When a taxpayer has no reasonable hope of paying the full amount of past taxes due or when it makes sense to borrow money from another source to pay taxes, sometimes it makes sense to settle the matter with an Offer in Compromise in order to get rid of the old debt and make a fresh financial start. I recently asked a group of accountants for tips in preparing an Offer in Compromise and this blog post is a compilation of ten tips that were offered:
1. The IRS pre-qualification calculator tool is excellent.
2. Download the latest Form 656 booklet that is updated almost every year. If you don’t use the latest forms, the offer will be rejected.
3. Worked out well with over $100,000 in debt forgiven.
4. More difficult to justify or get approved for lower dollar amounts.
5. It is not as easy as it used to be.
6. The whole process took under 3 months.
7. The process is very time-consuming and offers are not easily granted these days.
8. Make sure the client realizes that this is full disclosure.
9. Overestimate the time it will take and get a full retainer up front.
10. Be aware that clients who don’t pay their taxes often don’t pay their accountants either.