Let’s face it, if you’re in trouble, the LAST person you’d trust is the person that says you’re in trouble. That’s about how most people feel when it comes to getting tax advice or offers from the IRS, especially given the massive hiring plan the IRS in undertaking and we discussed a couple of months ago.
It’s the fox telling you how to clean a chicken coop.
On the other hand, since they are the folks that make the rules, it stands to reason that they could have access to options that you may not have thought about or they can remove certain barriers that might affect a similar offer if you, as a taxpayer, made it.
Even as a professional, I’m usually leery of “deals” made with the IRS, but, with the power of the law and firm documentation, if you find yourself in trouble with taxes, partnering with the IRS might be a solution, albeit a nerve-wracking one.
How’s it work?
In this scenario – where the taxpayer owes far more than could be reasonably repaid, the IRS can make what is called an Offer-in-Compromise or OIC. This compromise settles all the debt, all the fees, and any interest owed by requiring the taxpayer to pay the entirety of the OIC and then everything is “back to normal”.
Here’s the problem – cheap attorneys on late night television and local radio have made the OIC appear to be easy to get. It’s not. The IRS has strict guidelines on how they will make or accept an OIC and in many cases, they would rather negotiate from the point of view that you will be back on your feet financially so they can wring some more money out of you.
I know of one high-net-worth individual who had all his “ducks in a row” as he worked through his OIC and the IRS lost his information! You guessed it – he and his CPA were able to prove exactly where he was in terms of repayment and not get taken advantage of by the IRS, but it was still a truly stressful situation for him.
In other words, get ready to jump through some hoops.
What are they? Well, no more than you’d reasonably expect – your returns have to be legally filed, your payment and tax deposits have to be current, and you cannot be in bankruptcy proceedings.
Of course, if you have all that, then you might not be in dire straits to begin with, right?
The important thing to remember is that if you are in a situation where you might qualify for an OIC, then you need to have representation AND your finances in order. The best way me and my team have found to stay ahead of tax problems is simple – don’t put yourself in a situation to run afoul. Sure, that’s simple advice, but it still works.
What are the causes of tax issues? Not having a professional team, trying to use software that isn’t really calibrated for your actual needs, and, of course, business failures. Of those three, by far the biggest challenge is when a business folds or when an executive suddenly finds themselves out of a job. They may have the cash reserves to handle the bills, but the taxes on their assets may prove to be overwhelming and as a result, they find themselves in a morass of tax problems with the IRS.
My advice as a professional? If you ever feel like you are in a position to be in trouble with your taxes – for any reason – then start a conversation immediately with us. There are actions that can be taken long before the filing deadlines and as a result, you can save yourself money, time, and a lot of sleepless nights.
We’re here for you!