Sacramento + Roseville Offer in Compromise for Businesses
Cook CPA Group
If your tax debt has gotten out of control, you may be able to complete an offer in compromise with the IRS in Roseville and Sacramento, CA. With an offer in compromise, the IRS allows a taxpayer to pay off their tax debt for a small fraction of the total amount that they owe. An offer in compromise can offer a lot of freedom to a taxpayer who is unable to pay for a large tax debt, but applying for an offer in compromise does not guarantee that a taxpayer’s application will be approved.
The Roseville and Sacramento tax professionals at the Cook CPA Group can help those filing for an offer in compromise. To set up a time to discuss your offer in compromise during a free and confidential consultation, get in touch with the Cook CPA Group by calling (916) 432-2218 today.
Understanding an Offer in Compromise in California
Offers in compromise are opportunities for taxpayers to resolve their tax debt to the IRS by paying a portion of the full amount that they owe. Offers in compromise are recognized as a last option for taxpayers that already considered other payment options including installment agreements, which allow taxpayers to make monthly tax payments for the entirety of their tax debt. Offers in compromise allow taxpayers to make monthly payments on their debts (or a lump sum), but the overall amount they owe is significantly reduced.
When taxpayers enter into an offer in compromise, they are agreeing to adhere to certain terms and agreements set by the IRS. The terms and conditions of an offer in compromise are:
- Paying the full amount that you agreed to pay in the offer in compromise
- Paying all of your taxes on time for the next five years
- Agreeing to allow the IRS to keep any payments, refunds, or credits that were applied to your debt before you entered into the offer in compromise
- Agreeing to allow the IRS to hold any tax refunds that were issued to you in the year that your offer in compromise was approved
Qualifying for an Offer in Compromise in Roseville or Sacramento
To have your offer in compromise accepted by the IRS, you must prove that you are eligible. To be eligible, a taxpayer must, at the time that they file for an offer in compromise, have filed all of their tax returns and must not be in an open bankruptcy proceeding. The IRS provides a pre-qualifier tool on their website that can help people interested in engaging in an offer in compromise to determine whether they qualify.
Those interested in engaging in an offer in compromise should know that it is difficult to get an offer in compromise approved by the IRS. In fact, the IRS rejects 60% of offers in compromise made by taxpayers. The IRS will only approve an offer in compromise if the offer is greater than or equal to your “reasonable collection potential,” which is the value of your assets (real estate, bank accounts, automobiles, etc.) and anticipated future income, minus living expenses.
The IRS will only accept offers in compromise under one of three circumstances. These are:
- Uncertain liability – In this circumstance, the IRS will approve your offer in compromise if there is a dispute about the genuine amount of taxes that you should have paid. This will be accepted by the IRS if there was a major mistake made on your tax returns in the past.
- Uncertain collectability – If there is uncertainty about the amount that is to be collected (if the taxpayer’s income and assets are less than what they owe as tax liability), then the IRS may accept the offer in compromise.
- Effective tax administration – Under this circumstance, the IRS lacks certainty that the amount that the taxpayer owes is legally payable or can even be collected. The taxpayer who is making the offer in compromise will have to show that they are already saddled with economic hardship and that paying their tax debt will only burden them further.
How to Make an Offer in Compromise
To make an offer in compromise to the IRS, you will need to file certain forms. The circumstances in your life will determine which forms you will be required to submit: the reason that you are submitting your offer in compromise and whether you are filing as an individual or a business (or both). Consult the IRS website to learn more about which forms you will need to file to successfully make an offer in compromise to the IRS.
Those making an offer in compromise to the IRS should note that there is an application fee of $186; this fee does not need to be paid, however, if you are submitting your offer in compromise because of uncertain liability. Individuals that qualify for the low-income exception also do not need to pay the application fee.
When filing for an offer in compromise, it is advantageous for taxpayers to time their submission for when cash flow is low and when you have the lowest asset equity. The IRS takes your income and assets into consideration when deciding whether to accept your offer in compromise, so filing at a time when these are most reflective of your inability to pay your full tax debt may work in your favor.
Offer in Compromise Professionals Working in Sacramento and Roseville
If you are interested in learning about how an offer in compromise can benefit you or how you can file one, get in touch with the licensed Roseville and Sacramento CPAs that work with Cook CPA Group. During a free and confidential consultation, you can discuss the benefits of an offer in compromise and how to get your offer approved. Call (916) 432-2218 to learn more.