Successfully Negotiating Offers In Compromise

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Successfully Negotiating Offers In Compromise

• All audio is streamed through your computer
  speakers.
• There were  several attendance verification
  questions presented during the LIVE webinar to
  qualify for CPE of the LIVE event only.
• For the archived/recorded version of this
  webinar, the link at the end of this presentation
  will be to final exam on the topics and learning
  objectives covered during this webinar plus there
  are also 3 online  review questions to answer per
  hour.

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Successfully Negotiating Offers In Compromise

• Robert E. McKenzie
• Arnstein Lehr LLP
• 120 South Riverside PLZ
• Suite 1200
• Chicago, IL 60606
• 312.876.6927

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Learning Objectives

• Upon completion of this webinar you will be able
  to
• Comply with complex rules for settlement of
  outstanding tax obligations.
• Substantially reduce many tax obligations with an
  understanding of the new rules.
• Identify advanced techniques for offers in
  compromise including
• Maximizing IRS Allowable Expense Standards
• Techniques for Valuing Assets
• Effective Tax Administration Offers
• Reducing Hassles From Campus OIC Functionaries
• Alternatives to Avoid the 20 Downpayment
• Doubt as to Liability Offers
• Collateral Agreements
• Aggressive Advocacy
• Appealing Unsuccessful Offers

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MCKENZIES PRIME DIRECTIVE

• GET THE FEE FIRST!!

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OFFERS IN COMPROMISE

• DOUBT AS TO COLLECTIBILITY
• DOUBT AS TO THE ACTUAL LIABILITY
• PROMOTE EFFECTIVE TAX ADMINISTRATION OR
  EXCEPTIONAL CIRCUMSTANCES

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USER FEE

• BEGINNING 11-1-03 A USER FEE TO PROCESS OFFERS
• 150

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OICs

• 2011
  2012

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(No Transcript)
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Allowable Expenses

• 4-13 IRS has issued revised allowable expense
  tables which are a substantial improvement from
  2011 and a little better than 2012

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Allowable Expenses

• Allowable Expenses Used for I/As over 50,000
  OIC
• National Standards
• Medical expenses
• Regional Standards
• Local Standards
• Necessary for production of income or health
  welfare of the family

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New OIC Forms

• 5-12 IRS released new version of Form 656-B,
  Offer in Compromise Booklet, and revised Form
  656, Offer in Compromise.
• Many specific warnings to TP
• Waiver of fee and/or downpayment included in the
  form

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NEW FRESH START INITIATIVE

• 5-21-12
• Revises calculation of future income for OICs
• Expands allowable expense categories
• Liberalizes valuation of vehicles
• Liberalizes valuation of assets used in business
• Reduces use of dissipated asset theories
• Reduces multiplier for determining future income
  component of RCP

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Reduced Valuation of Assets

• As a general rule, equity in income producing
  assets will not be added to RCP of a viable
  business unless the assets are not critical to
  the business
• Reduce the value of TP cash by 1,000 and by the
  amount of allowable expenses because it will be
  used for those expenses
• Reduce the value of vehicles, planes boats used
  to produce income or for health welfare of the
  family by 3,450 each
• Less use of dissipated asset theory
• If liability did not exist at the time TP at time
  of transfer
• Withdrawals from IRAs 401Ks to invest in a
  business if taxpayer did not owe taxes at that
  time
• 3 year period for asserting dissipated assets
  including the year of submission

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Future Income Component

• More expenses allowed
• Student loan payments
• Payments to state agencies proportional to
  federal payment
• Charge card payments
• No longer only allow car payments to projected
  payoff date
• Extra 200 per month allowed for vehicles with
  more than 75,000 miles or 6 years or older

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IRC Sec. 7122(c)(2)(B)

• (B) Use of schedules. The guidelines shall
  provide that officers and employees of the
  Internal Revenue Service shall determine, on the
  basis of the facts and circumstances of each
  taxpayer, whether the use of the schedules
  published under subparagraph (A) is appropriate
  and shall not use the schedules to the extent
  such use would result in the taxpayer not having
  adequate means to provide for basic living
  expenses.

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Review Questions for Self Study CPE

• Nows the time to answer the review questions
  1-3.
• Click here
• http//www.proprofs.com/quiz-school/story.php?titl
  eNTc5ODQz
• Please leave quiz window open and wait to submit
  until prompted to complete questions 4-6. Once
  all questions are complete submit and close quiz
  window.

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TIPRA 2005

• (1) PARTIAL PAYMENT REQUIRED WITH SUBMISSION-
• (A) LUMP-SUM OFFERS-
• (i) IN GENERAL- The submission of any lump-sum
  offer -in-compromise shall be accompanied by the
  payment of 20 percent of amount of such offer .
• (ii) LUMP-SUM OFFER -IN-COMPROMISE - For purposes
  of this section, the term lump-sum offer
  -in-compromise' means any offer of payments made
  in 5 or fewer installments.

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Attendance Validation 3Time for our third
attendance check! Make sure you record the
answer to the question below. We will have
three more attendance validation questions later
in this webinar.

• What company administers NSA professional
  liability, life, health business insurance
  programs for members?
• Forrest T. Jones

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PERIODIC PAYMENT OFFERS

• The submission of any periodic payment offer
  -in-compromise shall be accompanied by the
  payment of the amount of the first proposed
  installment and each proposed installment due
  during the period such offer is being evaluated
  for acceptance and has not been rejected by the
  Secretary. Any failure to make a payment required
  under the preceding sentence shall be deemed a
  withdrawal of the offer -in-compromise .

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RULES OF APPLICATION

• (A) USE OF PAYMENT- The application of any
  payment made under this subsection to the
  assessed tax or other amounts imposed under this
  title with respect to such tax may be specified
  by the taxpayer.

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Calculation of Future Income

• Offers to be paid in 5 or fewer payments use 12
  as multiplier instead of prior 48
• Example TP can pay 300 per month the RCP is
  3,600 not 14,400
• Offers of 6 or more payments use 24 as multiplier
  instead of 60
• Example TP can pay 300 per month the RCP would
  be 7,200 not 18,000
• A deferred offer can no longer exceed 24 months

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Summary of 5-21-12 Changes

• Offers will now be accepted for a lot lower
  amount
• New Form 656 instructions for OICs
• Most liberal OIC policies since adoption of the
  allowable expense standards in the 90s
• The new policies can be used in negotiating
  installment agreements also

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2011 Offers in Compromise

• IRS expanded streamlined Offer in Compromise
  (OIC) program to cover a larger group of
  struggling taxpayers.
• Streamlined OIC expanded to allow taxpayers with
  annual incomes up to 100,000 to participate.
• Participants must have tax liability of less than
  50,000, doubling the current limit of 25,000 or
  less.
• OICs are subject to acceptance based on legal
  requirements.
• Generally, an offer will not be accepted if the
  IRS believes that the liability can be paid in
  full as a lump sum or through a payment
  agreement.

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2010 Fresh Start

• New Flexibility for Offers in Compromise
• Stop using 3 year average for income
• Consider a taxpayers current income and
  potential for future income when negotiating an
  offer in compromise.
• More use of future income collateral agreements
• Special Outreach Efforts to Unemployed

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Future Income for Offers in Compromise

• IRS revised its guidance to employees on figuring
  the value of a taxpayer's future income in
  evaluating an offer in compromise, with specific
  instructions to consider a variety of issues for
  unemployed or underemployed workers.
• The memorandum (SBSE 05-0310-012) noted that
  future income is defined as an estimate of the
  taxpayer's ability to pay based on an analysis of
  gross income, less necessary living expenses, for
  a specific number of months into the future.

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Income Averaging Addressed

• Judgment should be used in determining the
  appropriate time to apply income averaging on a
  case-by-case basis. All circumstances of the
  taxpayer should be considered in making this
  decision, the agency said.
• In situations where the taxpayer's income does
  not appear to meet stated living expenses, the
  difference should not be included as additional
  income to the taxpayer. Such inclusion should
  only be done if there are clear indications that
  the taxpayer is receiving, and will continue to
  receive, additional income not included on the
  collection information statement.
• Employees need to exercise good judgment when
  determining future income.

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Facts and Circumstances Approach Directed

• The memo directed IRS workers to evaluate each
  case on the facts and circumstances, and said the
  history must clearly explain the reasoning
  behind our actions.
• The agency said there are cases where it may be
  appropriate to use the taxpayer's current income
  and secure a future income collateral agreement,
  particularly in cases where the future income is
  uncertain, but where it is reasonably expected
  that the income will increase.

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Corporate Trust Fund Liabilities

• Requires that each potentially responsible
  officer of the company sign an agreement to
  assessment of the trust fund recovery penalty in
  advance of consideration of any corporate or LLC
  offer
• Extremely unfair because the IRS is requiring
  even those who should not be held liable for the
  TFRP to agree to liability and assessment
• Only after the liability has been assessed
  against a non-responsible person may she file a
  claim for refund and defend against the penalty.
• The system represents an attempt to deprive
  officers of their statutory due process rights

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IRM 5.8.5.5 Future Income

• A future income collateral agreement may be used
  in lieu of including the estimated value of
  future income in reasonable collection potential
  (RCP).
• Example
• Client earns 250,000 per year with a potential
  for increasing income in the future. The IRS
  might take a collateral in lieu of cash value
  providing for an escalating percentage of future
  income.

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IRM 5.8.10.2.2 Offers In Compromise Before
Bankruptcy

• If the Offer Investigator believes, based upon
  factual information, that the taxpayer is
  seriously considering filing bankruptcy, the
  employee should discuss the benefits of filing an
  administrative offer instead.

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Help for People Who Owe Taxes Pgs. 16-17

• February 2009, Fresh Start
• Prevention of Offer in Compromise Defaults

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Review Questions for Self Study CPE

• Nows the time to answer the review questions
  4-6.
• Click here
• http//www.proprofs.com/quiz-school/story.php?titl
  eNTc5ODQz
• Once all questions are complete submit and close
  quiz window.

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HAVE A LESS TAXING YEAR!!!!!Thank You!!
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Thank you for participating in this
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and CPE quiz

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  Use your password for this webinar that is in
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• You must complete this survey and the quiz or
  final exam (for the recorded version) to qualify
  to receive CPE credit.
• National Society of Accountants
• 1010 North Fairfax Street
• Alexandria, VA 22314-1574
• Phone  [phone]
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