FOR LIVE PROGRAM ONLY Offers in Compromise Strategies: Using OICs to Challenge Assessments and Request Reconsideration of Tax Bills TUESDAY , JUNE 27, 2017, 1:00-2:50 pm Eastern IMPORTANT INFORMATION FOR THE LIVE PROGRAM This program is approved for 2 CPE credit hours . To earn credit you must: • Participate in the program on your own computer connection (no sharing) – if you need to register additional people, please call customer service at 1-800-926-7926 x10 (or 404-881-1141 x10). Strafford accepts American Express, Visa, MasterCard, Discover . • Listen on-line via your computer speakers. • Respond to five prompts during the program plus a single verification code . You will have to write down only the final verification code on the attestation form, which will be emailed to registered attendees. • To earn full credit, you must remain connected for the entire program. WHO TO CONTACT DURING THE LIVE EVENT For Additional Registrations : -Call Strafford Customer Service 1-800-926-7926 x10 (or 404-881-1141 x10) For Assistance During the Live Program : -On the web, use the chat box at the bottom left of the screen If you get disconnected during the program, you can simply log in using your original instructions and PIN.
Tips for Optimal Quality FOR LIVE PROGRAM ONLY Sound Quality When listening via your computer speakers, please note that the quality of your sound will vary depending on the speed and quality of your internet connection. If the sound quality is not satisfactory, please e-mail sound@straffordpub.com immediately so we can address the problem.
Offers in Compromise Strategies June 27, 2017 Benjamin J. Peeler, J.D., CPA, LL.M., Partner Howard S. Levy Eide Bailly, Utah Voorhees & Levy, Cincinnati bpeeler@eidebailly.com howard@voorheeslevy.com A.J. Gross, CPA, EA, President and Founder ALG Tax Solutions, Howell, Mich. ajgross@algtaxsolutions.com
Notice ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY THE SPEAKERS’ FIRMS TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN. You (and your employees, representatives, or agents) may disclose to any and all persons, without limitation, the tax treatment or tax structure, or both, of any transaction described in the associated materials we provide to you, including, but not limited to, any tax opinions, memoranda, or other tax analyses contained in those materials. The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.
Tax Controversy Offers in Compromise June 2017 A.J. Gross, CPA, EA Benjamin J. Peeler, J.D., C.P.A., LL.M Howard S. Levy, J.D. LL.M. www.ALGTaxSolutions.com www.eidebailly.com www.eidebailly.com http://howardlevyirslawyer.com/
Navigating the IRS Offer-In-Compromise (OIC) procedures Mastering the IRS Offer-In-Compromise program 6 www.ALGTaxSolutions.com www.eidebailly.com www.eidebailly.com http://howardlevyirslawyer.com/
Learning objectives • Identify the three types of Offers-In-Compromise (OIC) • Examine the Doubt as to Liability (DATL) OIC criteria • Examine the DATL OIC Standards of review • Develop OIC strategies • Understand filing and documentation requirements 7 www.ALGTaxSolutions.com www.eidebailly.com www.eidebailly.com http://howardlevyirslawyer.com/
Doubt as to Collectability OIC (DATC) • Components of Collectability IRM 5.8.4.3.1 • • Future Income • Income less allowable expenses times12, 24, or # of months left on CSEDs • CSED can be a major factor • Equity in Assets Not just physical assets • IRM section 5.8.5.15 allows exclusion of income-producing assets • IRM section 5.8.5.18 IRS may include dissipated assets • • Amount Collectable from Third Parties • Ex. Transferee assessment, nominee lien, or suit to set aside a fraudulent conveyance • Assets/Income Beyond the Reach of the Government Equity in assets located outside the country • 8 www.ALGTaxSolutions.com www.eidebailly.com www.eidebailly.com http://howardlevyirslawyer.com/
Effective Tax Administration (ETA) OIC • Doesn’t Qualify for DATC OIC or DATL OIC DATC with Special Circumstances • • Economic Hardship IRM Section 5.8.11.2.1 Unable to pay reasonable basic living expenses • For individuals only • ETA allows for more deviation from national standard • Age, employment status, dependents, and extraordinary circumstances • • Public Policy/ Equitable Considerations IRM Section 5.8.11.2.2 Show that full payment would undermine confidence that tax laws being • administered fairly and in an equitable manner • Compromise Would Not Undermine Compliance with Tax Laws IRM Section 5.8.11.2.3 9 www.ALGTaxSolutions.com www.eidebailly.com www.eidebailly.com http://howardlevyirslawyer.com/
Effective Tax Administration (ETA) OIC • Examples of ETA OIC based on hardship There are sufficient assets to pay the tax liability. The taxpayer provides • full time care and assistance to a dependent child, who has a serious long- term illness. Taxpayer is retired with a retirement account that can pay the tax liability. • Taxpayer’s monthly income less allowable expense is not sufficient to enter • into an installment agreement. The taxpayer owns a modest house that is specially equipped to accommodate the taxpayer’s disability. There is sufficient equity to pay the tax liability. • Examples of ETA OIC based on Public Policy/Equitable Considerations Taxpayer has money in a qualified IRA account. The taxpayer would like to • move the money to a new IRA account. The taxpayer is not familiar with the rollover rules and wants it avoid penalties. The taxpayer submits an email inquiry to the IRS at its web page and is told the IRS must be transferred within 90 days. • Taxpayer uses a payroll service provider. Payroll service payroll provider missed tax deposits. The IRS may accept an ETA OIC of a diligent taxpayer while a uninvolved taxpayer will not. 10 www.ALGTaxSolutions.com www.eidebailly.com www.eidebailly.com http://howardlevyirslawyer.com/
Doubt as to Liability OIC (DATL) Dispute the existence or amount of a taxpayer’s correct liability. IRM Section - 4.18.2.2 • Conducted in a similar manner to an audit reconsideration IRS maintains separate file from any previous examination • • A statutory right, IRS required to examine and respond Automatically accepted if no response within 24 months • Denial letter sufficient to satisfy the statute • • Determined by evaluating the supporting evidence and circumstances • Cannot be used for adjudicated liabilities • Cannot submit DATL OIC combined w/ DATC or ETA OICs • Cannot not be rejected solely because IRS cannot locate the taxpayer's return or return information Avoid financial disclosure unlike DATC or ETA • No filing fee • 11 www.ALGTaxSolutions.com www.eidebailly.com www.eidebailly.com http://howardlevyirslawyer.com/
DATL OIC Like an audit reconsideration, IRS evaluates hazards of litigation and extent of doubt created in OIC. It is necessary to submit comprehensive documentation and information that explains the taxpayers’ position, including the following: Supporting documents, evidence, affidavits, etc. to supports claims • • A comprehensive summary of legal position w/ an analysis of the risk to the IRS Additional records unavailable at the time of an audit • • Corrected penalty and interest calculations Cancelled checks proving payments that were not credited properly • Court case, revenue ruling, and other legal authority that supports position • 13 www.ALGTaxSolutions.com www.eidebailly.com www.eidebailly.com http://howardlevyirslawyer.com/
DATL OIC Alternative to Tax Court • Missed deadline for petitioning Tax Court = judicial remedies require full payment of tax and filing a claim for refund before District Court filing • DATL OIC = can be submitted without paying the tax and filing claim for refund (unpaid tax)(end around statue of limitations problems) • Can also be appealed when an unfavorable result received, and if submitted via CDP Hearing, it can be appealed to the U.S. Tax Court (unless prior opportunity) and Chief Counsel can sometimes help 14 www.ALGTaxSolutions.com www.eidebailly.com www.eidebailly.com http://howardlevyirslawyer.com/
DATL OIC • DATL OIC Income Tax assessment example scenario • A taxpayer was represented during audit, but the representative fell ill and taxpayer missed Tax Court petition filing date. Tax was assessed and the IRS began collection action. Taxpayer had difficult time recovering documents from now deceased representative. DATL OIC is filed with RO for $1 submitting all available documents. While the OIC is pending assignment taxpayer sought FOIA to gather previously submitted documents. IRS reduces some of the adjustments, but taxpayer has to Appeal some of the remaining adjustments and new issues raised by examiner (assigned to the same examiner). 15 www.ALGTaxSolutions.com www.eidebailly.com www.eidebailly.com http://howardlevyirslawyer.com/
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