Internal Revenue News Release IR-2004-130
, October 25, 2004.
[ Code
Sec. 7122]
Compromises: Offers in compromise:
Procedures. --
The
IRS
is warning taxpayers to beware of tax
practitioners who encourage the use of an offer
in compromise as a way to settle tax claims for
"pennies on the dollar." The
IRS
's warning targets the actions of
"unscrupulous promoters" who charge
excessive fees when there is no chance that the
taxpayer will qualify for the offer in
compromise. Although the
IRS
has the authority to settle tax claims for less
than their full amount, an offer in compromise
may be considered only after other options, such
as an installment agreement, are considered..
The Internal Revenue Service issued a consumer
alert advising taxpayers to beware of promoters'
claims that tax debts can be settled for
"pennies on the dollar" through the
Offer in Compromise Program.
Such promoters make money by inappropriately
advising indebted taxpayers to file an
application for an offer in compromise with the
IRS
, promising unrealistic results, even when the
taxpayers do not meet the requirements of the
program. This bad advice costs taxpayers money
and time.
Taxpayers may refer promoters who are using the
program inappropriately to the
IRS
's Office of Professional Responsibility for
civil sanctions by sending their complaint to:
Office of Professional Responsibility (SE:OPR),
Internal Revenue Service,
1111 Constitution Avenue N.W.
,
Washington
,
DC
20224
.
An offer in compromise is an agreement between a
taxpayer and the
IRS
that resolves the taxpayer's tax debt. The
IRS
has the authority to settle, or
"compromise," federal tax liabilities
by accepting less than full payment under
certain circumstances.
"This program serves an important purpose.
But we do warn taxpayers to watch out for
unscrupulous promoters charging excessive fees
to taxpayers who have no chance of meeting the
program's requirements," said
IRS
Commissioner Mark W. Everson. "Taxpayers
should not be duped by high-priced
promises."
Although there are some tax practitioners who
promote dubious schemes, most practitioners give
quality service to their clients. Taxpayers who
need a qualified tax professional to prepare and
submit their offer in compromise application
form may contact state or local tax professional
associations to find enrolled agents, CPAs or
attorneys in their geographic area with the
education and experience to assist them.
The application package,
IRS
Form 656, Offer in Compromise, was recently
redesigned with new instructions, worksheet and
checklist to make it easier for taxpayers to
determine if they are eligible for the program
and to accurately prepare the necessary forms.
The July 2004 revision of the application form
also contains a new paid preparer signature
block. Taxpayers may wish to reconsider using
preparers who hesitate to identify themselves on
the form.
An offer in compromise may be considered only
after other payment options have been exhausted.
If taxpayers are unable to pay their taxes in
full, there are other payment options, such as
monthly installment agreements, that must be
explored before an offer in compromise can be
submitted.
The
IRS
Web site at www.irs.gov contains
information on the collection process and
payment options. Additional information is
available in
IRS
Publication 594, The
IRS
Collection Process, and Form 9465, Installment
Agreement Request. These documents provide
complete information on all options available
and help taxpayers determine if they qualify for
a payment program.
Taxpayers who are unable to pay their taxes in
full and who have explored the various options
should use the checklist in the Form 656 package
to determine if they are eligible for an offer
in compromise.
Some taxpayers may be exempt from the $150
application fee depending on income or whether
the offer in compromise is based solely on doubt
as to tax liability. Taxpayers who claim the
income exception must certify their eligibility
by completing Form 656-A, Income Certification
for Offer in Compromise Application Fee. This
certification should be attached to Form 656 in
lieu of the $150 fee at the time of submission.
The Form 656 package contains a worksheet
designed to assist taxpayers in determining
whether they qualify for the income exception.
The income exception applies only to
individuals.
The publications and forms are available at www.irs.gov
or by calling 1-800-829-3676 to order copies.
All publications and forms are free.
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