Offer in Compromise.
Only some taxpayers qualify for an offer in compromise, and there is no guarantee or right to having an offer in compromise granted by the IRS.
As a tax lawyer, I am not always able to say for certain if you will qualify for an offer in compromise., however, I am usually able to let taxpayers know if they will NOT qualify.
What makes you ineligible to file an offer in compromise?
Not all tax returns have been filed
The IRS has made it clear that beginning March 27, 2017, the IRS will return any offer in compromise applications if not all required tax returns have been filed. This means that if you have failed to file required returns, you are not eligible for an offer in compromise.
Expenses in excess of the standard will not generally be allowed
The IRS will consider ability to pay, asset equity, income and expenses. However, not all expenses are allowed when computing a taxpayer’s ability to pay. The expenses that are allowed are limited to the IRS Collection Financial Standards which are available on the IRS’s website. A household of two people will be allowed a food expense of $345.00, and a household of four people will be allowed a food expense of $845.00. Financial standards for other items such as housing, utilities, clothing, transportation and others are all available on the IRS’s website. Expenses in excess of the standard will typically not be allowed absent exceptional circumstances.
The IRS typically will only grant an offer in compromise if the amount offered is the most the IRS can expect to collect within a reasonable period of time.
The IRS typically has ten years to collect a tax liability, so if a taxpayer has significant equity, or significant net income after allowing for permitted expenses, it is very difficult to qualify for an offer in compromise.
How can a tax attorney help?
Using my expertise and understanding of the law, I able to go over a taxpayer’s chances of obtaining, or being rejected, from an offer in compromise based on their circumstances. Taking the time to determine whether a taxpayer qualifies for an offer in compromise can save them a lot of money. Also, in the event that a taxpayer likely will not qualify for an offer in compromise, I am able to assist clients in obtaining a payment plan with the IRS.
Looking for a tax attorney in Blackhawk, Danville or the greater East Bay?
Christina Weed has worked with clients in San Francisco, the Walnut Creek & Oakland East Bay, and throughout the United States. As a licensed attorney with an LL.M. in Taxation from the University of San Diego, and a Bachelor’s Degree in Accountancy, Christina offers a unique combined focus on Trusts & Estates, Tax Law, Tax Litigation, and Business Law. Christina is Chair of the Tax Section of the Contra Costa County Bar Association and is also a member of the Estate Planning Council Diablo Valley and the Tri-Valley Estate Planning Council.
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Mendes Weed, LLP offices are located in Walnut Creek and our skilled attorneys provide family, tax, business and trust law assistance for clients. For your convenience, we also have attorneys' offices in San Francisco and Sacramento by appointment only.
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