The post Learning Center appeared first on Cross Law Group.

When you owe back taxes to the IRS, the last thing you need is another bill. So, it’s natural to wonder if you can solve your tax debt on your own without having to hire an attorney and spending thousands of dollars you probably don’t have.

The truth is that most tax problems can be resolved without having to hire an attorney, assuming you’re willing and motivated to learn how to do it yourself. This article will give you some more detailed guidelines for deciding when you should hire a tax attorney.

Do you need to hire a tax attorney?

You might not need to hire a tax attorney if all the following are true:

• You owe less than $50,000 to the IRS
• You are not self-employed or do not own a small business
• You do not have unreported income or other indicators of tax fraud
• You have not been contacted by an IRS Revenue Officer
• You’re not intimidated by the idea of talking to the IRS
• You’re willing to spend time figuring out the correct forms to use and how to fill them out

The above criteria mean that your case is fairly simple and straight forward. It’s likely that you can handle resolving such a case on your own without spending money on expensive help. However, it’s going to take some work. Just like any DIY project, you’re going to save money with sweat equity.

We offer an online course that will teach you how to solve your tax debt problems by yourself.

You probably need to hire a tax attorney if any of the following are true:

• You owe more than $100,000 to the IRS
• An IRS Revenue Officer is assigned to your case,
• You are self-employed or own a small business
• You have a complicated or unusual financial situation
• You’re intimidated by the IRS and don’t feel comfortable talking to them on your own
• You’re willing to hire someone to save yourself the time and stress of trying to figure it out yourself

If any of the above characteristics describe your situation, you stand a good chance of getting a better outcome by hiring a tax attorney than you would on your own. This is because your case is more complicated and is going to get more scrutiny from the IRS. It would be smart to have a tax attorney to prepare your financial documents and handle the negotiations. This could mean the difference between acceptance and rejection of your offer in compromise, or paying more for your offer than would otherwise have been required.

You must hire a tax attorney if any of the following are true:

• You have unreported income or other indications of tax fraud
• You have undisclosed foreign bank accounts
• You owe more than $1,000,000 to the IRS
• You have valuable assets that you want to protect and keep away from the IRS

If any of the above apply to your situation, then it would be very wise to at least consult with a tax attorney to evaluate your case and then hire one if appropriate. You are in the “danger zone” of IRS tax collections and could be looking at forced asset sales, business closures, criminal tax prosecution, and other negative consequences that can last for years to come. At the very least, you should find and consult with a qualified tax professional for a review your case.

Beware Tax Debt Relief Companies

Chances are you’ve already received a bunch of direct mail advertisements from various companies, law firms, and CPAs offering to help solve your tax debt. Beware the promises these companies are making. There are a lot of dishonest tax resolution providers who will prey on your desperation and take advantage of you while you’re at your lowest point. They are notorious for charging outrageous fees and doing nothing to actually resolve your tax debt.

To avoid getting ripped off by one of these companies, you should do as much research as possible. Learn about the options for resolving your tax debt, and try to get a grasp on what is realistic in your case and what isn’t. Also, find out as much as you can from independent sources about anyone you are considering hiring — and be especially wary of anyone from out of state. Here’s more information about how to avoid tax resolution scams.

The Bottom Line

The bottom line is this: 90% of tax problems can be resolved without hiring a tax attorney. But, if you’re unsure, then you need schedule a consultation with an experienced tax attorney to make sure that it’s safe to handle your tax debt on your own.

If you’d like to learn more about our online course that will teach you how to solve your tax problem by yourself.

**This page is for informational purposes only and does not constitute legal advice. If you have a tax problem, we strongly urge you to consult with a tax attorney. Self-help should only be considered after meeting with a tax attorney to evaluate your case.**

The post When Should I Hire A Tax Attorney? appeared first on Cross Law Group.

So you’ve finally found a tax attorney you’re considering hiring, and you’ve scheduled an initial consultation. In all likelihood, you have never met with a tax attorney in this setting and have no idea what to expect. That’s perfectly okay.

Start by observing the office. Is it clean and tidy? Well-decorated? Are you greeted upon walking in? All of these things might seem minor, but attention to detail is important in tax matters and these might be an indication that such attention is lacking.

When you actually sit down to meet with the tax attorney, consider asking these seven questions before you decide to hire them:

#1: How much of your practice is devoted to solving tax problems?

This one is a sure way to separate the dedicated tax controversy practices from the general ones. The dedicated tax controversy practice will devote a substantial part, if not all, of their practice to handling tax controversy and tax debt relief cases. This is who you want handling your case.

#2: Who will do the work on my case? A licensed attorney, CPA, or an EA?

This is an important question to ask, especially if you are dealing with larger firms or tax debt relief companies. In most of these, the person you meet with for the initial consultation will not be the person who ultimately handles your case on a day to day basis. That task will be delegated to someone else in the firm, usually of lower credential and experience than the person you’re meeting with today. This gets back to the bait and switch tactics discussed in Beware of Tax Debt Relief Scams. So, make sure if your case is delegated to someone else in the firm, that he or she is well credentialed and experienced. You don’t want to pay for a tax attorney but have an enrolled agent work on your case.

On the other hand, this is less likely to happen at smaller firms or with solo tax attorneys. With these, the person you meet with is very likely to be the person who is going to handle your case from here on out. But be wary — even solo practitioners might have paralegals handling some of their caseload, so you want to ask regardless.

#3 Do you offer a 100% satisfaction guarantee?

First, notice that you are asking for a satisfaction guarantee, not a guarantee of the outcome. A true tax attorney will never guarantee a certain result from your case. However, they may offer a 100% satisfaction guarantee of their services. This would allow you to get a refund of your fees if they become inattentive to your case, fail to communicate with you on a regular basis, or otherwise do not live up to your expectations. We’ll warn you now: not many tax professionals offer such a guarantee, but it’s worth finding one that does.

#4 How do you bill for your services?

This is an awkward subject for most people. However, you are potentially looking at several thousand dollars worth of fees, so it’s prudent to make sure you understand how those fees will be incurred. Here are some more direct questions to ask:

• Do you bill on a flat fee basis? If so, what is included in the flat fee and what is not?
• Do you bill on an hourly basis? If so, what is your hourly rate?
• Do you require an initial retainer up front? If so, is any part of it considered non-refundable? (this is a big one, head for the door immediately if the retainer is nonrefundable)
• Do you charge for incidental costs like copying and postage?
• Do you charge for administrative support costs? If so, how are those costs calculated?

#5 How will you keep me informed about my case?

This is an extremely important question. The bad tax attorneys are notorious for poor communication with clients, so you want to make the professional you’re meeting with has a clear policy for communicating with clients. He or she should say that they will give you monthly updates and always return client phone calls or emails within 24 hours.

#6 Why do you work in this area?

Technically speaking, there is no right answer to this question, but it will give you a great deal of insight into the type tax attorney you are hiring and their philosophies about tax controversy work. Most will be caught off guard by this question and will hem and haw for an answer. The good ones will be eager to tell you that they tax controversy gives them an opportunity to help someone who is going through one of the most difficult times of their life. Unlike tax preparation or tax planning, tax controversy (especially tax debt relief) involves solving the gut wrenching pain of real people. We’ve had grown men sob like babies in our office due to the stress tax debt was causing on their marriage and home life. Helping these people get rid of their tax debt is a noble pursuit, and anyone who overlooks that connection and does it for the money will not care enough about your case.

Bottom Line

Avoiding the bad tax debt relief services is difficult, but asking the above questions can help give you an idea if the person you’re talking to runs an honest business.

The post Six Questions to Ask Before Hiring A Tax Attorney appeared first on Cross Law Group.

The IRS offer-in-compromise program allows taxpayers to settle their tax debt for less than they owe.  Below is free information on the process of submitting an IRS offer in compromise.  For more information on the IRS offer in compromise program, please contact us to speak with a tax attorney about your case.

How to Apply for an Offer in Compromise

In order to settle your tax debt with an offer in compromise, you must submit a completed application packet to the IRS.  This packet consists of the following:

• Form 656.  This is the Application itself.
• Form 433-A (OIC).  This is a personal financial statement for the IRS to review.
• A check for $186.  This is the application fee.  The fee is waived if you meet the low income certification requirements.
• A check for 20% of the offer amount.  This is non-refundable, but is waived if you meet the low income certification requirements.

The application packet is available from the IRS’s website. Here is the link.  You can also pick the packet up from any IRS Office.  Link: Information on the Reno IRS Office.

Step 1: Preparing your OIC Application

Prior to filling out the application packet for an offer-in-compromise, you should gather the following documents and information:

• Pay stubs from your employer
• Statements from all other source of income, such as pensions, social security, interest/dividends, child support, etc
• Statements for each bank account, investment account, and retirement account
• Statements for your mortgage, car loans, and other secured debt
• Statements from unsecured debts, like you credit card
• Utility bills, such as power, gas, water, telephone, trash, and internet
• Documentation to support any other income sources, living expenses, or assets not listed above.

The IRS typically likes to receive statements from the most recent three (3) month period.  Usually these statements can be accessed online and downloaded in PDF format, but you might have to request mailed copies in some cases so plan ahead just in case.

Step 2: Filling Out Your OIC Application

Once you’ve gathered all the above information, it’s time to start filling out the application (Form 656) and the financial statement (Form 433-A OIC).  Filling out these forms needs to be done with extreme care.  The IRS looks very carefully at the information on these forms, and it’s vital to your offer that everything is portrayed in the best light possible.  Mistakes can lead to a rejection of your offer or worse.  Because the forms are signed under penalty of perjury, intentional misstatements or false information can result in criminal prosecution.  Read: 8 Dumb Things People Do When Submitting an OIC Application.

Step 3: Waiting to Hear Back

After your application packet is completed and sent in, you’ll have to patiently wait to hear back.  Due to budget cuts and understaffing, it frequently takes the IRS between 6 and 9 months to start reviewing an OIC application.  Because of the time delay, the IRS usually asks for a whole new set of the documents included with your application.  This means new bank and credit card statements, pay stubs, etc.  So, you’ll have to be very careful after submitting your OIC application to avoid large or frivolous purchases that the IRS could interpret as meaning that you have more disposable income than you application makes it seem.   Read: Do’s and Don’ts After Submitting an Offer in Compromise.

Step 4: Answering Questions and Negotiating Your Offer

Once you’ve heard back from the IRS and provided updated bank statements and other records, the agent reviewing your application will likely have questions about certain items.  You’ll have to be very careful when answering these questions to make sure you don’t give away information that can be used against you to reject your offer.  The IRS is very stingy with accepting offers and will look for any reason not to accept.

It’s also likely that you’ll have to do some negotiating during this period.  The agent may not think your offer amount is high enough, in which case you can either refute the basis for this belief with additional information about your financial position or increase the amount of your offer.  You can expect the IRS to wonder how you are able to offer additional funds if you financial statement indicates you lack any additional means, so have an explanation prepared.  This phase can carry for an additional 1-3 months.

Step 5: The Final Determination

If all goes well, your offer will get accepted.  You’ll receive written notification of acceptance from the IRS.  The letter of acceptance will request you to send in the remaining portion of your offer amount.  After the payment is processed, you’ll receive a letter confirming the discharge of your tax debt (and the conditions going forward, such as remaining tax compliant for the next five years).  At this point, it’s been anywhere from 12 to 16 months since your offer was originally submitted.

On the other hand, you might have received a rejection of your offer.  The time for negotiating is generally over at this point and you’ll have to consider whether to appeal the rejection or accept it and begin making payment arrangements.

Step 6: Appealing the Final Determination

You have the right to appeal a rejection of your Offer in Compromise within 30 days of the rejection (this date is provided on the rejection notice).  The appeal is done through what is called a “Collections Due Process Hearing,” where you application is reviewed by an appeals officer who will reconsider the entire offer.  Appeals are not usually successful, but should be pursued if the original agent was unreasonable or refused to accept additional information that supported your case.

For more information on the IRS Offer in Compromise program, please see:

• Eligibility Requirements
• The Offer Amount
• How the IRS Decides to Accept or Reject an Offer in Compromise
• Alternatives to the Offer in Compromise

If you have any other questions about the Offer in Compromise Process, please contact our Reno, NV office.

The post Offer in Compromise Process appeared first on Cross Law Group.

The IRS Offer in Compromise program is a terrific opportunity for taxpayers to get a fresh start by wiping away their tax debt.  However, it is not without it’s pitfalls.  Here are 7 Stupid Mistakes I see people make with their offer in compromise that costs them a chance at a clean slate (in no particular order).  For more information on the IRS Offer in Compromise program or for help with your offer, contact us to speak with an IRS Offer in Compromise Attorney.

Offer in Compromise Mistake #1: Hiding assets or money

In How the IRS Evaluates an Offer in Compromise, we discussed how the IRS uses your financial information to decide whether or not to accept your offer in compromise.  This includes looking at all of your assets and income to decide if you can afford to pay more than the amount being offered. This naturally leads to the temptation to hide money and income from the IRS in order to make your offer look more attractive.

You must avoid this temptation.

The IRS will use a variety of tools to verify the financial information you provide on Form 433-A, including checking DMV records and reviewing financial statements.  If they discover assets or money that you did not disclose your offer will be immediately rejected.

But that’s not all.  Form 433-A is signed under penalty of perjury, which means you could be criminally prosecuted for perjury, which is a felony.  If convicted, you would lose the right to vote, own a firearm, and would forever have a criminal record.

Offer in Compromise Mistake #2: Frivolous spending

As part of the offer in compromise process, the IRS will review your bank statements to verify your income and personal living expenditures.  If they see frivolous spending, they will assume that you have untapped disposable income that can be used for paying your taxes, which most often leads to a rejection of your offer.  So, don’t make this common offer in compromise mistake.

“Frivolous spending” can include eating out too often, shopping for unnecessary items like consumer electronics, and going on vacation.  So, it’s vital that you closely monitor your spending and avoid any purchases that can be construed as unnecessary for at least three month prior to your offer in compromise submission, as well as throughout the entire time it is under consideration.

Offer in Compromise Mistake #3: Not paying the offer amount

The IRS does not require payment of the offer amount until after it is accepted.  Depending on the conditions of your offer in compromise, you might be required to pay the offer in full or in payments.  Either way, do not fail to pay the offer amount.  This will cause the IRS to revoke acceptance of your offer in compromise, meaning that you have to re-submit it and go through the entire process all over again.

Offer in Compromise Mistake #4: Not filing their tax returns afterwards

As a condition of acceptance, the IRS requires that you remain in compliance with your tax filing obligations for the next five years.  If you fail to file a tax return during this period, your offer’s acceptance will be revoked and the tax debt you once owed will be reinstated.  So, it is vital that you file all of your tax returns, even if you cannot afford to pay the tax.

Offer in Compromise Mistake #5: Falling behind again on their taxes

Similar to the requirement that you file all of your tax returns, the IRS also requires that you not fall behind again on paying your taxes for the next five years.  So, make sure that the correct amount of taxes are withheld from your paycheck or that you make the necessary quarterly estimated tax deposits on your self employment income.  If you end up with a balance due at the end of the year that you cannot afford to pay, be sure to contact the IRS and establish a formal repayment plan.  Do not let the balance linger or you might find yourself back to square one when your offer in compromise is reversed for failure to remain in compliance.

Offer in Compromise Mistake #6: Applying when they are not eligible

The eligibility requirements for the IRS Offer in Compromise program are strictly enforced.  It is a waste of your time, money, and efforts to submit an offer if you do not meet these requirements.  Of all the offer in compromise mistakes, this is the easiest to avoid.

Offer in Compromise Mistake #7: Inaccurate information in the application

The application process for the Offer in Compromise program is long and tedious.  When filling out Form 656 and Form 433-A, you must be very careful to make sure all of your information is correct.   Incorrect information can lead to processing delays and possible rejection of your offer.
One of the most common mistakes people make is misstating the amount of their tax debt or the year of their tax debt.  Do not simply guess or go off of memory.  You can call the IRS and verify this information by calling the taxpayer hotline.

Contact Us | Nevada Tax Debt Relief Law Firm

If you owe back taxes to the IRS and are considering an offer in compromise, we can help you avoid making mistakes on your offer in compromise.  Contact us to set up an initial assessment to discuss your tax debt and your options for getting out of it.

The post Avoid These Offer In Compromise Mistakes appeared first on Cross Law Group.

The offer in compromise program is not for everyone. The eligibility requirements are strict, and the evaluation criteria make acceptance of an offer unlikely for most taxpayers. If you are not a good candidate for an offer in compromise or your offer has already been rejected, you situation is not hopeless. You still have options for dealing with your tax debt.

Installment Agreement

The first and most likely alternative is to set up an installment agreement with the IRS. This is an arrangement that allows you to make monthly payments over a fixed period of time, during which the IRS will not take any further collections actions against you — including bank account levies and wage garnishments. For tax debts under $100,000, the IRS is generally fairly willing to accept the smallest monthly payment that will result in the liability being paid off within six years. For amounts greater than $100,000, the IRS often expects taxpayers to pay as much as they can afford — in addition to selling assets like second cars and collectibles. This often requires considerable negotiation to reach a payment that is both acceptable to the IRS and affordable by the taxpayer.

Non-Collectible Status

For certain individuals, it may be possible to suspend all IRS collections activity without making any monthly payments. This is called “non-collectible” status. It is available to taxpayers who are experiencing a financial hardship buy do not otherwise qualify for an offer in compromise. The non-collectible status will last for a period of 6 to 12 months before the taxpayer’s financial situation is re-evaluated.

Bottom Line

An experienced tax attorney can help you navigate the offer in compromise program and decide on an alternative that is best for you in the event you don’t qualify for an offer acceptance. Contact us if you’d like to speak with a tax attorney in Reno, Nevada about your case.

For more information on the IRS Offer in Compromise program, please see:

• Overview of the Offer in Compromise Process
• Eligibility Requirements
• The Offer Amount
• How the IRS Decides to Accept or Reject an Offer in Compromise

The post Offer in Compromise Alternatives appeared first on Cross Law Group.

If you owe back taxes to the IRS, you might be wondering about how the IRS will try to collect from you. This article will review the IRS collections process and discuss what you can expect to happen step by step.  If you have additional questions or would like to find out how we can help protect your rights when it comes to IRS collections, contact us to talk to an IRS tax attorney in Reno, NV.

First Contact: Notice of Balance Due

The first step the IRS has to make when trying to collect back taxes is to notify the taxpayer of the amount that is due.  This is done by sending a balance due notice to the taxpayer that looks like this.  The IRS will send this notice every month for three or four months in a row.  During this time, they are not allowed to take the taxpayer’s property or garnish the taxpayer’s wages.  However, we always advise taxpayers during this time to start making voluntary payments to the IRS as a showing of good faith.

Last Chance Before Collections Begin: Notice of Intent to Levy

After sending three months of “Balance Due” notices, the IRS will send the taxpayer a “Notice of Intent to Levy.”  This is the final warning that the taxpayer has unpaid taxes and needs to make payment arrangements with the IRS.  Otherwise, the IRS will start taking collections action in 30 days from the date of the notice.

This notice is also important because it gives the taxpayer the opportunity to request a “Collections Due Process Hearing.”  This is a review of the taxpayers case done by an Appeals Officer who will evaluate whether the proposed collections activity is appropriate and proper.  Taxpayers should consider requesting this hearing if they don’t think they owe the amount claimed by the IRS or have tried making payment arrangements but the IRS refused to accept them.

Case Assignment

After the 30 day period has expired, the IRS can start collecting the amount owed.  Collections are handled by different departments within the IRS depending on the amount of taxes owed and the complexity of the case.  Tax debts of less than $100,000 are usually assigned to the IRS “Automated Collections System.”  Unusually difficult cases or cases with a tax debts of more than $100,000 are usually assigned to a Revenue Officer working out of the taxpayer’s local IRS office.

It usually takes 4-6 weeks for the case to get assigned to either of these departments once the 30 day period on the Notice of Intent to Levy has expired.  Additionally, it can take up to an additional 12 weeks before the taxpayer actually hears anything from the department handling his or her case.  During this time, it’s smart for the taxpayer to start making voluntary payments to the IRS.  This way the IRS will view the taxpayer as less of a collection problem when the case finally makes its way to the appropriate department and is reviewed by the ACS or the assigned Revenue Officer.

IRS Levies & Wage Garnishments

Regardless of whether a taxpayer’s account is handed by ACS or a Revenue Officer, the IRS will usually attempt to collect the tax debt with it’s most powerful collections tool: the “levy.”  The levy allows the IRS to seize the taxpayer’s money and/or property in order to pay back taxes.  The most common form of levy is the “bank account levy,” used by the IRS to take all of the available funds out of the taxpayer’s checking account, savings account, or investment account.  The IRS can levy these accounts without any warning, leaving the taxpayer with a suddenly empty bank account despite having other bills to pay.  This is why it is important to deal with tax problems early on and prevent the IRS from using it’s levy power.

Another powerful collections tool available to the IRS is the wage garnishment.  The IRS can garnish up to 20% of a taxpayer’s wages, including social security.  In order to garnish the taxpayer’s wages, the IRS must send notice to the taxpayer’s employer.  This notice informs the employer that the taxpayer owes back taxes to the IRS and provides instructions for withholding a portion of the taxpayer’s wages.  If the employer refuses to cooperate with the garnishment order, the IRS can hold the employer responsible for the taxpayer’s unpaid tax debt.  So, it is very uncommon for an employer to refuse to comply with an IRS wage garnishment order.

Bottom Line

The IRS collections process is long and slow.  Taxpayers usually have at least three months from the time the tax debt arises until the IRS will begin collections activity.  Whether the account is handled by ACS or a Revenue Officer depends on the amount of the tax debt.  Once assigned, the IRS will begin using collections efforts like the bank account levy or the wage garnishment to collect back taxes.

For more information about IRS Collections, please see:

• IRS Automated Collections (ACS) 
• Collections Due Process Hearings
• Tax Attorney Fees

The post IRS Collections Process appeared first on Cross Law Group.

The IRS has very specific guidelines for accepting or rejecting an offer in compromise.  Understanding these guidelines and what the IRS considers to be in it’s best interests can help make sure your offer has the best chance of getting accepted and eliminating your tax debt once and for all.

Three Reasons for Accepting of an Offer in Compromise

Generally, the IRS will accept an offer in compromise for three reasons.  The first and most common reason is “doubt as to collectability.”  This is where the taxpayer demonstrates that he or she will not be able to pay the tax owed now or in the future — and the IRS is better off settling the tax debt than trying to keep collecting from them.  The evaluation is based on a full review of the taxpayer’s financial situation (including income, expenses, assets, and other debts).

The second reason is “doubt as to liability.”  Offers are accepted for his reason when the taxpayer can prove that he or she should not actually owe the tax, either because the tax law was misapplied or the IRS made a mistake in assessing the tax against the taxpayer.  The IRS does not look at the financial position of the taxpayer in these types of offers.

Lastly, there is “effective tax administration.”  Offers are rarely accepted for effective tax administration because it applies only when the taxpayer can point to some exceptional circumstances that justify forgiveness of the their tax debt, regardless of their financial position or liability for the tax owed.

The criteria for “doubt as to collectability” are discussed in more detail below.

Doubt as to Collectability

Doubt as to Collectability is by far the most common reason that the IRS accepts an offer in compromise, and the most likely reason that your offer will be accepted.  When doubt as to collectability is involved, the evaluation comes down to the taxpayer’s “Reasonable Collection Potential” (RCP).  The idea behind RCP is to figure out the taxpayer’s ability to pay and compare that to the amount of the taxpayer’s offer.  If the IRS believes the taxpayer can pay more than the offer, it will be rejected.

When calculating “Reasonable Collection Potential,” the IRS starts with a review of the taxpayer’s financial position.  This includes all sources of income, living expenses, assets, and other debts.  Next, the IRS calculates the taxpayer’s monthly disposable income.  This is done by taking all sources of income and subtracting allowable living expenses.  The IRS then assumes that the taxpayer can make payments of this amount over the next 12-24 months.  So, the offer must be more than 12-24 months worth of the taxpayer’s disposable income in order to get accepted.  Read more about How Much to Offer.

Additionally, the IRS will consider whether the taxpayer can sell any of his or her assets.  The IRS will generally assume that a taxpayer can sell things like second cars, recreational vehicles, and valuable collectibles.  They also will take into account investments portfolios and retirement accounts, even if the taxpayer has not reached retirement age.  The IRS cannot generally force taxpayers to sell their primary residence, but they can include the value of the taxpayer’s home when deciding whether or not to accept an offer in compromise (with the understanding that the IRS will get to collect any profit on the home when and if the taxpayer sells it).

At the end of the day, the IRS will accept an offer in compromise for doubt as to collectibility only if they are convinced that the taxpayer does not have the ability to pay more now or in the next 12-24 months.  This requires a careful showing on the part of the taxpayer of his or her financial condition, as well as negotiations with the IRS once the offer is under consideration.

For more information on the IRS Offer in Compromise program, please see:

• Overview of the Offer in Compromise Process
• Eligibility Requirements
• The Offer Amount
• Alternatives to the Offer in Compromise

The post How the IRS Evaluates an Offer in Compromise appeared first on Cross Law Group.

One of the hardest parts of submitting an offer in compromise is figuring out how much to offer.  You obviously want to pay as little as possible to the IRS in order to settle your tax debt, but you also don’t want to low-ball and ruin your chances for acceptance.  So, how do you find the magic number?
Unfortunately, it’s more of an art than science.  This is because every case is different,  and being able to recognize when a low offer amount will work (and when it won’t) takes a lot of experience.
Even though I can’t give you a magic formula for hitting the nail on the head with your offer amount, I can give you some ways to at least get a ball park figure on how much you should offer.  Hopefully it helps.

The Bare Minimum Offer Amount

If you plan to submit an offer in compromise on the basis that you cannot afford to pay the tax owed (as opposed to doubt as to liability or effective tax administration), then your offer amount must be greater than your “reasonable collection potential” (RCP).  This is a number used by the IRS to represent your ability to pay the taxes owed.  The RCP takes into account your monthly income, monthly living expenses, assets, and other liabilities.  Your offer amount has to be greater than your RCP, otherwise it’s guaranteed to get rejected by the IRS.

Calculating your RCP can get complicated, but here’s a basic way to get an idea of your RCP.  Start with total monthly income from all sources and subtract all of your necessary living expenses.  This means rent, utilities, groceries, gas, car payment, etc.  It does not include your budget for going out to dinner every week or the cost of your season tickets.  The resulting amount is your monthly disposable income.  Take that number and multiply by 12 (which is equal to one year worth of disposable income). This is the bare minimum you can offer to the IRS.  They will almost never accept less than this amount.  The rationale is that you can afford to pay this amount each month for the next year, so why should they let you off the hook for something less now?

If you have any assets than can be sold, like an extra car, investments, or valuable collectibles, you’ll have to add that amount to your offer as well.  Determining the value of these assets can be tricky — and is often a point of negotiation with the IRS.  Also, even though you’re allowed to keep your home in most cases, you might have to include the equity in your home if it’s anything significant.

So, that’s the bare minimum you can offer.  It’s no guarantee that your offer will be accepted, but at least you know you’re in the right ballpark instead of something that’s laughably low.

Paying the Offer Amount in Installments

Many people I meet with worry that they can’t come up with the offer amount in one lump sum payment.  That’s okay.  The IRS allows monthly payments of the offer amount, but a lump sum is always preferred.

The most you can break up the offer amount is 24 months, although I don’t recommend doing this.  Anything more than 5 months and the IRS will use 2 years of your disposable income instead of just 1 year to calculate your RCP, which would essentially double the amount you’d have to offer.  So, I strongly recommend paying the offer amount in 5 or fewer monthly installments if you can, even if you have to borrow the money for your offer.  It’s always better to owe money to a friend, relative, or even a bank than to the IRS.

Bottom Line

Figuring out the optimal amount to offer the IRS is not easy.  It takes a lot of experience to know where the sweet spot lies for any given case.  In general though, you can start off with an estimate of 1 year worth of your disposable income and add to that any valuable assets you can sell for additional cash.  The IRS is primarily concerned with making sure it gets at least the same amount of your Reasonable Collection Potential, so make sure the offer amount is higher than your RCP in any case.

For more information on the IRS Offer in Compromise program, please see:

• Overview of the Offer in Compromise Process
• Eligibility Requirements
• How the IRS Decides to Accept or Reject an Offer in Compromise
• Alternatives to the Offer in Compromise

The post How To Determine The Offer Amount for IRS Offer in Compromise appeared first on Cross Law Group.

In this article, we’re going to give you an idea of how much it normally costs to hire a tax attorney, starting with the types of fee structures that most attorneys use. Hopefully, you’ll be able to use this information to get a rough idea of what your legal fees might be, and can compare them to other options you have available.

Types of Tax Attorney Fees:

Tax attorneys generally charge either an hourly rate or a flat fee for their services.

• Hourly Rate: The majority of tax attorneys charge by the hour. Every attorney will charge a different hourly rate, but most rates are between $200 to $400 per hour. Highly experienced attorneys or attorneys working in big firms in large cities can charge more than $1,000 per hour.

• Flat Fees: The other options is a“flat fee,” which is a one-time charge regardless of how many hours the attorney spends on your case.  Flat fees are generally only used on simple or routine matters.

Which one is better? There are benefits and drawbacks to both of these fee types. An hourly rate is attractive because you don’t run the risk of overpaying if the attorney is able to resolve your case quickly or with very little work. On the other hand, you bear the risk of higher legal fees if the opposite occurs and your case takes more time to resolve than originally expected. This is one reason why most consumers prefer a flat fee arrangement, which allows them to lock in the cost of hiring an attorney.

At the end of the day, you might not have much choice. Generally, tax attorneys charge by the hour unless the case is very routine or simple. Feel free to request a flat fee, but the attorney might not be willing to take the risk of having to perform extra work if something unexpected happens in your case.

Typical Cost of Hiring a Tax Attorney

Here’s a very simple breakdown of the average prices that tax attorneys charge for common tax services (whether hourly or as a flat fee):

• Installment Agreement: $750 – $1,500
• Offer in Compromise: $3,500 – $6,500
• Penalty Abatement: $1,000 – $2,500
• IRS Audit (simple): $2,000 – $3,500
• IRS Audit (complex): $5,000 +
• IRS Appeals: $5,000 – $7,500
• US Tax Court Litigation: $10,000 +

Keep in mind that the prices quoted above are only averages. The actual fees you might have to pay will depend on where you live, how experienced of an attorney you hire, and the complexity of your case.

How Much Do We Charge?

To give you a better idea of how much it will cost to hire a tax attorney, we’ve provide a summary of the fees that our office charges for various tax resolution cases. Keep in mind that we help clients all over the country, even though we are located in Reno, NV. Our fees tend to be significantly lower than attorneys located in regions with higher cost of living (like southern California).  Your case might be less or more depending on the unique characteristics of your case (click here to request a price quote):

• Fees for Tax Debt Relief
• Fees for Tax Audit Defense

Save Money by Doing It Yourself

If you can’t afford a tax attorney, you have the option of handling your tax matter by yourself. Although that might sound intimidating, there are plenty of resources available that will help you learn how to solve your tax problem yourself.

If you are thinking about doing it yourself, check out our Self Help Courses. These are online web courses prepared by our tax attorney that cover everything from installment agreements to US Tax Court litigation. Each course gives you a step-by-step guide on how to resolve your specific tax problem. If you’re interested in our self-help course on how to get rid of your tax debt.

Check out these articles for more helpful information:

• The truth about tax debt relief companies
• How to find a reputable tax attorney
• Enrolled Agent vs. CPA vs. Tax Attorney

The post How Much Does a Tax Attorney Cost? appeared first on Cross Law Group.