Calculating OIC Offers in Connecticut
An offer in compromise is the IRS's agreement to accept less than the full tax due from a taxpayer based upon extraordinary circumstances and calculation of each taxpayer's reasonable collection potential. The successful granting of an offer of compromise requires a full working knowledge of all the factors and calculations involved in the approval process and determination, including:
- Reasonable collection potential
- Proper income calculation
- Allowable expenses
- Total offer amount
- Proper grounds for accepting an OIC
- Exceptional circumstances
At the Law Offices of Neil Crane, LLC, our attorneys can guide you through the offer in compromise application process. Contact us online, call us at 203-230-2233 or toll free at 888-249-3027 for a free initial consultation.
Thorough Preparation is Essential
The process starts with the collection and analysis of substantial financial documentation to determine if a taxpayer is qualified or a potential offer in compromise candidate.
The initial analysis requires a careful examination of monthly pay stubs, bank statements, past tax returns, credit card statements, mortgage statements, assets, liabilities and monthly expenses. Understanding what constitutes "allowable" monthly expenses is the critical element in determining excess monthly income. It is a complicated process that requires the knowledge and experience we've built over three decades of successful tax relief for clients throughout Connecticut.
Understanding the Application Process
The application process begins with the preparation and submission of Forms 656 and 433-A. These forms provide the IRS with a complete assessment of the taxpayer's financial condition. They also allow the IRS to calculate the taxpayer's reasonable collection potential (RCP). The RCP calculation determines the lowest amount acceptable in an OIC. It measures the taxpayer's ability to pay in accordance with:
- Realizable asset values: This is the amount that would be obtained through a hypothetical liquidation of all hard and soft assets, including cash, bank accounts, vehicles, business assets and real estate.
- Monthly disposable income: This is a calculation of the monthly amount available from all income sources over a one-to-two year period minus allowable expenses as determined by household size and geographical area.
Determining the Proper Income Calculation
In order to determine the proper offer amount for an offer in compromise, all individual circumstances must be calculated and customized to the specifics of your total tax debt and the taxpayer's allowable income and expenses. To make the proper income determination, it is essential to understand what income will be included by the IRS in the taxpayer's proper income calculation. Income from various sources and overall household income must be properly analyzed, reviewed and revised in accordance with the IRS's definition of income for your specific offer in compromise calculation. Improperly excluded or unrecognized income can result in rejection of any offer submitted in an offer in compromise application.
Determining Allowable Expenses for Your Application
In order to properly determine the appropriate offer to submit in an offer in compromise application, experienced tax relief counsel needs a complete working knowledge of the IRS guidelines for allowable expenses. Not every expense in a taxpayer's monthly budget will be considered by the IRS as an allowable expense when determining monthly income available to fund a properly calculated offer in compromise.
At the Law Offices of Neil Crane, LLC, we use IRS guidelines for every county in Connecticut on a regular basis, providing us with complete knowledge of the IRS calculation of allowable monthly expenses. This makes us uniquely suited to best advise you on the proper calculation and determination of an offer in compromise.
Total Offer Amount and Successful Offers in Compromise
Understanding and calculating "allowable living expense" is a complicated and ever-changing area of tax law involving local standards, guidelines and detailed criteria. The proper application of these criteria to individual taxpayers in need requires the knowledge and experience we've gathered at the Law Offices of Neil Crane, LLC, in provided tax relief to Connecticut residents since 1983.
The combination of properly determined realizable asset values and monthly disposable income is the basis for calculating proper settlement amounts for a successful offer in compromise. Each calculation is based on the individual circumstances of a requesting taxpayer and determines the proper total offer amount. At the Law Offices of Neil Crane, LLC, we understand that small budget adjustments and proper calculation of the reasonable collection potential are the key factors in submitting acceptable offer in compromise settlement offers.
To learn more about offers in compromise and the application process, contact a lawyer at the Law Offices of Neil Crane, LLC. Contact us online or call us at 203-230-2233 or toll free at 888-249-3027. Your first consultation with us is free of charge. We have office locations in Hamden, Bridgeport, Ridgefield, Waterbury and Rocky Hill.
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