If you have a tax debt, it means that somewhere along the way you made a mistake. That's ok. We're human and we all make mistakes. Unfortunately, there is no "magic fix" to your mistake; anyone who tells you otherwise is taking you for a ride. The best way to solve your problem — if you are to pursue an IRS Fresh Start Program Offer in Compromise — is to submit an offer that's going to let the IRS know you are legitimately wanting to solve this problem and move on.
New rules mean new obstacles
The IRS has the ability to use their discretion whenever accepting offers. Even though they have kept the same guidelines, their mentality has definitely shifted. They started to feel that some of the deals getting through were not in the best interest of the government, and so they started to decline a number of the offers they were receiving.
Does that mean offer in compromise under the Fresh Start Program is pointless? Absolutely not! But it does mean that the offers being submitted need to be grounded in real numbers and come to a reasonable conclusion.
Some things never change
Even though a submitted offer in compromise might be legitimate, IRS Agents are known to say things along the lines of, "Even though your offer right now is reasonable, we might be able to collect in the future," and use that as a reason to decline the offer. The IRS wants to collect as much money as they can, so expecting them to want the best for you is going to land you in a world of trouble.
One of the things I've found with IRS Agents who work with the Offer in Compromises is that they don't necessarily know all of the guidelines. They want the person to pay a fair percentage, instead of what they are able to pay. Those aren't the rules, but it's the mentality a number of IRS Agents hold.
People always ask us, "What percentage of my debt will the IRS take?" It doesn't boil down to percentages. The IRS has you fill out a form to determine what they think you can afford. Be wary of anyone who promises that you that you will only pay 10%, or "Pennies on the dollar".
The stakes are raised
There are favorable guidelines with the IRS Fresh Start Program, but the shift in the leniency of the IRS to accept offers raises the stakes. Our chief goal is to minimize your reasonable collection potential by showing that your asset and expense valuations are leaving you with the least amount of money possible. It's critical to get these numbers right as they determine what is going to constitute a reasonable offer.
If you slap together a nonsensical offer in compromise, it can have a lot of negative consequences. Not only does it increase the amount of time that the IRS has to collect, but if you don't qualify you're back to square one. Even though those are both bad, they're not the worst part about submitting a frivolous offer. More than anything, an unreasonable offer makes you look bad in front of the IRS. If you get back to the place where you want to submit a new offer in compromise, they won't take you as seriously thanks to previous offers.
Do it once and do it right
As always, it's important to remember the overwhelming gravity of the CSED (Collection Statute Expiration Date). The IRS knows they only have so long to collect, and you should be aware of that as well. Using this inevitable deadline to further your own cause is a great tactic, but a frivolous offer in compromise does the opposite – it extends the amount of time that the IRS has to collect. Our philosophy is that you do it once, and you do it right.
We always like to remind taxpayers that knowledge is power when dealing with the IRS. Knowing the best program and guidelines for your particular problem is the first step in getting the resolution you deserve. We're always happy to talk to you and hear about your situation and see if we can be of help. Feel free to contact us at any point in your case's journey and we'll see if we can't get things sorted.