IRS PROMISES TO ACCEPT MORE OFFERS IN COMPROMISE

You may be able to settle your tax liabilities for pennies on the dollar through the IRS offer in compromise program. Never before has there been a better time to pursue an offer in compromise.

The IRS' top executive, Commissioner Rossitti, recently announced new policies that will "break down the barriers for the offer in compromise program to make it easier for taxpayers to qualify." There has never been a better time than now to seek settlement through an offer in compromise. This sudden change of position was not the idea of the IRS - it was the idea of Congress that ordered the IRS to significantly make offers in compromise easier to get.

Here are some of the more significant changes to expect from the IRS concerning offers in compromise, some are already in place:

- a more reasonable approach in allowing taxpayer's actual expenses rather than unrealistic "nationalized standard expenses" that were traditionally used to deny offers in compromise;

- a new way to get an offer in compromise accepted called hardship and equity - this means given all the facts and circumstances it would not be fair to reject the offer in compromise [currently, there are only two ways to get an offer in compromise: (1) you cannot afford to pay the tax, interest, and penalties; and (2) you don't owe the tax, interest, and penalties];

- fewer financial condition disclosures for taxpayers seeking smaller offers in compromise; and

- allowing taxpayers up to two years to pay an accepted offer in compromise.

NEVER ASSUME YOU MUST PAY I.R.S. PENALTIES

By the time the I.R.S. gets around to filing a tax lien there is almost always a huge amount due for taxes, for interest, and for penalties. The most common types of penalties are (1) failure to pay the tax due as shown on the income tax return [Late Pay Penalty], and (2) filing a tax return late that has

a tax due but unpaid [Late File Penalty]. Often, the I.R.S. assesses both penalties together. The late pay penalty is 1/2% (.005) per month of the tax due up to a maximum of 25% of the tax due. This penalty increases to 1% per month after the I.R.S. notifies the taxpayer it intends to levy assets. The late file penalty is 5% (.05) per month up to 25% of the tax due.

The law grants relief from either penalty where the failure to pay or where the failure to file is due to a reasonable cause not the fault of the taxpayer. Sadly, almost all

taxpayers ultimately pay these penalties even when legally they do not have to. These penalties can usually be challenged before or after they are paid.

The I.R.S. often will excuse these penalties when the taxpayer (a) gets incorrect professional advice, (b) experiences postal delays, (c) was ill, (d) lacked access to records, and (e) has other situations where there is reasonable cause not the taxpayer's fault.