What Not to Do When Filing an Offer in Compromise Yourself:
Filing an Offer in Compromise can be confusing and quite a process if it’s your first time, second time or even third time. There is a reason this process is not easy and why the IRS rejects 6 out of 10 OIC’s filed.
- Missing Returns – Before considering filing an Offer, make sure you have filed all required tax returns and received at least one notice of balance due. If you are already in Collections, we do not recommend speaking with them yourself as this could do more harm than good.
- File Bankruptcy – The IRS cannot consider an Offer while there is an open bankruptcy. Some folks use this as a method to stall while filing and it’s a terrible idea.
- Wait – Now is the time to file an Offer in Compromise. The mentality is to wait until you have more money to file, and it’s quite the opposite. Are you unemployed due to COVID-19? Is your bank account purging funds just to keep up with your day to day expenses? If you answer yes, now is the time to file when you have nothing.
- Call the IRS – Have you received notices and you are stressing out about what to do and how to stop the bleeding? Then it’s time to call a reputable professional to help, but please don’t call the IRS on your own. We had a client come to us who called Collections to ask for more time to pay, okay sounds safe. What came next, though, was not so good. The Collections Agent asked why they needed more time to pay. Our client told them they wanted to file an Offer but needed to change bank accounts. Why, asked the Agent. Client says, because I am expecting a hefty bonus and don’t want to be levied again. Ugh…guess what happened next. The Agent notates in the taxpayer file about this conversation. So, now if an Offer is filed, what question do you think the Offer Examiner will want an answer to…right, where are these funds and how much was there. We do not suggest or condone lying to the IRS, but less is more. If you’re not sure what to say or how to handle a IRS Collections Agent or Revenue Officer, it’s okay to say, “I’m feeling a bit overwhelmed and need to contact my Power of Attorney for more assistance.” Once they leave or hang up, call a resolution specialist to help you right away.
- Prepare the Offer Yourself – As you look through the IRS Booklet on how to file an Offer, you may be thinking, hey, this isn’t so bad…I bet I could do this myself. Sure, it may look uncomplicated, but it’s quite the opposite. For example, how many dependents do you have in your household? This number will drastically change the amount of expenses you are able to claim through National Standards, but also the end amount of your Offer. Did you know the IRS will comb through your bank statements to find frivolous expenses? Yes, they will look to see how much you spend on movies, eating out, dog toys, etc. The advantage of using a firm who has a track record of successful Offers is they know what to look for, what are your red flags, are your assets really listed for their fair market value, etc.
- Rushing to Submit – Unfortunately, we have seen this before. A client is worried as they have balances due and they seem to become larger with each notice the IRS sends. They call us and say, let’s hurry up. However, if you are filing an Offer at the end of the year, are you expecting a large bonus from work? If yes, now may not be the time to submit an Offer. It’s best to hire a tax resolution specialist as they are experienced in knowing when it’s best to file, or when it’s best to wait. Often times, they will know when and how to contact the IRS to ensure levies stop while an Offer is being prepared. Seriously, the extra help is well worth the wait!
- Don’t panic – When dealing with the IRS it’s always best not to panic. Yes, you have balances due with the IRS and penalties and interest continue to accrue. Yes, you are receiving notices informing you monthly of these balances and the threat increases with each notice. Still, there is no reason to panic. When we panic, mistakes are made, and we lose what it is in our best interest. If you are in this state, contact a tax resolution specialist right away. Make sure it’s a reputable firm and one you can trust. The important thing is to be honest, not only with yourself, but also with the team with which you are working. Tell them you are scared, or panicked, or fearful of what might happen. A good resolution specialist will put your mind at ease knowing how they can help. In the end, isn’t a good night sleep worth the help they can provide?
If you feel that you may be in over your head, or just want to get a second opinion, let’s set up a short call. To avoid the back and forth emails and phone tag, I have included a link to my Calendar https://calendly.com/taxman/tax-problem-resolution-initial-consultation. Let’s set up a 30 min. phone conference to get to know each other. The phone number to call is 855-829-5877 and my extension is 203.