OIC question?

Question

How do I pick the right tax professional to help me file an OIC. I dont think I can deal with the IRS directly and would feel more comfortable if someone guided me thru the process even though it might cost me a little more.

I know the IRS deals with each case differently. I just want to do it right the first time and get my taxes caught up. I am so worried that I will get into a bigger mess.

Please help!

Answer 1

I would suggest calling the IRS first before considering a tax professional. They will take financial information to help you determine if you might qualify. For example, if the information shows you have an ability to pay either monthly or through borrowing or liquidation of assets, you'll probably not qualify. On the othe hand, if the information shows you fit their hardship criteria they will defer collection.

The fact of the matter is that unless you're filing based on "doubt as to liability" or demonstrate unusual personal and/or financial circumstances, filing an OIC is generally a waste of the $150 application fee. Moreover, the collection statute of limitations is suspended while the IRS considers the offer.

Answer 2

You might find that other programs exist that you may qualify for such as bankruptcy, currently not collectable, or a partial payment installment agreement.

OIC's have a bad reputation because of all the late night television commericals, Bostonian is correct in that less than 25% are ever accepted.  This is mostly due to unrealistic offers, you have to remember that an OIC can't just be a good deal for you, it has to be good for the government too.

You have nothing to lose by visiting your local IRS office and asking them for help with currently not collectable or a partial payment installment agreement.

With the execption of a bankruptcy you will have to be current in your tax obligations before any program is approved.  With the case of an OIC if you owe taxes in the 5 years following acceptance it voids the OIC and you owe the full amount again.

Answer 3

Another reason to avoid the late-night informercials...besides charging 4 times what a good EA would, they often get you to sign POAs and then...do absolutely nothing.

One large firm has been sued in 18 states.  One of the common complaints, filing an OIC when they should have known the person wasn't even eligible.

Here's a clue--your interview with the firm should entail talking to the person who will actually do the work.  The late-night infomercial firms use sales people.  Your legal commitment to pay should be based on the work being done.  (Eg, a time table and then you pay as the work is done.)  You do not pay up front and if you can't afford it all at once, *you* put the money on a credit card instead of writing a check.

The late-night informercial places make you pay up front (they even have arrangements for financing) and as soon as you sign/pay, they hand the "case" over to a clerk to do the work.  There's no guarantee the clerk is even capable of doing the work.  The salesman who called you daily will be replaced by a clerk who won't call you at all....

Answer 4

Seek out a LOCAL CPA or EA who has experience with Offers in Compromise.  Do NOT deal with the shysters that advertise on TV or talk radio.

Bear in mind a few important points:

Less than 25% of all OICs are accepted by the IRS.  Statistically your odds are not good.

The IRS has up to 2 years to consider your offer.  During that time, you are REQUIRED to continue making payments on the outstanding debt.

Contrary to what the TV ads claim, submitting an OIC will NOT "stop the IRS cold in their tracks" with the any collection actions open to them.

There are substantial fees and deposits required with the OIC.  These are NOT refundable if your offer is refused, although the deposit will be applied to your debt.

Answer 5

I am somewhat biased because you are in my area of specialization here.  I recommend an enrolled agent with a collection background.

By submitting an Offer in Compromise you have to offer as much or more as IRS could collect from you through monthly payments or seizing your property.  The amount you have to pay is, to use the IRS jargon, is "an amount that represents the reasonable collection potential of the account." This is a lump sum equal to what you could get from the equity in all your assets if they were sold at a quick sale, generally 80% plus 48 times what you could pay monthly on an installment agreement.



For example, if you had a car worth  $10,000 and owed $5,000 on it and nothing else and IRS said you could make payments to IRS of $100 per month you would have to offer a lump sum of 80% of the $10,000 minus the $5,000 owed = $3,000 PLUS 48 times $100 = $4,800 for a total of $7,800 on whatever you actually owed. Your own affairs are likely to be more complicated.

As an enrolled agent preparing offers for clients I have gone from one client who owed a quarter million dollar liability accepted at 1 cent on the dollar to don't even bother trying. Your case might also dictate an entirely different approach including getting the whole account put on ice for a few years or filing for bankruptcy or actually paying it in full over several years.  There is no way to know without analyzing your individual situation.

If you want to hire a professional representative stay away from the ones that advertise on cable TV. The ads sound like  promises they will deliver you a pennies on the dollar deal but nobody really can.  Their fees will start in the $4,000 area (about triple what I charge.)  If you want some additional information outside this forum, you can email me through my profile.