For a lot of us, the word compromise doesn’t bring up the most positive of feelings. We understand that we have to give up a portion of something we want in order to appease someone else. Well, it’s an unfortunate reality that when dealing with the IRS, you’re almost never going to get everything you want while depriving them of the thing that they want most – your money.
Unfortunately, clamping your wallet shut isn’t a suitable defense against the IRS.
There are far too many tax resolutions firms and “experts” out there claiming to have a way to get you off scot-free. I’m here to set the record straight. There’s no such thing as a magic fix for tax problems. I always tell my clients that they’re going to have to pay something, but through hard work and experience, we’re going to do everything we can to trim that number down significantly.
The first thing I looked at when the IRS Fresh Start Program was put into place was the offer in compromise guidelines. The new guidelines, while not being entirely clear as to what’s changed, do allow IRS Agents more flexibility when deciding whether an offer in compromise is reasonable. We’ve now come to the keyword of my firm’s approach to offer in compromise – reasonable.
You have the right to remain reasonable
I’m just going to have to assume that you wouldn’t go to the store, pick up a gallon of milk, bring it to the register, and tell them you would give them $.10 for it. The price you’re offering has absolutely no basis in reality. From feeding the cows to having the milk transported, there are reasons that milk costs what it does. That being said, if the same grocer was to dramatically increase the price to $100 per gallon, you’d be justified in being outraged. At that price point, many people would be unable to buy milk, a staple to the diet of many Americans. The point of the matter is that a reasonable compromise has to be met in order to cover the needs of those producing the milk and those doing the purchasing.
In similar fashion, offers made to the IRS need to take two factors into mind: the IRS needs some sort of payment to cover your debts and you have to be able to afford that amount. Looking at your assets and your liabilities allows you to find out how much you can afford to pay to get the IRS out of your life.
Fair vs. Able
There’s a very distinct divide in the thinking done by IRS Agents and by taxpayers and their representation. The IRS operates under the assumption that the amount you pay should be fair. Regardless of the circumstances, you unfortunately found yourself behind on your tax payments. IRS Agents often operate under the mentality (even though it does not exist anywhere in the Internal Revenue Manual) that the amount you pay back should be indicative of your debt to society. Because you didn’t pay your taxes, you are asking other taxpayers to shoulder the burden of what you owe.
That’s just not accurate. Whether in Fresh Start or regular offer in compromise, it all boils down to what you are able to pay. You’ll be given sheets that help you come to the number that you can feasibly pay to wipe your debt away. Always remember that the IRS is not going to do anything that’s not in their own interest. Just because they try and guilt someone into feeling that they’re being unfair doesn’t mean that holds any basis in reality.
Same old story
An offer in compromise will only work if the IRS does not believe that you are able to either pay off the entire sum or to whittle it down via installment agreement. They’re never going to do anything that doesn’t have the most benefit for them. An offer in compromise – requiring both sides to give up something – is only going to work if the IRS doesn’t think they can squeeze you for more. This is true regardless of whether or not an individual is taking part in the Fresh Start Program or not.
While offering some more leeway with the guidelines, the IRS Fresh Start Program, as it relates to offer in compromise, isn’t that far removed from the previous guidelines. The program is put there to be better attuned to a variety of real-world circumstances. When everything is said and done, offer in compromise boils down to offering an amount that reflects your current situation and ability. You have the right to remain reasonable.