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/

APPEALS

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

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

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

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

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

OFFERS IN COMPROMISE

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

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

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

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

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

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

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

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

Types of OIC payment terms:

1) Lump Sum Cash

2) Short Term Periodic Payment

3) Deferred Periodic Payment

OFFER IN COMPROMISE

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

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

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

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.

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

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

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

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

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