Insurance World

While there are many tips written about Offers in Compromise, few are from a former IRS Agent that taught Offers in Compromise at the IRS.

Most of the tips I read are fairly accurate. The points I will bring to the table are told in light of how the IRS Agent, reviewer of Offers in Compromise, looks at a case.

Here are my top ten tips about Offers in Compromise:

1. Fill out the Offer in Compromise correctly. Seems simple, however, about 50% of the offers are returned for not being completely filled out. Make sure all the applicable boxes are completed. The IRS will return your offer in a heartbeat if it is not filled out completely.

2. The IRS will look to reject the offer first! Trust me on this. The IRS first eyes always look to reject. They are looking at all the reasons to send back or reject the offer. Why? It is less work for the Agents. Since IRS Agents are graded on inventories or case loads, they want to clear out their inventories.

3. File the Offer in Compromise during the worst time in your financial life. A lot of people wait until they start to make some money and decide to file the offer. Make absolutely sure your income levels are as low as they possibly can be. Make no deposits of self employment income before you turn in your offer, it may bump up your average income.

4. The base rule for offers is that you must give the IRS your total equity in all assets. If your assets total $9000 you must offer at least that. The IRS is very strict about this. You can use a low distressed value for your assets. Use liquidation values. Get an appraisal if necessary.

5. Be completely truthful. The IRS has been trained to sniff out stink on a case. This is all they do for a living. Do not lie!

6. Make sure the financial statements are filled out correctly. If you forget to fill out one box or put "none" on any section where applicable, the IRS can and will reject the OIC.

7. Provide all documentation. The IRS will want every figure documented with a check and invoice to prove this is your actual expense. They are very thorough on this issue. Get all documents to prove your case.

8. Check the IRS pub to find out what the IRS allows for expenses. For example, the IRS does not allow for college tuition. There is a complete list of dos and don'ts, so be forewarned.

9. Make sure all your tax returns are up to date and you are current on ES payments or adequate withholding is being taken out of your check.

10. The IRS will do a very thorough check on your Offer. Do not be surprised if they pull your credit report, google your name and use all types of searches to verify the worth of your assets.

Remember, 25% of all offers in compromise are accepted. Hire a professional tax firm and one that has a former IRS Offer in Compromise specialist like myself.

Michael D. Sullivan is a seasoned IRS tax expert. Learn more about Michael and the services he provides at http://www.freshstarttax.com/.

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I am a former IRS Agent who has worked and taught the "Offer-in-Compromise" Program in the IRS Regional Training Center. The Offer-in-Compromise is a much talked about program and advertised as "pennies on the dollar" settlement.

FACTS: Approximately 52,000 "Offer-in-Compromise" (hereafter referred to as OIC) are filed each year and that number will be rising at a record pace. 12,000 OIC are accepted each year. The program has an acceptance rate of about 22%.

OICs are worked only by an IRS Tax Specialist whose expertise is OIC. All the tax specialists are trained to scrutinize the OICs. I bite my tongue in saying this; it is my firm belief that the Agents working these cases look first to reject rather than to accept an OIC. Why, simply because it is far less work for an Agent. It is much easier to send a rejection letter than fully document the case for acceptance. Therefore the Agents look for any reason they can use to reject the OIC. An OIC rejection closes out their inventory quickly, making the Agent look very efficient in managing their case load.

The Key to having your OIC accepted is listed below:

1. Fully document the case. Get every piece of paper you can, verify every number you put on the Form 433A, the IRS financial statement.

2. Keep up with the OIC. As soon as the case is assigned, call the Agent every two weeks to ask for an update. This lets the Agent know you really want this pushed through and that you can furnish additional documents if needed. Most Agents will not even contact the Taxpayers or their representative, they will usually just send out a rejection letter. It is the easy way out.

3. Make sure the case makes sense. If you believe the Agent will have questions, send in an additional statement the clarify questions you think will arise.

4. Know that IRS will look at the history of the taxpayer and income levels for the last five years. If there have been major fluctuations in your income level, please document the fluctuations in detail.

5. Believe it or not, many offers are rejected because payments were not attached or the OIC was not signed. To avoid a rejection, you should have a tax professional review the OIC before submitting.

I have been in this business a number of years and truly believe you would be a fool not to have professional representation. Find a professional tax firm specializing in OIC, which is your very best chance of having the OIC accepted.

Former IRS Agents who have worked the Program are best suited for this job; after all, they know the tax policies.

Michael D. Sullivan is a seasoned IRS tax expert. Learn more about Michael and the services he provides at http://www.freshstarttax.com/.

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Having worked for the Internal Revenue Service for 10 years as an Instructor, there are a few acid tests Revenue Officers/Agents will use when working a taxpayers' case in their inventory. I also want to mention that when I was an instructor at the IRS, this was the first bit of instruction I would give to Revenue Officers coming on board. "Assume the taxpayers are lying." While this is a bit of an over statement on my part, you should know that as an IRS Agent, "taxpayers on a regular basis never tells the whole truth". While some taxpayers are as honest as the day is long, most are deceiving - and in that case you must dig further for the truth.

Therefore going into each case, these three acid tests are the fastest and quickest ways to spot liars and deceivers.

Three main tips:

1. Make sure the bank statements, tax return, financial statements all have a common thread of income. While there are many exceptions to this rule because of changing circumstances i.e. loss of jobs, life events, generally the money you deposit in your bank needs to tie into your current wages and your income information on your tax return. If this doesn't match up, you can bet your last dollar, IRS will investigate further to see if there may be hidden income. Also your cost of living should be in line with your wages. Exceptions exist such as you are borrowing money or living on savings.

2. IRS can and will pull credit reports to verify monthly payments you are making on other debt or assets. Many people who try to hide and/or deceive the government, will buy money order or cashiers checks. A smart IRS Agent will pull credit reports to verify your IRS financial statement with items found on your credit report.

3. IRS will check through credit reports for loan applications submitted to banks, car dealerships or other financial institutions to verify income and assets. IRS will compare the financial statement you gave the financial institution with the financial statement you submitted to IRS. It should match up; however this is rarely the case.

While this is not a comprehensive list, however, IRS knows where to look for lies and deception and they will find it.

Always turn in a truthful financial statement to the IRS.

Anytime you deal with the IRS, it is always wise to seek reputable professional counsel.

Michael D. Sullivan is a seasoned IRS tax expert. Learn more about Michael and the services he provides at http://www.freshstarttax.com/.

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