Saturday

Recent Emails From Clients

_______________________

11-13-2010

Hi Nick,


Thanks for staying in touch. You should be commended on your professional and timely correspondence.


John A.
_______________________


11-12-2010
 
You are great. Hope I have a chance to meet you personally and shake your hand. If the world had more people like you it would be a blessing.



Thanks
Melinda F.
______________________


11-11-2010



YOU are THE man!   thanks again


Gerry D.
______________________


11-10-2010


If I don't talk to you again before the holidays I wish you all the best and a great big huge fat THANK YOU !!!!


Diana R.

Wednesday

1st Week of November's Highlights- 3 Levy Releases, Abatement of $13,762, and 3 Summon Quashes!


Succesfully Abated $13,702.  Hire another company and you may end up paying that amount just in their fees and still not get the results you will with me!  I also had three new client come to me whose bank accounts had previously been levied and paycheck garnished, all released!  Not to mention three summons quashed!

Prepared an old 2006 1040 personal income tax return and was able to negotiate the release of a bank accout levy for this client.


Client has unfiled returns, but was still able to manage a wage garnishment release (not common)!

There were also three clients who came to me where I was able to quash the summons (not pictured).  Which means that the taxpayer did not have to meet with the Internal Revenue Service.  Busy week, but a very successful one. 


If you are looking for help, look no further, call me today 720-340-4065 or email nick@patriotresolution.com

Tuesday

Wage Garnishment Released Within Hours of Hiring Nick

Within a few hours from hiring Nick, this taxpayer had their wage garnishment released by the Internal Revenue Service. 
Although it is not typical to have a wage garnishment released without providing financial statments and while having unfiled tax returns,  I managed to negotiate a release with the ACS Collection Agent.

Dissecting a Retainer Billing Statement from a Large Tax Resolution Company

Retainer Billing Practices 101


All large tax resolution companies bill by the hour. The contract you sign, usually titled an engagement letter, service or work agreement, may not clearly state that you will be billed by the hour, sometimes it is hidden with broad language and vague legalese not immediately recognized by non-attorneys.  The salesperson may tell you it is a "flat-fee" but then you will be surprised when they send you a retainer statement a month or two down the road asking you to "replenish" your retainer by sending them extra money (usually thousands).

Here is a copy of a "monthly retainer billing statement" from one of the larger tax resolution companies. I am currently working with this taxpayer to obtain a refund from this firm he fired after coming to me.


Please keep in mind that I don't mean to suggest that everyone who works at these companies are necessarily bad people, but they are pushed by their management team to get in as much money from their current clientele as possible. So although you would reasonably assume that your interests are aligned with theirs i.e. they get the best results for you and get to brag about it, sounds reasonable, but the reality is their priority is to milk you for as much of your money as quickly as possible, over and above the initial retainer or fee. They will not resolve your case, in fact they will stall, until they can manipulate as much money out of you as possible.  The same seedy tactics that are employed by used car dealers and mechanics to rip you off are prevalent in the tax resolution industry. 

This client was charged $612.56 in overhead expenses alone.  I really feel bad for taxpayers who go with companies like this, especially when their are better alternatives out there to resolve their tax liability (although it seems like all companies that start out with good intent eventually fall to their owners greed).  Bottom line:  hire an independent who takes pride in their craft and not just their monthly quota.    

Click on the images to enlarge. 













2010 IRS Nationwide Tax Forum San Diego Review

The 2010 IRS Nationwide Tax Forum was nicely set up and had some great presentation speakers. 


Some of the highlights discussed from the forum:
  • There were almost one million federal tax liens filed in 2009.
  • The National Taxpayer Advocate's Office discovered that federal tax liens drop your credit score 100 points as soon as they are filed. 
  • The investigation also found that the three major reporting credit agencies, Experian, Equifax, and Transunion, do not remove tax liens for years, if at all, even after the tax has been paid.  The Fair Credit Reporting Act allows the agencies to keep the lien on your credit report for up to 7 years after payment in full.  Regardless of this Act for some reason the investigation found that Equifax keeps liens on your report for up to 15 years, Experian keeps the liens on your report for 10 years, and TransUnion indefinently! 
  • Federal Tax Lien filings went up 475% over the past 10 years.
  • Bankruptcy on back taxes are dischargable in a bankruptcy 3 years from due date + extensions or 2 years after filing late return (I always thought it was 3 years no matter what, so this is welcomed news). 
There were many other more complicated tax preparation and tax representation tax law changes in 2010 that were discussed.  I was very impressed by the forum and it was a fun and valuable way to earn 18-20 Continuing Education Credits for Enrolled Agents, CPAs, and Attorneys. 


Nicholas Hartney, E.A.
(866) 947-7209 toll free
(720) 340-4065 direct
nick@patriotresolution.com



Monday

What is an Enrolled Agent?

An Enrolled Agent (EA) is a federally-authorized tax practitioner who has technical expertise in the field of taxation and who is empowered by the U.S. Department of the Treasury to represent taxpayers before all administrative levels of the Internal Revenue Service for audits, collections, and appeals. 

So with that said, what exactly is an “Enrolled Agent”?


“Enrolled” means to be licensed to practice by the federal government, and “Agent” means authorized to appear in the place of the taxpayer at the IRS. Only Enrolled Agents, attorneys, and CPAs may represent taxpayers before the IRS. The Enrolled Agent profession dates back to 1884 when, after questionable claims had been presented for Civil War losses, Congress acted to regulate persons who represented citizens in their dealings with the U.S. Treasury Department.


How does one become an Enrolled Agent?


The license is earned in one of two ways, by passing a comprehensive examination which covers all aspects of the tax code, or having worked at the IRS for five years in a position which regularly interpreted and applied the tax code and its regulations. All candidates are subjected to a rigorous background check conducted by the IRS.


How can an Enrolled Agent help me?


Enrolled Agents advise, represent, and prepare tax returns for individuals, partnerships, corporations, estates, trusts, and any entities with tax-reporting requirements. Enrolled Agents’ expertise in the continually changing field of taxation enables them to effectively represent taxpayers audited by the IRS.


Privilege and the Enrolled Agent


The IRS Restructuring and Reform Act of 1998 allow federally authorized practitioners (those bound by the Department of Treasury’s Circular 230 regulations) a limited client privilege. This privilege allows confidentiality between the taxpayer and the Enrolled Agent under certain conditions. The privilege applies to situations in which the taxpayer is being represented in cases involving audits and collection matters. It is not applicable to the preparation and filing of a tax return. This privilege does not apply to state tax matters, although a number of states have an accountant-client privilege.


Are Enrolled Agents required to take continuing professional education?


In addition to the stringent testing and application process, the IRS requires Enrolled Agents to complete 72 hours of continuing professional education, reported every three years, to maintain their Enrolled Agent status.  Because of the knowledge necessary to become an Enrolled Agent and the requirements to maintain the license, there are only about 46,000 practicing Enrolled Agents.


What are the differences between Enrolled Agents and other tax professionals?


Only Enrolled Agents are required to demonstrate to the IRS their competence in matters of taxation before they may represent a taxpayer before the IRS. Unlike attorneys and CPAs, who may or may not choose to specialize in taxes, all Enrolled Agents specialize in taxation. Enrolled Agents are the only taxpayer representatives who receive their right to practice from the U.S. government (CPAs and attorneys are licensed by the states).


Are Enrolled Agents bound by any ethical standards?


Enrolled Agents are required to abide by the provisions of the Department of Treasury’s Circular 230, which provides the regulations governing the practice of Enrolled Agents before the IRS.

Patriot Tax Resolution | Better Business Bureau Review | Longmont, CO

Patriot Tax Resolution | Better Business Bureau Review | Longmont, CO

Sunday

Business Installment Agreement $500 month on $35,000 Liability on 941, 940 and 1120 taxes on his S-Corp

Was also able to negotiate with this client's Revenue Officer (RO) to avoid the dreaded trust fund recovery penalty that the Revenue Officer's are being directed to assess on all quarterly payroll (941) liabilities on the individual of the business whom it deems willful and responsible for the non-payment of the trust fund portion of the tax (the amount withheld from the employee's wages).  

Friday

Client's Case Resolved in less than 30 Days-Resolution: Uncollectible

I was successfully able to have this client's business account placed into uncollectible status after being on the case for less than 30 days (started July 15th and had the case in uncollectible status by August 5th) after pushing the Revenue Officer and the Taxpayer Advocate to approve the uncollectible status due to the client's bank demanding the case be resolved before my client's home was foreclosed upon (qualified for a loan modification under Obama's HAMP Program).

Beware of Ambulance Chasing Telemarketers Calling You Regarding a Government Tax Lien; Direct Violation of IRS Circular 230!

Ring*Ring* "Hello we are calling to speak to the (owner/Mr./Ms.x) regarding a private matter".

"Yes this is Ms. X". 

"Ms. X, we are calling you regarding a federal tax lien that was filed are you aware of that?"

"Yes, I am."

"Well Ms. X (in pleasant "soft" voice, usually female) I am with Muddy Waters Financial and we specialize in helping people resolve their back taxes.  How much are they claiming you owe?"

"Around X amount."

"OK, hold on for me, we can definitely help."

{Transfers you to the "closer" for a hard sell}

"Hello Ms. X, my name is Seth Gideon, I am a senior consultant here at Muddy Waters Financial. We have been in business since Aramaic was still a spoken language....hire us and all the penalty and interest will stop immediately.  If you don't the IRS will levy your bank account!"

Sound familiar?  If you have had the misfortune of the IRS or your State Taxing Authority place a tax lien against you and/or your property chances are very high you have already received a call from one, if not several, of these ambulance chasers from all across the country.  The movie Boiler Room hits on how the system works (although they sell stock the underlining principles remain the same) with tax help telemarketing scams. 





video


Take away securities, replace with tax representation rhetoric and take away the suits and replace with t-shirts and jeans and you have a typical tax resolution salesroom floor.

If you are unsure what a boiler room refers to it is this: an unflattering term used to describe a place of business where high-pressure telemarketing tactics are used to solicit sales. A boiler room is most often associated with stock brokerage firms (in this case tax resolution companies). A boiler room may rely on aggressive cold calling to sell risky stocks (false or overreaching claims to resolve a taxpayer's debt) to willing investors (taxpayers). A boiler room may use sales methods that violate National Association of Securities Dealers (NASD) (in this case Circular 230 IRS regulation that bars unlicensed sales people, i.e. attorneys, enrolled agents and certified public accountants from soliciting taxpayers) rules requiring brokers to recommend investments that are appropriate to an investor's portfolio (in this case offer in compromise or penalty abatement promises). For example, an unlicensed salesperson (they call them operners and closers) working in a boiler room might try to sell very speculative tax resolution services to a taxpayer who has equity in his home, makes over $100,000 and has not filed his tax returns in 5 years which would tell any competent tax professional that an Offer in Compromise is highly unlikely and based on the circumstances (no reasonable cause for falling behind on his taxes other than he just didn't do it) do not qualify for what they are selling. Boiler room tax resolution salespeople may also try to create taxpayer interest in non-existent IRS programs to heighten their sales pitch (always easier to sell a lie than it is the truth).






video

In Colorado every company I know that ambulance chases is owned not by a licensed tax professional but by some former bill collector, salesman or flat out conman.  This explosion and exploitation  of "tax firms" has hurt the reputation of the real tax professionals who are college educated (such as myself-CU and Regis University), and are required to earn their annual CPEs (continuing professional education) by attending IRS and other professional seminars on top of  having to hit the books for years to earn their license just so they will be allowed to practice.   A stark contrast to these high pressure Sales Floors.  You really don't want to see where they "make the meat".  Walking into one of these salesrooms is similar to that bar scene in the first Star Wars.  All kinds of "interesting" characters who believe me, look nothing like they may sound on the phone.  


The good news is I have spoken to several IRS Revenue Officer's who have said that the Service is trying to convince Congress to crack down on these snake oil salesmen.  The bad news is the government is being lobbied as usual by special interests and now with the House and Senate being split good luck on seeing any meaningful legislation being passed, so unfortunately the harassment of hundreds of thousands of taxpayers will continue for the unforeseeable future. 

Although Circular 230, which prescribes the rules governing practice before the U.S. Internal Revenue Service (IRS), rules that require attorneys, Certified Public Accountants (CPAs), Enrolled Agents, and others preparing tax returns and giving tax advice to do certain things, and prohibit certain things and penalties may be applied for noncompliance such as solicitation and advertising by an un-enrolled preparer (i.e. unlicensed telemarketers), directly or indirectly, an uninvited solicitation of employment. Solicitation includes, but is not limited to, in-person contacts, telephone communications, and personal mailings directed to the specific circumstances unique to the recipient.  The rules are clear so how is it that these unlicensed salespeople are so prevalent in the tax help industry? 

The truth is that  Congress should not allow any company that provides tax services to be owned by a non-licensed tax professional (any Joe-schmo is not legally allowed to open a law firm so why should anyone be allowed to hide behind a tax resolution firm offering professional tax services that require licensed people to perform the work???). Could you imagine if law firms were publicly traded companies?  Talk about the over billing that would go on so they can issue their shareholders dividends, that is what is happening with a lot of these larger companies such as Tax Masters.



Another problem is that some in Congress (and some within the IRS) take the position that these snake oil companies are a positive for the Service because it eventually scares people enough to get them to pay the IRS and creates less work for their Revenue Officers and their collection department (ACS).  Too many officials in the federal government view taxpayers who are being ripped off by these tax schemers as collateral damage- taking the moral high ground if they would have paid their taxes in the first place they would not be in the position to get ripped off by these companies. This is why so many of these companies are allowed to stay in business.  


In my opinion it takes a even higher precedence to pass legislation that should bar non-licensed people from soliciting professional tax representation.  It makes absolutely no sense and in the end all that ends up happening is people getting ripped off not only by the IRS with the insane amount of penalties and interest they charge, but these parasite financial/consulting companies.    These sales floors, let me tell you from first hand experience who work at these companies, are primarily made up of drug addicts, felons and flat out psychopathic con artists-strong language but the truth needs someone to shed light on these vampires and I am happy to oblige. 

Here are some things to watch out for when you talk to one of these "Financial/Consulting" companies that are calling you:

Some common lies that are used to manipulate people into buying the snake oil:

  • Penalties and Interest stop as soon as you hire us.
  • We have "special" relationships with the IRS that allows us to solve your case quick.
  • We will file an appeal to get the case out of the Revenue Officer's hands so we can settle faster. 
  • You don't have to pay your current taxes (federal tax deposits, estimated tax payments, withholding, etc.), we will include those in the agreement.
  • We have a flat fee.
  • We have been in business for 25 years. 
This is just the tip of the iceberg.  The bottom line is don't fall victim to these con artists.  You will either end up paying them several times more than they initially quoted you on how much it would cost (even if they claim it is a one time flat fee-which if they do RUN!) or they will drop your case if you refuse to send them more money. 

100% of these firms will pull the bait and switch on you.  The salesperson will tell you what you want to hear then hand your case off to a "team" to work your case where they will "down sell" what you were initially told.  Funny story about a client who recently left one of these companies to sign on with me:  She said that she was told by her Representative to "forget about what the sales guy told you, this is how it is..."

Can they really be that bad? They have some complaints with the BBB but have a decent rating.
 
Because of the high level of competition in the tax help/resolution industry there are several telemarketing companies slick enough to realize that it is smarter to refund a client in full then to get another BBB complaint.  On average, I am able to assist my clients by drafting a demand of refund letter after they realize they had been hoodwinked (i.e. the sales guy tells them one thing, the person assigned to their case tells them another and asks them several more thousands of dollars in the process).  

Another trick they use to mislead consumers is to change the business name by using a dba name such as Berkshire Financial Consulting who bought a company called Quantum Financial in 2008.  


Quantum Financial had a horrible BBB record due to the amount of complaints and also had several lawsuits pending.  All of a sudden an out of state company came in and took over the same clients, same employees, same building, same phone number (i.e. an alter ego of Quantum).  They registered with the BBB and overnight had an A+ rating.  It is undetermined if Berkshire was a shell company (i.e. if it was even doing business and/or if it provided the same services they do now - it is extremely unlikely that they did).  Of course it was inevitable being that they were hit with BBB complaints and when they were they quickly changed their operating name from Berkshire Financial Partners to Berkshire Capital Partners.  


The BBB clearly did not do its due diligence even though several competitors reported this to them.  When you take into account that the BBB gave the middle east terror group Hamas an A- after a group of jokers registered it in 2010 you start to see the bigger picture (ABC NEWS BBB HAMAS)



2.  Ask them if they will allow you talk to an attorney or the person who will be assigned to your case if you choose to hire them.  They won't.  And when you do hire them your case will more than likely be worked by a low level assistant with an attorney signing off on their work.  They are just there to put up a front so they can collect a check.  Most companies who telemarket may have one licensed person for every 5-6 of their representatives, so chances are you will not get any one licensed assigned directly to your case.

3.  If you do hire them the only time you will hear from an attorney who works at their firm (and the fact is-no self-respecting attorney would work at a firm that ambulance chases-at best maybe one who just got out of law school and is waiting to get on with a real law firm and can't wait to leave) is when you initially hire them and when they are asking you for more of your money. 

4.  The fact is there are no self-respecting lawyers, CPA's or Enrolled Agents who would work for a firm that employs ambulance chasing "salespeople".  These salesroom floors are flooded with all varieties of drugs (Oxycontin I hear is now the favorite on tax resolution floors, but coming in at a close second is heroin).  These are the people who you initially talk to before you send them your money.  They can be very persuasive with their rhetoric, which is not all that hard to do when you can make up any lie and fabrication and get away with it.  Psychopath's run rampant in these salesroom floors so be EXTREMELY careful and use your better judgement.  


As I stated earlier I represent many taxpayers who were once using one of these financial/consulting firms and I hear all the time about how nothing ever got resolved and how they had to keep throwing good money after bad. These companies tell prospects that they will have a "team" of "professionals" that will help them resolve their taxes-which really means two-three inexperienced, unlicensed paper pushers who send out all the boilerplate letters, faxes and have a licensed tax professional rubber stamp their work ( I worked for a firm years ago that told me they wanted to get an actual stamp of my signature!).   These "assistants/para's" charge clients up to $150 an hour for simple faxes, boilerplate letters, etc. (which adds up nicely if they have you on a retainer agreement). 
 
Pyramid Tax Schemes

After the well polished sales person (the Closer) gets you to sign on they then quickly dump your case to a "team" of tax professional (i.e. unlicensed assistants making $12.00 an hour but billing $125-$175 an hour).  These "teams" are required to milk their book of clients for as much as $30,000 - $40,0000 + each month.  When it is your turn to pay and you balk for any reason they will simply revoke the power of attorney and stop doing work on your case until you do.  People who work at these firms and decide to say something about their practices are quickly shown the door (I would like to see the statistics of these firms rate of resolving cases vs. their turnover ratio).  I ran across an interesting blog which details what it is like working for one of these large tax resolution companies (For legal purposes I have to state that I am not confirming or denying what this blogger has to say about this particular tax company):

http://blog.jonathanharrington.com/2004/08/what-you-need-to-know-about-omni.html
http://blog.jonathanharrington.com/2004/04/farewell-omni-financial-i-did-indeed.html

These "consulting/financial" firms can be very pushy.  If you want them to stop calling simply tell them to take you off their list and that you  have the situation handled and then hang up. 



For all you ambulance chasers out there reading my blog (I have a lot of them that do and a lot of them that leave messages late at night on my business phone and spam my other website after I beat them out on a deal) I would like to say, get a real job.  And all of you licensed representatives who are stuck working at one of these ambulance chaser firms I would like to say:

When leads are not flowing you way, the first thing you should do is check your two-pronged marketing plan and ask, "Am I implementing it properly and fully?" If yes, then consider doing a full evaluation of how your firm operates. But whatever you do, do NOT take a loving look at the telephone and consider calling prospects. It is an easy temptation, especially when you know their names.

But you are an education resource, an accessible expert, with years of experience, skills, and successes. You are a professional. People come to you. You do not go after them, other than indirectly through providing education and creating relationships with your marketing. It is salespeople who call you at home or work and try to pressure you into giving them your money ASAP or lose out on the deal of the century.

The moment you place a cold-call, you are no longer you. You are no longer a high-value, high-priced professional provider of quality services that only people like you can provide. Put another way, calling is like begging. It demolishes your credibility. You look desperate. If you are supposed to be so good, why would you be chasing after clients?

Are these companies trying to scare you? Here is something to scare them:  

Why I am, by far, the better value:

No Bait and Switch. I am licensed to perform the work and will be the only person you talk to, no para legals, no assistants, no low level clerks. I am the only one working your case from start to finish. The majority, most likely all, of these companies that have contacted you has done so with a unlicensed salesperson. If their fear tactics don't work they will tell you anything to get you in the door then flip your case over to someone else to work who has to downplay the expectations that you were fed.  I under sell and over deliver- and have the references to prove it.

No Outrageous Retainer Fees. Most of these companies, if you read the fine print, will charge on an hourly basis(even though you may have been told it is a flat fee). They will bill you anywhere from $50-$1,000 for a boiler plate letter. They do this so they can “re-write” you for additional fees. Click here to read the post and to see the actual retainer statement of a current client of mine received from one of these companies prior to hiring me.  All companies who perform the “bait and switch” have a “production” or “services” department who also earn their paycheck on commission. The person assigned to your case is expected to generate a monthly quota by re-writing existing clients (even though they will most likely tell you otherwise).  Why throw good money on bad?


Licensed to Perform the Work. Many companies use unlicensed salesmen who never worked, yet alone resolved a case in their lives (although many will lie and say they have), to talk to you about the case and outsource the work with to someone else who is licensed. You may, or may not even get an opportunity to speak to the person who actually talks the Internal Revenue Service. And if you do, the only time you will hear from them is at the start of the case and when they ask for more money-the rest of the time you will be contacted by one of their assistants (they call them paras).


Full Disclosure. If you have a business that has fallen behind on its quarterlies (941s) and now has a payroll tax liability the IRS will be looking to assess you personally for the Trust Fund portion of the taxes. This is the amount withheld directly from the employee’s pay (not including FICA and medicare, or penalties and interest). That is why my Service Agreement includes both your business as well as you personally.


Remember the old adage: "A man who represents himself has a fool for a client."


Nicholas Hartney, E.A. not only has very reasonable fees but more importantly provides a value of service that is unprecedented in the field of tax representation. Feel free to email Nick at nick@patriotresolution.com or directly at (720) 491-3531.

Addendum:

I would like to say that I have been in this industry long enough to see many of my once colleagues go on and either create their own business or become a manager at one of these firms. They all started out with good intentions but after they got a taste of the money they quickly sell out and their ethics go down the drain.  Of course they will tell you that they are not boiler rooms but the fact is they are.  They have their managers knock on the doors of their tax professionals offices daily, every hour asking them how much money they have coming in.  When I was at Omni-Financial from 2002-2004 I remember the meetings of their management staff every morning in front of the whole company (I would say approximately 100 people at that time)going around the room and asking each Associate (tax professional) how much money they had coming in on that day and throughout the week.  They were so much of a boiler room that they would make you pick up your clients checks using Federal Express and you would have to write on the "Money Board" where everyone could see who you "rewrote" (i.e. ask for additional money above the initial sales contract) and throughout the day made you confirm three times by marking x 1, x 2, x 3. They were blood thirsty vampires, and their employees and clients were nothing more than a means to the owners end.  If you continued to miss your quota you were fired, the turnover rate was remarkable. It was ALL about money, don't let them fool you.   Look up boiler room in a dictionary and you will find Omni-Financial

Clear Creek Financial was started by a team of an unlicensed Associate and his paralegal (they had to talk to the IRS by using a relatives CPA license until they could afford to hire licensed people).  The company was started with all the right intentions (at least that's what they say) but they became a carbon copy of Omni-in fact some have said even worse.


Berkshire Capital Partners/ Berkshire Financial Partners/ Berkshire Tax, etc.  The company is an alter ego of Quantum Financial, LLC another Omni-Financial spin-off.  I talked about them previously in this post.  They lie about their length in business (11-12 years-but in reality 1-2) and their affiliation with Quantum Financial and have already changed their name again to avoid marks on their BBB (from Berkshire Financial Partners to Berkshire Capital Partners). 

Keys to a Successful Offer in Compromise- New Offer in Compromise Package Effective May 2012!!


The Keys to Unlock A Successful
Offer in Compromise
by
Nicholas Hartney, E.A.


The Offer in Compromise is an agreement between a taxpayer and the IRS that settles the taxpayer’s liability for some amount which is less than the full amount due. The IRS has the authority to settle or compromise federal tax liabilities by accepting less than full payment under certain circumstances.


The taxpayer makes an Offer in Compromise on Form 656. If the IRS accepts the Offer in Compromise, then a contract is formed in which the IRS agrees to cancel the tax debt in return for the payment of the agreed sum. The IRS has a whole set of rules, policies and procedures which govern when it will accept an offer.


Unfortunately, you just don’t offer to pay them 10, 25, or 50 cents on the dollar. They look at your offer, compare it to their guidelines and then either accept it, reject it or encourage you to offer more money. For an offer to be acceptable it must be based on one of three theories.


There are Three Types of Offers:

 
1) Doubt as to Liability;
2) Doubt as to Collectibility; and
3) Effective Tax Administration.


Doubt as to liability means that there is some reason that you don’t owe the tax or doubt exists that the assessed tax is correct. This does not mean that you have doubt that you don’t owe the tax or part of it. It means that the IRS has doubt about you owing the tax, and in my experience, the IRS never doubts that you owe the tax.


They are in the business of taking your money. Why would they ever wonder or care if there was a possibility that you did not owe the tax? It is not their job to care about you.

However, if there is clear evidence that you don’t owe the tax or part of it, a professional can usually get all or part of the tax abated without you having to pay anything. I have not found offers based on Doubt as to Liability to be very useful. Let's be clear about that.


Usually when people come to see us about their unpaid taxes, the liability is legally established and there is no doubt that they have a valid assessment. That is not to say the assessment is correct. The IRS is always making mistakes, but the taxpayer must defend against the assessment before it is made. Once an assessment is made there  is a strong legal presumption it is correct. I know what you are thinking but I don’t make up the rules.
 
Doubt is to Collectibility is where the IRS has doubts that you could ever pay the full amount. I have to emphasize the word "ever." If the IRS feels that if there is a chance that you could ever pay the liability prior to the running of the ten year statute of limitations, they will not compromise with you.  DON’T FORGET THIS! If the IRS feels that if there is a chance that you could ever pay the liability prior to the running of the ten year statute of limitations, they will not compromise with you.


Effective Tax Administration is where there is no doubt that the tax is correct and no doubt the amount owed could be collected, but an exceptional circumstance exists that allows the IRS to consider the offer.  To be eligible for a compromise on the basis of Effective Tax Administration you must demonstrate that collection of the tax would create an economic hardship or would be unfair and inequitable. I have been trying to find out for years what this means and have only a little insight.


These are some non-exclusive factors outlined in the IRS training materials to be used to determine when there is an economic hardship:

• Long term illness, medical condition, or disability that renders the taxpayer incapable of earning a living;


• Liquidation of assets to pay the tax liability would create an inability to meet reasonable basic living expenses;


• Taxpayers are unable to borrow against the equity in assets and sale of the asset would have sufficient adverse consequences such that enforced collection is unlikely.

Sometimes the IRS runs upon a situation where it would get a lot of bad publicity if it tried to collect the tax, like foreclosure on an orphanage. In such a case they try to bend the rules to classify the account as uncollectible. Somebody puts a code 53 on the account and hopes nobody else at the IRS will notice. I am not sure why anyone in this situation would want to pay money to compromise a liability that the IRS is not going to enforce. Why not just sit it out in 53 status until the statute of limitations run?


This is the example the IRS gives its employees when describing an offer that should be accepted on the basis of Effective Tax Administration:


"The taxpayer is disabled and lives on a fixed income that will not, after allowing basic living expenses, permit full payment of the liability through an installment agreement. The taxpayer owns a house that has been specially equipped to accommodate his disability. There is sufficient equity in the house to full-pay the liability. However, because of his fixed income and limited earning potential, the taxpayer is unable to obtain a mortgage or borrow against the equity. In addition, because the taxpayer’s home has been specially equipped to accommodate his disability, forced sale of the residence would create severe adverse consequences for the taxpayer, making such a sale unlikely."

Now since the IRS is not going to seize this guy’s house or levy on his income, why would he want to make an offer? He could just sit back and wait until the statute of limitations runs. This may not be the way out for you, but keep in mind that the sadder your story the more likely the IRS is inclined to accept an offer as to Doubt as to Liability. If you have a sad story then you will want to use it with your Offer as to doubt as to collectibility. The Offer Specialist is instructed to consider all special circumstances.


When you make your offer, be sure to include an attachment that spells out your sad story. Make it sound as pitiful as possible but stay within the bounds of the truth.  Still put as sympathetic a spin on the story as you can. Be sure to include as many of these buzz words as you can: hardship, economic hardship, medical condition, illness, disability, and basic living expenses. Underline them, highlight them or bold them so that they jump out at the reviewer.

Here are the forms you will need if you wish to try and tackle this yourself :

Click here for new changes to IRS Offer Program (i.e. increased allowable living standards and change in their calculation from 48 months to only 12!  More people now qualify for opportunity to lower tax debt  http://nickhartneyea.blogspot.com/2012/07/what-successful-irs-offer-in-compromise.html).


http://nickhartneyea.blogspot.com/2012/07/what-successful-irs-offer-in-compromise.html


This client owed over $65,000 and as you can see below the IRS settled for $5000 through their Offer in Compromise program.  This of course is not typical for every client.  The selling points for convincing the IRS to settle on this taxpayer's debt was his age (over 60), health issues (artery disease), and lack of assets and monthly disposable income.













This taxpayer had hired the now defunct Tax Masters who had him on a $100 a month payment plan after he paid them to prepare an Offer in Compromise.  I stepped in and first had the IRS drop the installment agreement (i.e. monthly payment plan), then negotiated a currently not collectible status.  After that he was able to borrow $5000 from a friend (which we noted in the Offer in Compromise) and after 8 months they finally agreed to accept the Offer.




Remember the old adage: "A man who represents himself has a fool for a client." 

Offers are very difficult to negotiate.  The IRS accepts less than 25% of the Offer in Compromises submitted according to the most recently published IRS Data Book.  Now with that said, I am sure there are many taxpayers and tax professionals who submit offer in compromises just to "buy time" before the IRS starts shooting out bank levies, wage garnishments, seizures, account receivable levies, etc. so this will skew the numbers, but nonetheless they are certainly not a given to be accepted.  

With that said, it is worth it if it looks like there may be a reasonable shot of having an offer in compromise approved.  It is the number one tax resolution strategy for saving money if approved (or negotiated to an amount you and the IRS agree upon).  If it fails you have appeal rights, if that fails you can petition the tax court or simply enter into another type of resolution with the IRS such as an installment agreement, partial payment installment agreement, currently not collectible (status 53), or if you have a business a reorganization may work if it does not have too high of equity in its assets.   As with any negotiation it is worth starting with the most attractive options (offer in compromise) first and if it is not successful move down to one of the other tax resolution strategies mentioned. 

Nicholas Hartney, E.A. not only has very reasonable fees but more importantly provides a value of service
that is unprecedented in the field of tax representation.  Feel free to email Nick at nick
IRS Update on how to Appeal a Denied Offer in Compromise (November 2010)


Offer in Compromise (OIC) Disagreed Items


In preparing a request for an appeal, compile a list of specific with which items you do not agree and include a statement explaining why you disagree with each item. Consider using Form 13711 in the preparation of your appeal. You may also find a review of the following beneficial:

The Asset/Equity (AET) and Income/Expense (EIT) Tables that accompanied the OIC denial letter;

Your Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals;

the supporting documentation submitted with the Form 433-A; and

Publication 1854: How to Prepare a Collection Information Statement.

Check your figures and calculations again and verify the documents you submitted to Collection. If you do not have your completed Form 433-A available, refer to a blank Form 433-A.

The Monthly Income/Expense Statement (see Section 4, Page 4) requires you to provide the following:

Proof (i.e. pay stubs and earnings statements) of gross earnings and deductions for the past three months from each of your employers;

Proof of pension, social security and/or other income for the past three months;

Current statement(s) from the lender on your automobile(s), including the monthly payment and balance due for each vehicle;

Current statement(s) from all lien holders on your residence, including the amount of the monthly payment and balance due for each lien;

A copy of your last filed Form 1040 with all schedules, and

Proof of current expenses paid for the past three months including utilities, rent, insurance, property tax, non-business transportation expense (i.e. car payments, lease payments, fuel, oil, insurance, registration, parking), healthcare (including insurance premiums co-payments, other out-of-pocket expenses) and court-ordered payments.

Note: The amounts used on the "Monthly Income/Expense Statement" of Form 433-A could be different than the amounts used on the IET worksheet for food, clothing, miscellaneous, transportation, housing and utilities, out-of-pocket healthcare and other expenses. Collection Financial Standards are used to help determine a taxpayer's ability to pay a tax debt. All standards, except miscellaneous, are derived from the Bureau of Labor Statistics (BLS) Consumer Expenditure Survey (CES). These financial standards are explained below:

National standard expense allowed for food, clothing and miscellaneous monthly expense. The standard amount is computed based upon your income and family size instead of actual expenses.

National standard expense allowed for out-of-pocket healthcare expenses including medical services, prescription drugs, medical supplies (i.e. eyeglasses, contact lenses, etc.). This amount is based on Medical Expense Expenditure Panel Survey data and is in addition to the amount paid for health insurance.

Housing and utilities expense allowed for housing and utilities monthly expense. The standard amount is computed based upon the state and county where you reside and your family size.

Transportation expense allowed for monthly transportation expenses. The standard amount is computed by combining the standard for ownership cost and operating cost. This is based on the number of vehicles you own and the region you live.

Did you compute the amounts in accordance with instructions? Review the instructions in the following sections on Form 433-A:

Section 4, Items

Section 4, Items 14-15: Available Credit and Life Insurance

Section 4, Items 17-19: Personal Asset and Liability

Section 5: Self-Employed

Note: Certain assets such as vehicles, and real estate should be valued at the quick sale value. This is the amount you can sell the asset today. You may compute the value of a vehicle by consulting a trade association guide for the fair market value (FMV) and discounting the value by 20%. You may compute the value of real estate by an appraisal, the replacement cost value on your residence and possibly the taxable value of your home.

Did you provide the required attachments? See the bottom of page 4 of Form 433-A for "Attachments Required for Wage Earners and Self-Employed Individuals."

Update May 2011 IRS Collection Activity Reports Discouraging

Offer in Compromise acceptance rate per the 2010 IRS Data Book remains at under 25%.  In the midst of the second greatest economic downturn in the history of the United States the Internal Revenue Service received over 57,000 Offer in Compromises submitted by taxpayers across the country. Of the 57,000 plus Offers that were submitted only 13,866 were approved.

In a time when the unemployment rate hovers around 9% (The official unemployment index, based on a monthly survey of sample households, counts only people who reported looking for work in the past four weeks. It doesn't account for part-time workers who want to work more hours but can't, given the tight job market. And it doesn't include those who have given up trying to find work. When the underemployed and the discouraged are added to the numbers, the unemployment rate rises to 16.6%) one would think that the IRS would be more lenient in accepting these Offers.


 

Rather than cutting back on expenses the IRS continues to gouge taxpayers with ridiculous amounts of penalty and interest (penalties up to 50% of the tax plus a never ending amount of daily compounded interest) and offers taxpayers much too little relief.  Forgot about those snake oil commercials you see on television or solicitations you receive from cold calling telemarketers after you had a federal tax lien placed on you, the Offer in Compromise program is only works for the few. 


It is not that Offer in Compromises can not be done but it is very important  to set your expectations low when submitting one.  In my opinion it does not hurt to ask and if you your offer is denied you can always work out another agreement such as a payment plan (installment agreement) or enter into currently not collectible status.


For more information give me a call toll free at 866-947-7209 or 720-340-4065 local or shoot me an email at nick@patriotresolution.com


The following text is taken directly from Form 656B-IRS Instruction Booklet:

WHAT YOU NEED TO KNOW

What is an offer?

An offer in compromise (offer) is an agreement between you (the taxpayer) and the IRS that settles a tax debt for less than the full amount owed. The offer program provides eligible taxpayers with a path toward paying off their debt and getting a “fresh start.” The ultimate goal is a compromise that suits the best interest of both the taxpayer and the IRS. To be considered, generally you must make an appropriate offer based on what the IRS considers your true ability to pay.

Submitting an offer application does not ensure that the IRS will accept your offer. It begins a process of evaluation and verification by the IRS, taking into consideration any special circumstances that might affect your ability to pay. Generally, the IRS will not accept an offer if you can pay your tax debt in full via an installment agreement or a lump sum.

This booklet will lead you through a series of steps to help you calculate an appropriate offer based on your assets, income, expenses, and future earning potential. The application requires you to describe your financial situation in detail, so before you begin, make sure you have the necessary information and documentation.

Are you eligible?

Before you submit your offer, you must (1) file all tax returns you are legally required to file, (2) make all estimated tax payments for the current year, and (3) make all required federal tax deposits for the current quarter if you are a business owner with employees.

Bankruptcy
If you or your business is currently in an open bankruptcy proceeding, you are not eligible to apply for an offer. Any resolution of your outstanding tax debts generally must take place within the context of your bankruptcy proceeding.

If you are not sure of your bankruptcy status, contact the Centralized Insolvency Operation at 1-800-913-9358. Be prepared to provide your bankruptcy case number and/or Taxpayer Identification Number.

Doubt as to Liability
If you have a legitimate doubt that you owe part or all of the tax debt, you will need to complete a Form 656-L Offer in Compromise (Doubt as to Liability). The Form 656-L is not included as part of this package. To submit a Doubt as to Liability offer, you may request a form by calling the toll free number 1-800-829-1040, by visiting a local IRS office, or at www.irs.gov.

Other important facts
Penalties and interest will continue to accrue during the offer evaluation process.
You cannot submit an offer that is only for a tax year or tax period that has not been assessed.
The law requires the IRS to make certain information from accepted offers available for public inspection and review. These public inspection files are located in designated IRS Area Offices.
A Notice of Federal Tax Lien (lien) gives the IRS a legal claim to your property as security for payment of your tax debt. Generally, if a lien is not already filed, a lien will not be filed during the offer evaluation process. If a lien was filed, it will normally not be released until the payment terms of the accepted offer are satisfied, or the tax debt is paid in full, whichever comes first.

If your business owes trust fund taxes, and responsible individuals may be held liable for the trust fund portion of the tax, you are not eligible to submit an offer unless you pay the trust fund portion of your tax debt first. Trust fund taxes are the money withheld from an employee’s wages, such as income tax, Social Security, and Medicare taxes.

The IRS will keep any refund, including interest, for tax periods extending through the calendar year that the IRS accepts the offer. For example, if your offer is accepted in 2011 and you file your 2011 Form 1040 showing a refund, IRS will apply your refund to your tax debt.

The IRS may keep any proceeds from a levy served prior to you submitting an offer. The IRS may levy your assets up to the time that the IRS official signs and accepts your offer as pending. If your assets are levied after your offer is pending, immediately contact the IRS person whose name and phone number are listed on the levy.

If you currently have an approved installment agreement with IRS and are making installment payments, then you may stop making those installment agreement payments when you submit an offer. This will allow you to make your offer payments noted below. If your offer is returned for any reason, your installment agreement with IRS will be reinstated with no additional fee.

PAYING FOR YOUR OFFER

Application fee

All offers require a $150 application fee.

EXCEPTION: If you are submitting an individual offer and meet the Low Income Certification guidelines (see page 2 of Form 656, Offer in Compromise), you will not be required to send the application fee.

Payment options
Submitting an offer requires the selection of a payment option as well as sending an initial payment with your application. The amount of the initial payment and subsequent payments will depend on the total amount of your offer and which of the following payment options you choose.

Payment option 1: This option requires 20% of the total offer amount to be paid with the offer and the remaining balance paid in five or fewer payments.

Payment option 2: This option requires the first payment with the offer and the remaining balance paid in accordance with your proposed offer terms. Under this option, you must continue to make all subsequent payments while the IRS is evaluating your offer. Failure to make these payments will cause your offer to be returned.

The length of the payment option you choose may affect the amount of the offer we will accept. Generally, an offer paid within five months of acceptance will require a lesser amount. Your offer amount cannot include a refund we owe you.

If you meet the Low Income Certification guidelines, you will not be required to send the initial payment, or make the monthly payments during the evaluation of your offer but you will still need to choose one of the payment options.

If your offer is returned or not accepted, any required payment(s) made with the filing of your offer and thereafter, will not be refunded. Your payment(s) will be applied to your tax debt.

If you do not have sufficient cash to pay for your offer, you may need to consider borrowing money from a bank, friends, and/or family. Other options may include borrowing against or selling other assets. NOTE: If retirement savings from an IRA or 401k plan are cashed out, there will be future tax liabilities owed as a result. Contact the IRS or your tax adviser before taking this action.

Future tax obligations
If your offer is accepted, you must continue to timely file and pay your tax obligations. If you fail to file and pay your required tax returns, before your offer is paid in full, or for five years after your offer is accepted, which ever is longer, your offer may be defaulted. If your offer is defaulted, all compro-mised tax debts will be reinstated.

HOW TO APPLY
Application process
The application involves filling out Form 433-A (OIC), Collection Informa-tion Statement for Wage Earners and Self-Employed Individuals and/or Form 433-B (OIC), Collection Information Statement for Businesses, filling out a Form 656, (Offer in Compromise), attaching an initial payment, and attaching a $150 application fee for each offer you send in.

If you and your spouse owe joint and separate tax debts
If you have joint tax debt(s) with your spouse and also have an individual tax debt(s), you and your spouse will send in one Form 656 with all of the joint tax debt(s) and a second Form 656 with your individual tax debt(s), for a total of two Forms 656.

If you and your spouse have joint tax debt(s) and you are also each responsible for an individual tax debt(s), you will each need to send in a separate Form 656. You will complete one Form 656 for yourself listing all your joint and separate tax debts and your spouse will complete one Form 656 listing all his or her joint and individual tax debts, for a total of two Forms 656.

If you and your spouse/ex-spouse has a joint tax debt and your spouse/ex-spouse does not want to submit a Form 656, you on your own may submit a Form 656 to compromise the joint debt.
Each Form 656 will require the $150 application fee and initial down payment unless your household meets the Low Income Certification guide-lines (See page 2 of Form 656, Offer in Compromise).
COMPLETING THE APPLICATION PACKAGE

To calculate an offer amount, you will need to gather information about your financial situation, including cash, investments, available credit, assets, income, and debt. You will also need to gather information about your average gross monthly household income and expenses. The entire household includes spouse, significant other, children, and others that reside in the household. This is necessary for the IRS to accurately evaluate your offer. In general, the IRS will not accept expenses for tuition for private schools, college expenses, charitable contributions, credit card payments, and other unsecured debt payments as part of the expenses calculation.

Step 1 – Gather your information
Step 2 – Fill out the Form 433-A (OIC), Collection Information Statement for Wage Earners and Self-Employed Individuals)
Step 3 – Fill out Form 433-B(OIC), Collection Information Statement for Businesses
Step 4 – Attach required documentation
Step 5 – Fill out Form 656, Offer in Compromise
Step 6 – Include initial payment and $150 application fee
Step 7 – Mail the application pack-age

Fill out the Form 433-A(OIC) if you are an individual wage earner and/or a self-employed individual. This will be used to calculate an appropriate offer amount based on your assets, income, expenses, and future earning potential. You will have the opportunity to provide a written explanation of any special circumstances that affect your financial situation.

Fill out the Form 433-B(OIC) if your business is a Corporation, Partnership, Limited Liability Company (LLC) classified as a corporation, single member LLC, or other multi-owner/multi-member LLC. This will be used to calcu-late an appropriate offer amount based on your business assets, income, expenses, and future earning potential. If you have assets that are used to produce income (for example, a tow truck used in your business for towing vehicles), you may be allowed to exempt the equity in these assets.

You will need to attach supporting documentation with Form(s) 433-A(OIC) and 433-B(OIC). A list of the documents required will be found at the end of each form. Include copies of all required attachments, as needed. Do not send original documents.

Fill out Form 656. The Form 656 identifies the tax years and type of tax you would like to compromise. It also identifies your offer amount and the payment terms.

The Low Income Certification guidelines are included on Form 656. If you are an individual and meet the guidelines, check the Low Income Certification box in Section 4, on Form 656.
Include a check, cashier’s check, or money order for your initial payment based on the payment option you selected (20% of offer amount or first month’s installment).

Include a separate check, cashier’s check, or money order for the application fee ($150).
Make both payments payable to the “United States Treasury.”
If you meet the Low Income Certification guidelines, the initial payment and
application fee are not required.
Make a copy of your application package and keep it for your records.
Mail the application package to the appropriate IRS facility. See page 23 for details, Application Checklist.

IMPORTANT INFORMATION
After you mail your application, continue to:

File all federal tax returns you are legally required to file.

Make all federal estimated tax payments and tax deposits that are due for current taxes.

Reply to IRS requests for additional information within the time frame specified. Failure to reply timely to requests for additional information could result in the return of your offer without appeal rights.