In order to qualify to file an OIC, you must have filed all of the tax returns you are required to file; however, you do not have to make payment on those filed returns. In the case of self-employed individuals, “compliance” means filing and full payment for two consecutive quarters.

The settlement procedures depend on how much is collectible from you. It has nothing to do with how much you owe to the IRS . For example, a $4 million tax liability could be settled for $1,000 if you are only collectible for $1,000.

For collectibility, the IRS looks at both assets and income.

In analyzing income, the IRS is required to allow you to offset your income with reasonable and necessary living expenses (e.g., housing, food, transportation, heath care, court ordered payments, child care, etc.).

The IRS will discount assets to their “quick sale” value. In the case of real estate, cars and other fixed assets, the IRS discount is at least 20% in almost all cases.

If you disagree with an IRS determination by an Offer Specialist, the offer can be appealed to an IRS Office of Appeals. The appeal conference is informal.

If the IRS is actively pursuing a collection action against you (either a levy, lien or garnishment of wages) , you can appeal that collection action in what is called a Collection Due Process Appeal. During that Appeal hearing, you can offer an Offer in Compromise or an Installment Agreement as an alternative to the collection action.

All tax liabilities of individuals and corporations can be compromised, including payroll tax liabilities and tax liabilities for tax fraud, and any tax liability not dischargeable in bankruptcy.

The Congress requires the IRS to have a “liberal acceptance” policy for offers in compromise. The legislative tax policy for offers-in-compromise is to give taxpayers a “fresh start.” The IRS adopts that tax policy.

A tax liability can be settled, even if you are collectible for the full amount of that tax liability, if you can demonstrate “special circumstances” for those assets or income. This can be done if the settlement is important for “effective tax administration."

:: IRS ABUSES, LEVERAGE AND INTIMIDATION

The Internal Revenue Service is adept at using leverage to intimidate, coerce and bluff taxpayers and their representatives into adverse collection and examination determinations based upon weak legal authority and incomplete or insufficient facts.  The IRS will “roll-over” taxpayers and weal representatives who are not familiar with taxpayer rights and lack of knowledge about the nuances of the tax law.  The IRS enforced collection actions are extreme, and they mostly abuse the intent of the Congress not to refrain from collection actions that create an economic hardship within the meaning of §6343 of the Internal Revenue Code.

The IRS agent is both "prosecutor" and "jury." The IRS agent raises issues and comes to conclusions that are presumed to be correct under present law. Also, taxpayers, not the IRS agent, must prove the accuracy of their deductions.

This leverage against a taxpayer applies even if the agent uses incorrect or incomplete facts or makes determinations on erroneous or flawed argument and law. It is not unusual for the IRS to tax extreme positions on the factual and legal issues. The agent can be sloppy and incompetent and still get a large and unjustified tax deficiency. The raw power of the agent’s position and presumption of correctness is intimidating to taxpayers and intimidating to the representatives of the taxpayer who do not have the skill or ability to identify and advocate the factual and legal issues for their clients.  The "intimidation" of the IRS agent is used as a tool to close cases quickly.

:: SELECTING YOUR IRS REPRESENTATIVE

Tax professionals in a local tax practice (CPAs, accountants, enrolled agents, attorneys) have an inherent “conflict of interest” for aggressive representation of any one client because they do not want to antagonize the local IRS revenue officer or examiner in a way that will have a negative impact on their other clients.   The IRS will take advantage of the timid local practitioner who finds it necessary to generate a positive image for the balance of his client base.

 We specialize in dealing with IRS controversies, problems and issues of every kind throughout the United States .  We have active cases pending throughout the United States .  Having worked within the IRS at a high executive level, we understand the most effective ways to deal with the IRS to advocate a reasonable solution to resolve your IRS problems.

CPAs, accountants, bookkeepers, enrolled agents, and attorneys without a tax specialty may not have the time, experience, education, insight or technical skill to deal with the technical analysis, legal research, identification of issues, interpretative creativity and insight, negotiating skills, knowledge of the IRS , or technical writing ability necessary to effectively prevent avoidable tax overpayments. The person who prepares your tax return may only have six weeks of training, and that training may be limited to how to put numbers into an IRS income tax return. Your bookkeeper is not a tax expert. Your CPA prepares tax returns for approximately three months out of the year and spends the balance of the time preparing books, records, and financial statements. Most, if not all enrolled agents are not tax lawyers. Attorneys may have a general or a specialized practice that does not include tax issues and problems. Nevertheless, accountants, CPAs, bookkeepers, enrolled agents, and non-tax attorneys will usually agree to represent you if you approach them with a tax issue even if they do not have the training or experience to handle difficult, complex, or creative tax issues.  The IRS can be expected to take advantage of those representatives who are not specialists in the tax law and who do not deal with the IRS on a full-time basis.

A tax attorney can do something an accountant cannot do. An experienced tax attorney can thoroughly research a tax statute and master it. He will know its legislative history. He will be familiar with the Treasury regulations and IRS rulings on that statute. He will penetrate the many court decisions involved in the litigation of the tax statute. He will have read tax articles and books that deal with the tax statute. It is improbable that your accountant has the training or experience that would permit him to penetrate the complexity of the tax law on a particular tax issue. It is also not likely that the accountant can take the time out of a busy accounting practice, working with numbers and preparing financial statements, to master the vast array of difficult tax law that bears on a tax statute.

Even worse is the fact that the mind-set of an accountant is to see "black and white" rather than the "gray" because they are trained to be precise with numbers. Tax law is drenched with ambiguity where there is mostly no answer that is right or wrong. Tax lawyers are trained to seek and find the ambiguity in the law (i.e., the "gray"). Tax law ambiguity can be used as a "sword" to attack and IRS position and also as a "shield" to protect the taxpayer.

However, not all tax attorneys are equal just as, for example; professional golfers have difference levels of skill and ability. Tax attorneys have different levels of creativity, insight and skill.

The most important attribute of a good tax attorney is to be "creative" with the tax law. This creativity may arise in many ways. A creative tax attorney will use interpretative skill to find support of a taxpayer position. A creative tax attorney will find a gap in a statute or a regulation (a "tax loophole") that permits favorable tax treatment in situations not covered by the statute under consideration. A creative tax attorney will be able to identify inconsistencies by the IRS in its published positions or private ruling letters. A creative tax attorney will use interpretative skills to spin facts, case law, regulations in favor of the taxpayer. Creativity is unlimited in its potential to interpret and apply the law or the ability to develop that knowledge through research skills.

Any attorney is a better representative than a non-attorney because “taxes” is based on law written by the Conges and non-attorneys are not trained to research and interpret tax law.  As between two attorneys, a specialist in taxes is a better choice as the result of superior training and experience.  As between to tax attorneys who both specialize in IRS problems and controversies, a firm that has IRS experience, as we do, have better insight to the inner workings of the IRS .  Knowledge of the administrative processes of the IRS is a distinct advantage in choosing your representative.   

In explaining what a tax lawyer does that other representatives cannot do, it is helpful to understand what is meant by a legal issue. Legal issues are developed from expert creative analytical, interpretative, and technical research skills.  Technical research includes: determining Congressional intent from the legislative history of the tax law; a search and analysis of the provisions of the applicable provisions of the Internal Revenue Code, Treasury tax regulations, IRS revenue rulings, private letter rulings and procedures and the IRS administrative procedures and guidelines..

The fact that tax law is complex and arcane is well known. This complexity is he reason a qualified tax attorney is in a superior position to protect a taxpayer from overpaying a tax liability - provided that attorney has strong creative, analytical and interpretative skills.  Interpretative and analytical skills involve the sophisticated ability to read tax legislation, regulations, cases and other authority to identify subtle distinctions, ambiguity or supportive facts, issues, and argument.

:: DELEGATION OF AUTHORITY TO AN EXPERT AND IRS EXPERIENCED TAX ATTORNEY

Regardless of your location or taxpayer identity, a Power of Attorney on IRS Form 2848 permits you to be represented by a tax attorney with comprehensive IRS National Office technical, administrative and procedural experience.

Harness the "good will" and inside knowledge of a former IRS Chief Counsel attorney. It is advantageous to know IRS personnel, how the IRS thinks, and what "bells to ring" in arguing the facts, the law, and if necessary, negotiating a settlement.

Tax attorney representation prevents IRS coercion, intimidation, abuse and bluff. An experienced tax attorney has more training, education, technical skill, experience and overall ability than an adverse IRS agent. The tax attorney can reverse intimidation, stop abusive actions, and prevent IRS bluff. Thus, the tax attorney is in a position to identify faulty logic, argue the correct law, and negate incomplete factual determinations.

:: Effect of Form 2848 – Power of Attorney:  You are relieved of the following burden:

-Making appearances at any IRS office, including Washington, DC.
-Preparation of responses to all IRS communications.
-Confront and argue with IRS agents, supervisors, and conferees.
-Pursuance of all administrative and procedural remedies. Each level of appeal creates a new opportunity to reduce tax liability.
-Risk of malpractice for CPAs, Accountants, Bookkeepers, Enrolled Agents, and Attorneys who do not have either the time, education, technical skill, interpretative ability, experience or creative insight to effectively identify or resolve a complex or important tax issue.
-Technical analysis, issue identification or development, research, drafting, strategy, settlements and undeveloped tax issues.
-Surface the flaws in erroneous or weak IRS determinations on factual and legal issues.

You can download the power of attorney form – Form 2848 - from the IRS , using the freely available Adobe Acrobat Reader to view or print it.

:: LEGAL ISSUES DEVELOPED BY TAX LAWYERS

In explaining what a tax lawyer does that other representatives cannot do, it is helpful to understand what is meant by a legal issue. Legal issues are developed from expert creative analytical, interpretative, and technical research skills.

Technical research includes: determining Congressional intent from the legislative history of the tax law; a search and analysis of the provisions of the Internal Revenue Code; Treasury tax regulations; IRS revenue rulings, private letter rulings and procedures; IRS internal practice procedures and audit guidelines; case law; tax treatises; and tax articles.

A taxpayer representative must have the skill and experience to identify and interpret the applicable tax law and also find ambiguity and inconsistency in the law to protect a taxpayer from erroneously overpaying a tax liability. The same legal skill may be used to identify the tax law that will support a legal argument in favor of a taxpayer position.

Tax law is based upon legislation passed by Congress. No tax statute is comprehensive and complete. Congress cannot think of every issue that could arise under tax legislation and draft a comprehensive legislative answer for all potential technical issues.

All words have ambiguity. Hence legislation needs to be clarified. Tax law may be interpreted within the context of the statute or related tax statutes. The language of a statute may be interpreted by language in the reports of Committee on Ways and Means of the House of Representatives, the Senate Finance Committee, or the Joint Tax Committee. Legislative intent may also be discerned from Congressional debate or colloquy.

The language of a tax statute is further applied and interpreted by tax regulations drafted by the Treasury Department. Treasury regulations have significant ambiguity and require clarification. The IRS issues revenue rulings, private ruling letters, technical advice memoranda to District directors, procedures, guidelines and notices - all designed to clarify the tax law but in turn may be ambiguous or inconsistent.

Tax issues are litigated in the Tax Court, the Courts of Appeal, the Claims Court and the Supreme Court. Some issues have judicial precedent and others do not. Other than the Supreme Court, many courts come to opposite and conflicting decisions. All court decisions are limited by the facts and the legal issues in each instance - those distinctions raise interpretative issues.

The fact that tax law is complex and arcane is well known. This complexity is he reason a qualified tax attorney is in a superior position to protect a taxpayer from overpaying a tax liability - provided that attorney has strong creative, analytical and interpretative skills.

Interpretative and analytical skills involve the sophisticated ability to read tax legislation, regulations, cases and other authority to identify subtle distinctions, ambiguity or supportive facts, issues, and argument.

Interpretative and analytical skills are creative when they identify unique authority and argument and ascertain the persuasive law and argument that permits a taxpayer to beat the IRS or reduce tax liability.

:: FACTUAL ISSUES

Similarly, it is helpful to understand the skill of a tax attorney in identifying and developing factual issues A tax attorney identifies, develops and creatively applies factual issues to defend and protect a taxpayer, to reverse an adverse IRS determination or to get a favorable tax settlement.

The IRS often makes determinations on incomplete facts, and it will not develop facts that reduce tax liability. The development of factual issues by an experienced tax attorney bears directly on the legal issues and can negate or mitigate tax liability.

:: SETTLEMENTS

Due to the proven high IRS error rate, aggressive audit determinations, and its desire to avoid litigation on weak factual and legal determinations, the IRS is willing to negotiate a settlement in a majority of audit issues.

The IRS agent, the agent's Supervisor, and an Appeals Officer each have the power to negotiate a settlement and concede issues. Taxpayers have a unique advantage in an Appeals conference - the IRS does not have either the manpower or the inclination to litigate all cases.

Settlements increase commensurate with the strength of the facts, law and argument presented by your tax attorney. If the law and the facts are on your side, you will get a 100% settlement and not have any tax liability. In lesser cases, your tax attorney should be able to assess the strengths and weaknesses of your situation and get the best settlement for you in the circumstances. This is where the skill, knowledge and creativity of your attorney is demonstrated for your benefit and tax savings.

Inside knowledge of IRS thinking, procedures and personnel is advantageous in negotiating the best possible settlement. IRS agents have varying degrees of knowledge, skill and ability. Some agents are dogged while others careless or lazy. In most situations, agents are under time constraints and are anxious to move on to other taxpayers. The ability to size up the weaknesses of an IRS agent is an important ingredient of how tax issues are resolved or negotiated.

Learn more about Offer in Compromise

Click here to Contact Us

Click here for our TAX BLOG

[Top of Page]