Check Carefully before Applying for
Offers in Compromise
The Internal Revenue Service has issued a consumer alert advising taxpayers
to beware of promoters’ claims that tax debts can be settled for “pennies on the
dollar” through the Offer in Compromise Program.
Such promoters make money by inappropriately advising indebted taxpayers to
file an application for an offer in compromise with the IRS, promising
unrealistic results, even when the taxpayers do not meet the requirements of the
program. This bad advice costs taxpayers money and time.
Taxpayers may refer promoters who are using the program inappropriately to
the IRS’s Office of Professional Responsibility for civil sanctions by sending
their complaint to: Office of Professional Responsibility (SE:OPR), Internal
Revenue Service, 1111 Constitution Avenue N.W., Washington, DC 20224.
An offer in compromise is an agreement between a taxpayer and the IRS that
resolves the taxpayer's tax debt. The IRS has the authority to settle, or
"compromise," federal tax liabilities by accepting less than full payment under
certain circumstances.
“This program serves an important purpose. But we do warn taxpayers to watch
out for unscrupulous promoters charging excessive fees to taxpayers who have no
chance of meeting the program’s requirements,” said IRS Commissioner Mark W.
Everson. “Taxpayers should not be duped by high-priced promises.”
Although there are some tax practitioners who promote dubious schemes, most
practitioners give quality service to their clients. Taxpayers who need a
qualified tax professional to prepare and submit their offer in compromise
application form may contact state or local tax professional associations to
find enrolled agents, CPAs or attorneys in their geographic area with the
education and experience to assist them.
The application package,
IRS Form 656,
Offer in Compromise, was recently redesigned with new instructions,
worksheet and checklist to make it easier for taxpayers to determine if they are
eligible for the program and to accurately prepare the necessary forms. The July
2004 revision of the application form also contains a new paid preparer
signature block. Taxpayers may wish to reconsider using preparers who hesitate
to identify themselves on the form.
An offer in compromise may be considered only after other payment options
have been exhausted. If taxpayers are unable to pay their taxes in full, there
are other payment options, such as monthly installment agreements, that must be
explored before an offer in compromise can be submitted.
The IRS Web site at www.irs.gov
contains information on the collection process and payment options. Additional
information is available in
IRS
Publication 594, The IRS Collection Process, and
Form 9465,
Installment Agreement Request. These documents provide complete information
on all options available and help taxpayers determine if they qualify for a
payment program.
Taxpayers who are unable to pay their taxes in full and who have explored the
various options should use the checklist in the Form 656 package to determine if
they are eligible for an offer in compromise.
Some taxpayers may be exempt from the $150 application fee depending on
income or whether the offer in compromise is based solely on doubt as to tax
liability. Taxpayers who claim the income exception must certify their
eligibility by completing
Form 656-A,
Income Certification for Offer in Compromise Application Fee. This
certification should be attached to Form 656 in lieu of the $150 fee at the time
of submission. The Form 656 package contains a worksheet designed to assist
taxpayers in determining whether they qualify for the income exception. The
income exception applies only to individuals.
The publications and forms are available at
www.irs.gov or by calling
1-800-829-3676 to order copies. All publications and forms are free.
|
