A Greenwood, Mississippi taxpayer came to us after working for her employer in the Mississippi delta as the in-house bookkeeper for several years handling payroll taxes and estimated tax payments for her employer. She contacted us after IRS found this taxpayer liable for the past due payroll taxes of her employer because they paid less than the full amount of the required federal payroll taxes.
Unfortunately, under direction from her supervisor, this taxpayer was paying the past due payroll tax amounts instead of the current payroll taxes, which snowballed the federal tax that became due.
As a result, the client found herself with a tax liability assessments from the IRS and a tax bill over $73,000 for payroll taxes going back several tax years. She contacted the IRS regarding the payroll tax liability assessment, payment options, and the resulting tax bill from the IRS. Still, they could not work out a tax liability resolution with the IRS that she could afford.
What type of offer in compromise to offer the IRS?
As a result of the unpaid tax bill, the IRS threatened a wage garnishment or bank account levy within 30 days. The client sought the assistance of Damiens Law Firm to review the assessment by the IRS, confirm she had filed all required tax returns for the open tax year, calculate her future income, and examine whether she may qualify for an offer in compromise, based upon the various offer in compromise options, namely, doubt as to liability, effective tax administration (exceptional circumstances) or doubt as to collectibility. These are the varied offer in compromise OIC options.
The latter of the three is based upon a taxpayer’s reasonable collection potential after reviewing monthly income and monthly living expenses to determine if a monthly tax liability payment would result in economic hardship for the taxpayer.
We always suggest you seek a qualified tax professional to negotiate a tax liability settlement (offer in compromise), and certainly those based on your financial situation and ability to pay.
Steps to submit an OIC to the IRS
Upon reviewing the taxpayer’s financial information, we determined that the client qualified for financial hardship and the IRS offer in compromise program, and we began calculating a reasonable offer amount. We determined, while she may also be eligible for a doubt as to liability offer, we ultimately decided a lump sum or period payment offer in compromise was a better option for this taxpayer.
Damiens Law Firm was able to prepare tax returns and craft an undeniable financial hardship argument, and the offer in compromise tax liability settlement was accepted without any delay.
Ultimately, Damiens Law Firm secured an offer in compromise tax liability settlement of $708 against the client’s $73,000 tax balance, saving over 99.9% of her tax liability, paid over six months using the lump sum periodic payment method.
We further reduced her balance because her offer in compromise was accompanied by a low-income certification, allowing low-income taxpayers to waive the OIC application fee for offers in compromise with the IRS. The application fee for an offer in compromise is currently $205.
How to get the help of a qualified tax attorney in Mississippi
If you would like to learn more or schedule time to discuss your tax issues, tax liability, lack of ability to pay the full amount of your tax liability, or your ability to file an offer in compromise, please give us a call. Offers in compromise are the most scrutinized tax resolution option offered by the Internal Revenue Service.
Whether it be our firm, or another, we always recommend seeking a qualified tax attorney to help you with your offer in compromise. It is far more involved than filling out an IRS form 656 or 433 A OIC or the offer in compromise booklet provided by the IRS.
OIC Tips for a Mississippi Taxpayer
The OIC program requires quite a long time to settle a tax for less than the amount owed, and even more so if you’re self-employed and need to file a 433 B as well. Wait times can be more than a year, and rejections are quite typical for DIY’ers. There a few prerequisites to filing an offer in compromise with the IRS before the IRS will accept your OIC application.
First and foremost, the IRS may keep your non-refundable offer amount if you fail to have your required tax returns filed, fail to make required estimated tax payments, have an open bankruptcy proceeding, you have federal tax or taxes owed for years not included in the offer. You must demonstrate that an installment agreement would be unfair and inequitable.
Best of Luck –
Joseph Damiens, Tax Attorney
Damiens Law Firm, PLLC