10 Mar 11 Offer In promise Overview For Enrolled Agents

Offer In promise Overview For Enrolled AgentsBy: Sawyer Adams .... Click author's name to view profile and articles!!!Retargeting by ChangoTweet So you did your homework, took anEnrolled Agent Course or used anEnrolled Agent study guide and passed theEnrolled Agent Exam. Now that you have bee an Enrolled Agent you want to represent clients who have tax problems. The Internal Revenue Service Offer in promise (OIC) program is a good place to start. There are not many taxpayers that actually qualify for the OIC program, but almost every taxpayer who owes a balance to the IRS will inquire about it. Therefore, as an Enrolled Agent you should bee familiar with how the OIC program works.Three Types of Offers in promiseThere are three types of Offers in promise for which the IRS may consider settling a tax liability for payment of less than the full amount owed. The three types are Doubt as to Collectibility, Doubt as to Liability and Effective Tax Administration.1. Doubt as to Collectibility - Doubt exists that the taxpayer could ever pay the full amount of tax liability owed within the remainder of the statutory period for collection.Example: A taxpayer owes $20,000 for unpaid tax liabilities and agrees that the tax heshe owes is correct. The taxpayer'smonthly ine does not meet their necessary living expenses. The taxpayer does not own any real property and does not have the ability to fully pay the liability now or through monthly installment payments.2. Doubt as to Liability - A legitimate doubt exists that the assessed tax liability is correct. Possible reasons to submit a doubt as to liability offer include: (1) the examiner made a mistake interpreting the law, (2) the examiner failed to consider the taxpayer's evidence or (3) the taxpayer has new evidence.Example: The taxpayer was vice president of a corporation from 2004-2005. In 2006, the corporation accrued unpaid payroll taxes andthe taxpayer was assessed a trust fund recovery penalty as a responsible party of the corporation.The taxpayer was no longer a corporate officer and had resigned from the corporation on 12312005. Since the taxpayer had resigned prior to the payroll tax liability accruing and was not contacted prior to the assessment, there is legitimate doubt that the assessed tax liability is correct.3. Effective Tax Administration - There is no doubt that the tax is correct and there is potential to collect the full amount of the tax owed, but an exceptional circumstance exists that would allow the IRS to consider an OIC. To be eligible for promise on this basis, a taxpayer must demonstrate that the collection of the tax would create an economic hardship or would be unfair and inequitable.Example: Mr. amp; Mrs. Taxpayer have assets sufficient to satisfy the tax liability and provide full time care and assistance to a dependent child, who has a serious long-term illness. It is expected that Mr. and Mrs. Taxpayer will need to use the equity in assets to provide for adequate basic living expenses and medical care for the child. There is no doubt that the tax is correct.OIC Payment OptionsIn general, a taxpayer must submit a $150 application fee and initial payment along with the Form 656, Offer in promise. Taxpayers may choose to pay their Offer in promise in one of three payment options:1. Lump Sum Cash Offer - Payable in non-refundable installments, the offer amount must be paid in five or fewer installments upon written notice of acceptance. A non-refundable payment of 20 percent of the offer amount along with the $150 application fee is due upon filing the Form 656.If the offer will be paid in 5 or fewer installments in 5 months or less, the offer amount must include the realizable value of assets plus the amount that could be collected over 48 months of payments or the time remaining on the collection statute, whichever is less.If the offer will be paid in 5 or fewer installments in more than 5 months and within 24 months, the offer amount must include the realizable value of assets plus the amount that could be collected over 60 months of payments, or the time remaining on the collection statute, whichever is less.If the offer will be paid in 5 or fewer installments in more than 24 months, the offer amount must include the realizable value of assets plus the amount that could be collected over the time remaining on the collection statute.2. Short Term Periodic Payment Offer - Payable in non-refundable installments; the offer amount must be paid within 24 months of the date the IRS received the offer. The first payment and the $150 application fee are due upon filing the Form 656. Regular payments must be made during the offer investigation.The offer amount must include the realizable value of assets plus the total amount the IRS could collect over 60 months of payments or the remainder of the statutory period for collection, whichever is less.3. Deferred Periodic Payment Offer - Payable in non-refundable installments; the offer amount must be paid over the remaining statutory period for collecting the tax. The first payment and the $150 application fee are due upon filing the Form 656. Regular payments must be made during the offer investigation.The offer amount must include the realizable value of assets plus the total amount the IRS could collect through monthly payments during the remaining life of the statutory period for collection.The IRS is not bound by either the offer amount or the terms proposed by the taxpayer. The OIC investigator may negotiate a different offer amount and terms, when appropriate. The investigator may determine that the proposed offer amount is too low or the payment terms are too protracted to remend acceptance. In this situation, the OIC investigator may advise the taxpayer as to what larger amount or different terms would likely be remended for acceptance. IRS Circular 230 DisclosurePursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this munication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or remending to another person any transaction or matter addressed in this munication.Article Source: abcarticledirectoryFast Forward Academy is a leading publisher of education for enrolled agents and tax professionals. Access to free questions for the enrolled agent exam is available on their website.Note: The content of this article solely conveys the opinion of its author, Sawyer AdamsRetargeting by ChangoDid You Like This Article? Share It With YourFriends!Please Rate this Article 5 out of 54 out of 53 out of 52 out of 51 out of 5 Not yet Rated Click the XML Icon to Receive Free Articles About Auditing via RSS!Additional Articles From - Home Accounting AuditingWhat you need to know about Auditing from the experts.- By : john newportCulture and business proposition- By : foxhatsNavigating Miscellaneous Itemized Deductions- By : Sawyer AdamsAbout The National Association Of Enrolled Agents (NAEA)- By : Sawyer AdamsThe History Of Enrolled Agents- By : Sawyer AdamsThe Canon Sd780is Black Silver Gold Red - Very Nice Christmas Gift- By : ArticleSubmit AutoIRS Increasing Enforcement Activity- By : Sawyer AdamsDestination Military Surplus Products- By : Ali Khan5 Tips For Getting The Right Health Insurance For Your Needs- By : danica12 Quick Tips For Eye Shadow- By : Ali Khan Still Searching? Last Chance to find what you're looking for. Try using Bing Search!