How much to offer IRS tax debt settlement.?
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I owe the IRS $18000+ for the 2008 tax year. I want to make an offer to the IRS, but don’t know how low I can go. What is a reasonable offer to make, 10%, 20% 30%…, or lower? If anyone has been in a similar situation, please let me know what you offered. Also will my IRA affect the settlement?
I failed to mention that I’m retired, will be 69 this year, and receive a pension and Social security. I’m also in debt with credit cards to a tune of $90000. I could pay off the $18000 and my credit card debt, but that will leave me with nothing to live on!! I was told that the government could not touch my IRA. Is that right or wrong?
If this is a personal tax and you are seeking to settle your debt download on irs.gov the Form 656, Offer in Compromise. Answer the questions line by line. This form includes the form for Collection Information Statements.433-A . Complete this as accurately a possible. You may want to go to the Kelly Blue Book website for a value for car. Have your bank statements ready to record accurately the amount you owe, the ending dates. on the 433-A. If you own a house, here are other websites that odder appraised value, you neighborhood Realtor refuses to give you any value. Get copies of your 1099-Rs or any stub to determine your monthly pension.
The IRS will only allow if the credit card debt will be paid off in 90 days or you are with a credit counselor ( This depends on the OIC specialist you will be assigned to)
Th 433-A expenses . you will have to use the standard expenses established by the RS. Tip: On the 656 follow the instructions.
The 433-A will establishe your monthly payments. The 656 will eatablish your Reasonable Offer Value. This you have to pay 0% up front plus the $150. You can ent te rest in 90 das or 24 months, its up to you.
Send the OIC package certified to the Center appropriately fo your state. On your cover letter make sure you request the OIC coordinator near your area. At least ask the Coordinator’s address.
In about 30 days., after you received the return receipt from the certified mail, go to your nearest IRS Office and ask from the Wage & Investment Rep for your 2008 trancript and ask the Rep oit there is an Offer indicator you should have an OIC indicator, If not Contact the OIC coordinator. If there is an OIC indicator, the IRS should not levy the IRA account, If they do, they should use as part of the offer. To Levy the IRA account, the Revenue Officer will need to have his group manager sign the levy also. I know I had to get the area director’s signature.
If your IRA gets levied, Read the instructions of te form 5329 when you file your 1040. there is a code you use that says that you should not have all of your IRA be subject to 10% penalty. Also if your IRA gets levied use he lump sum distrbution form (its on line 39 or 40 on the back of your 1040).
Before you get levied, you should receive a L-1058, certified. It will contan your rights and right to appeal. Contact the person on the upper right hand portion of the letter. This would be the best scenario becsue the Revenue Officer can help you complete the 433-A.
He should send the 656 a ltter of recommendatiion, give you the coordinator’s address because they are responsible to place your OIC on track, thenyou will be assigned a OIC specialist ; This may take about 8 months.
Consult a Bankruptcy attorney and you decide.
Good Luck; Don’t forget. you have rights
Are you broke?
Do you have no assets?
Do you have no income?
If the answer is “no”, “no” and “no”, then the IRS will garnish wages, seize assets, seize bank accounts, etc. until they are paid.
If the answer is “yes” to these questions, then offer what you’ve got.
“Creditors” and not touch your IRA if you file bankruptcy but the IRS certainly can.
LOL! Unless you are disabled and will be unable to make a living for the rest of your life, the IRS will be looking for the full $18,000.
You have to offer an amount that represents what IRS thinks it can eventually collect from you. If you can make payments of about $350 per month, they can collect it all.
The amount you have to pay is, to use the IRS jargon, is “an amount that represents the reasonable collection potential of the account.” This is a lump sum equal to what you could get from the equity in all your assets if they were sold at a quick sale, generally 80% plus 48 times what you could pay monthly on an installment agreement.
For a simple example, if you had a car worth $10,000 and owed $5,000 on it and nothing else and IRS said you could make payments to IRS of $100 per month you would have to offer 80% of $10,000, that’s $8,000 minus the $5,000 owed = $3,000 PLUS 48 times $100 = $4,800 for a total of $7,800 on whatever you actually owed. For your IRA, if you cashed it in you would probably pay about 40% of the value in federal and state taxes so add 60% of its value to whatever else you have.
I’d consider bankruptcy to get rid of that credit card debt, then when your’re out of that setup a payment plan with the IRS. If you can’t afford the $300 they ask for, they will take a financial statement to determine how much, if any, you can pay. If your income is derived from your IRA, they won’t ask you to liquidate or borrow from that. I
As for them levying your pension, they can levy a part of any monthly payment you receive. It is possible for the to levy the principle, but only if the account is assigned to a Revenue Officer and even then, it’s not very common. An $18k debt would normally not be assigned to a Revenue Officer.
Acceptance isn’t based on a % of what you owe. They look at what income and assets YOU have.
A great company by the name of Limon Whitaker & Morgan Tax Advisors can help answer your questions. They specialize in tax debt. You can call 888.858.8933 ext 858 or go to http://www.taxadvisorpros.com .