Can you really abate (remove) IRS penalty? And other IRS Collection Stats

IRS Delinquent Collection Activities for 2011

This is a review of IRS collection actions for 2011.  This includes Offers in Compromise accepted, Filed Federal tax lien, notices of levy served on third parties, IRS seizures, and IRS penalty abated/removed.  If you have questions about this review, please reference:  bp105.

• If you know you need to take action, read my article “IF” you should hire IRS back tax help.  (You should not automatically.) Titled “Owe IRS back taxes? When, who, and how do I hire IRS back tax help?” before you do anything else.

As usual, If you like the tone of this writing, I would like to refer you to someone who meets irs back tax help criteria.  Please contact irs back tax help.  Before you email me, please click on and read “About irs back tax help.”

Interesting stats for 2011 and somewhat contradictory.  IRS acceptance of Offers in Compromise have jumped dramatically.  Is it due to IRS leniency, or because the main offenders of frivolous offer in compromise filers are out of business?  Ronni Lynn Deutch is out of business, J.K. Harris is out of business, and TaxMasters is in bankruptcy. 

Source:  IRS Back Tax Collections, Offer in Compromise, Federal Tax Liens, IRS Levy, IRS Seizures

IRS Offer in Compromise Accepted and Rejected

There has been a large jump in the percentage of accepted Offers in Compromise with no stated equally dramatic change in policy.  By comparison in 2010, only 24% of all offers were accepted. 

Offers in compromise (thousands) [5]:	2011	% Accepted
Number of offers received	59
Number of offers accepted	20
Amount of offers accepted	154,092	34%

IRS Tax Liens, Levy, & IRS Seizure Stats 

IRS Seizures are the real concern here.  IRS tax liens and IRS levies stayed relatively level. 

Enforcement activity:	2010	2011	% Change
Number of notices of Federal tax liens filed [6]	1,096,376	1,042,230	-5%
Number of notices of levy served on third parties	3,606,818	3,748,884	+4%
Number of seizures	605	776	+22%

 IRS Civil Penalty Abatement Statistics, Yes, it does really happen

Everyone always asks.  Can you really Abate IRS Penalty?  Yes.  The IRS admits it officially.  Roughly one-third of all penalty is abated.  It is important to fight IRS penalty.  46% of all civil penalty is abated for employment taxes.  If your Revenue Officer isn’t working with you on IRS penalty, they should be. 

Table 17.  Civil Penalties Assessed and Abated, by Type of Tax and Type of Penalty, Fiscal Year 2011 [1]
[Money amounts are in thousands of dollars]
Type of tax and type of penalty	Civil penalties assessed		Civil penalties abated [2]
	Number	Amount	Number	Amount
	(1)	(2)	(3)	(4)
Civil penalties, total	38,646,963	30,921,558	4,871,988	11,008,638	36%
Individual income tax:
Civil penalties, total [3]	28,749,882	15,580,904	3,067,370	5,241,771	34%
Accuracy [4]	500,472	1,112,671	51,461	252,004
Bad check	296,559	24,795	11,959	5,088
Delinquency	3,736,987	6,344,147	790,190	2,718,565
Estimated tax	7,366,907	1,569,824	263,442	450,376
Failure to pay	16,841,952	6,291,624	1,944,535	1,697,104
Fraud	2,391	186,116	167	107,263
Other [5]	4,614	51,727	5,616	11,371
Business income tax:
Civil penalties, total	1,080,027	1,496,418	250,325	611,457	41%
Accuracy [4, 6]	4,204	191,564	d	d
Bad check [6]	4,679	14,551	210	250
Delinquency [6]	594,265	651,050	170,685	295,428
Estimated tax [6]	198,697	203,923	8,465	99,486
Failure to pay [6]	259,245	304,238	64,793	149,844
Fraud [6]	192	9,383	d	d
S corporation/partnership information [7]	18,662	117,262	1,758	10,547
Other [6]	83	4,447	4,318	38,618
Employment taxes:
Civil penalties, total [8]	7,745,830	5,298,944	1,364,041	2,424,513	46%
Accuracy [4]	2,590	13,638	238	962
Bad check	192,135	25,154	3,610	2,632
Delinquency	1,669,240	1,340,470	291,429	655,989
Estimated tax	3,595	14,182	648	10,878
Failure to pay	4,162,673	1,100,324	673,166	383,485
Federal tax deposits	1,715,095	2,795,325	394,938	1,370,523
Fraud	256	3,404	12	44
Other	246	6,447	0	0

Not happy with IRS back tax results?  

If you feel like you are on the wrong side of all these statistics, it is probably worth seeking a second opinion.  If you would like irs back tax help to be your first or second opinion, I can be reached at irsbacktaxhelp@gmail.com.  I do not pressure people in an already stressful situation.

Regards,

irs back tax help

 

How do I get a Streamlined Offer in Compromise Program (IRS Form 656)

All IRS Back Tax Help comments are in blue.  This post is about the streamlined version of the IRS Offer in Compromise.  (IRS Form 656)  

If you know you need to take action, read my thread about whether or not you should hire someone (You shouldn’t automatically) titled “How do I hire IRS back tax help?”  Here’s the link:

https://irsbacktaxhelp.wordpress.com/2011/10/31/i-owe-the-irs-back-taxes-how-do-i-hire-irs-back-tax-help/

As usual,  If you like the tone of these posts, contact me for consultation.  I can be reached at irsbacktaxhelp@gmail.com.  Before you email me, please click on and read “About IRS BACK TAX HELP”.

Here is the link to irs.gov:

http://www.irs.gov/businesses/small/article/0,,id=239097,00.html

Here are the new guidelines for the Streamlined Offer in Compromise program:

• Fewer requests for additional financial information  This is a big improvement.  Many IRS Offers in Compromise are rejected not because they weren’t valid, but because the deadlines were missed or people gave up.  Once you have submitted your IRS Form 656, you need to commit to all their admin requirements.  
• If necessary, requests for additional information by phone, not by mail
• Greater flexibility when considering your ability to pay  Three ways:  20% down with lump sum, 20% down with payments over 2 years, or a five-year installment agreement for the amount of the offer with the monthly amount  submitted with the IRS Form 656.  

You can be:  

• Wage earners
• The unemployed
• Self-Employed taxpayers with no employees and gross receipts under $500,000

and,

• Your total household income is $100,000 or less, and
• The amount you owe is less than $50,000 when your offer is filed

References/Related Topics

• Offer in Compromise

This also assumes you have filed all of your over due taxes.  You must have those filings complete prior to submitting an Offer in Compromise.  If Substitutes for Returns have been filed for you by the IRS, that is acceptable to them.  Typically, in our industry the minimum fee to do an IRS Offer in Compromise is $2,500.  If it makes more sense for you spend your time and effort, pursue this on your own.  If you don’t have the time, hire someone (us) to do this work for you.  If you don’t address it, it will get worse.  

How do I get an IRS Offer in Compromise. (IRS Form 656)?

This blog is intended to generate discussion, so if you have questions or comments, don’t be shy!  All IRS Back Tax Help comments are in blue.  All text in black is from the original post.  

If you know you need to take action, read my thread about whether or not you should hire someone (You shouldn’t automatically) titled “How do I hire IRS back tax help?”  Here’s the link:

https://irsbacktaxhelp.wordpress.com/2011/10/31/i-owe-the-irs-back-taxes-how-do-i-hire-irs-back-tax-help/

As usual,  If you like the tone of these posts, contact me for consultation.  I can be reached at irsbacktaxhelp@gmail.com.  Before you email me, please click on and read “About IRS BACK TAX HELP”.

Here’s the original link and all the text:  http://www.irs.gov/taxtopics/tc204.html

An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service that settles the taxpayer’s tax liabilities for less than the full amount owed.  This includes actual income or payroll tax owed plus IRS penalty and interest.  

In most cases, the IRS will not accept an offer unless the amount offered by the taxpayer is equal to or greater than the reasonable collection potential (the RCP). The RCP is how the IRS measures the taxpayer’s ability to pay. The RCP includes the value that can be realized from the taxpayer’s assets, such as real property, automobiles, bank accounts, and other property. In addition to property, the RCP also includes anticipated future income, less certain amounts allowed for basic living expenses.  Simply put, it is net disposable income plus net equity.  If those numbers are less than what you owe, then you are in a position to make an offer.  If you are not, it’s a waste of time.  Do not do this if you intend to stay in business.  The IRS will not give you an unfair advantage over your competitors.   

The IRS may accept an OIC based on three grounds. First, acceptance is permitted if there is doubt as to liability. This ground is only met when genuine doubt exists that the IRS has correctly determined the amount owed. You don’t or shouldn’t owe the back tax.  Second, acceptance is permitted if there is doubt that the amount owed is collectible. This means that doubt exists in any case where the taxpayer’s assets and income are less than the full amount of the tax liability. This is the most common type of offer.  Circumstances have changed for you financially, and you’ll never be able to pay it back.  Third, acceptance is permitted based on effective tax administration. An offer may be accepted based on effective tax administration when there is no doubt that the full amount owed can be collected, but requiring payment in full would either create an economic hardship or would be unfair and inequitable because of exceptional circumstances.  A good example of this is you lived on a fixed income and your only asset is the home you live in.  

Taxpayers may choose to pay the offer amount in a lump sum or in installment payments. The tax law provides rules for “lump sum offers” and “periodic payment offers” submitted on or after July 16, 2006. A lump sum offer is defined as an offer payable in 5 or fewer installments. If a taxpayer submits a lump sum offer, the taxpayer must include with the Form 656 a nonrefundable payment equal to 20 percent of the offer amount. There is a common misconception that 20% must be submitted with all offers.  This payment is required in addition to the $150 application fee. The 20 percent amount is called “nonrefundable” because it cannot be returned to the taxpayer even if the offer is rejected or returned to the taxpayer without acceptance.

Ordinarily, the statutory time within which the IRS may engage in collection activities is suspended during the period that the OIC is under consideration and is further suspended if the OIC is rejected by the IRS and the taxpayer appeals the rejection to the IRS Office of Appeals within 30 days from the date of the notice of rejection.  This means they get to extend their time to collect from you.  The statutory clock stops ticking.  

If the IRS rejects an OIC, then the taxpayer will be notified by mail. The letter will explain the reason that the IRS rejected the offer and will provide detailed instructions on how the taxpayer may appeal the decision to the IRS Office of Appeals. The appeal must be made within 30 days from the date of the letter. Do not miss this deadline.  you’ll void the appeal process completely.  In some cases, an OIC is returned to the taxpayer, rather than rejected, because the taxpayer has not submitted necessary information, has filed for bankruptcy, has failed to include a required application fee or nonrefundable payment with the offer, or has failed to file tax returns or pay current tax liabilities while the offer is under consideration. A return is different from a rejection because there is no right to appeal the IRS’s decision to return the offer.  A new offer in compromise may be submitted if circumstances warrant.  

Additional information about the offer in compromise program can be found on Form 656 (PDF), Offer in Compromise, The IRS Collection Process, or by visiting the http://www.irs.gov Offers in Compromise web page.