Tax Lawyer, Sam Brotman on IRS Appeals and Offers in Compromise
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Transcript of Tax Lawyer, Sam Brotman on IRS Appeals and Offers in Compromise
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BROTMAN LAW ON IRS APPEALS AND OFFERS IN COMPROMISEBy Sam Brotman, Tax LawyerMasters of Law in Taxation, Masters in Business Administrationwww.sambrotman.comhttps://plus.google.com/+SamBrotmanBrotmanVirtualLawOffice/
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APPEALS
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APPEALS
Reasons for disagreeing must be based upon the tax laws
Cannot appeal your case based on only moral, religious, political, constitutional, conscientious, or similar grounds
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APPEALS WITHIN THE IRS Can appeal to your local Appeals Office
Separate from and independent of the IRS office taking the action you disagree with
Conferences are held in an informal manner
By correspondence, By telephone, or At an in person meeting
Most differences are settled at this level If an agreement is not reached, you may
be eligible to take your case to court
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APPEALS TO THE COURTS
If you cannot reach a settlement with IRS Appeals, you may be entitled to take your case to:
The United States Tax Court The United States Court of Federal Claims The United States District Court
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APPEALS TO TAX COURT If you disagree with the IRS over:
Income Tax, Estate Tax, Gift Tax, or Certain excise taxes
Available only if the IRS sends you a notice of deficiency
You must file a timely petition within 90 days or 150 days if addressed to you outside the United States If you file your petition on time, the court will
schedule your case for trial at a location convenient to you
Can hear case before tax is assessed and paid
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APPEALS TO DISTRICT COURT & COURT OF FEDERAL CLAIMS
Hear cases only after:1) You have paid the tax in full, and 2) Filed a claim for a refund
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OFFERS IN COMPROMISE
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What it is: An agreement between a taxpayer and the
IRS that settles the taxpayer’s tax liabilities for less than the full amount owed
Includes all tax, interest, and penalties due
To qualify: Must be unable to pay your tax liability in full
OFFER IN COMPROMISE
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To apply: Accurately complete a Form 656, the official compromise
agreement. This is signed under penalty of perjury. Accurately complete a Form 433-A and if needed a Form 433-
B, the collection information statements. These are also signed under penalty of perjury.
Submit forms with a $150 application fee and appropriate payment (unless waived)
OFFER IN COMPROMISE
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Possible waiver of fees: Waived if income falls at or below certain
published levels. Determined by the OIC Application Fee & Payment
Worksheet. Not required to pay application fee or the
required initial payments Complete Form 656-A, Income Certification
for OIC Application Fee and Payment
OFFER IN COMPROMISE
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Fees are non-refundable: Cannot be returned to the taxpayer,
even if the offer is rejected However, the amount will be applied
to the taxpayer’s tax liability
OFFER IN COMPROMISE
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Reasons the IRS might accept an OIC:
1) Doubt as to Liability
2) Doubt as to Collectability
3) Promote Effective Tax Administration
OFFER IN COMPROMISE
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Doubt as to Liability: Legitimate doubt exists that the taxpayer
owes part or all of the assessed tax liability
No application fee is required
OFFER IN COMPROMISE
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Doubt as to Collectability: Doubt exists that the taxpayer will ever
be able to pay the full amount of tax liability owed
Offer amount must equal or exceed your reasonable collection potential (RCP) RCP = The net equity of your assets
Plus potential future income, Less certain basic living expenses
OFFER IN COMPROMISE
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Promote Effective Tax Administration: No doubt that the tax is owed An exceptional circumstance exists that
would allow the IRS to consider your offer
Have to submit a written narrative explaining circumstances
OFFER IN COMPROMISE
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Types of OIC payment terms:
1) Lump Sum Cash
2) Short Term Periodic Payment
3) Deferred Periodic Payment
OFFER IN COMPROMISE
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Lump Sum Cash: Offer amount must be paid in five or fewer
monthly installments 20% of the total amount of the offer must be
submitted with the offer
OFFER IN COMPROMISE
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Short Term Periodic Payment: Offer amount paid within 24 months First payment must be submitted with the
offer Must continue to make regular payments
during offer investigation
OFFER IN COMPROMISE
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Deferred Periodic Payment: Amount paid over the remaining statutory
period for collecting the tax First payment must be submitted with the
offer Must continue to make regular payments
during offer investigation, or your offer will be withdrawn
OFFER IN COMPROMISE
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OFFER IN COMPROMISENotice of Federal Tax Lien The IRS may file a Notice of Federal Tax Lien
with any of the previously discussed payment options.
This is a legal claim to your property as security for your tax debt. It is released when you satisfy the terms of your OIC.
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If Your OIC is Accepted: You Must;
Timely file and timely pay all tax for five years (Five year compliance)
Abide by all terms and conditions of OIC If you subsequently default, the IRS can reinstate
the full tax amount owed plus penalties and interest
OFFER IN COMPROMISE
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If Your OIC is Rejected: You will be notified by mail
The letter will have reasons and how to appeal You may appeal the decision to IRS Office of
Appeals within 30 days from date of the letter
OFFER IN COMPROMISE
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Collections Suspended: During the consideration and evaluation of
the offer For 30 days after the offer is rejected During appeal of an offer rejection
OFFER IN COMPROMISE
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Approved Installment Agreement: If you submit a periodic payment offer, you do
not need to continue making installment payments during investigation
Do need to make the OIC periodic payments
OFFER IN COMPROMISE
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THANK YOU FOR VIEWING OUR PRESENTATION ON IRS AUDITS AND IRS OFFERS IN COMPROMISE
FOR QUESTIONS PLEASE CALL TAX LAWYER, SAMUEL BROTMAN AT (619) 378-3138