Offer in Compromise or OIC is an agreement between the Internal Revenue Service (IRS) and the Hawaiian taxpayer which may allow the taxpayer to settle their IRS tax debt for less than the total amount owed.  The Internal Revenue Service will only accept an OIC offer if the taxpayer meets certain conditions and the tax amount can not be paid in full or through an installment agreement.

The IRS does not accept all OIC offers, in fact, they currently deny up to 80%.  The IRS may be willing to accept an offer if they believe it will put the taxpayer in a position to meet all future tax debt obligations.  Failure to pay tax debt can result in wage garnishment, property repossession or bank account levies.

Hawaiian taxpayers who are considering an Offer in Compromise may want to contact a tax professional. Offer in Compromise can be expensive, time consuming and difficult to implement. It is only one option for Hawaiian taxpayers and may not be the best option.

Three types of Offer in Compromises:

1. Doubt as to Collectibility - The IRS doubts the Hawaiian taxpayer will be able to pay the full amount of their tax debt within the statutory time for tax collection.

2. Doubt as to Liability- There must be a legitimate doubt that the amount of IRS tax debt assessed against the Hawaiian taxpayer is correct. This can occur if the IRS examiner made a mistake in the interpretation of the law, the IRS examiner did not consider all of the taxpayer’s financial evidence, or the Hawaiian taxpayer can produce new evidence for the IRS.

3. Effective Tax Administration- The amount of tax debt assessed is correct and the IRS may be able to collect the tax debt, but there is some extenuating circumstance which makes the IRS think payment of the tax debt would cause an economic hardship which is unfair or inequitable.

Rejection of Offer in Compromise in Hawaii

The Internal Revenue Service has been given sole authority to collect taxes and to determine if they will accept Offer in Compromise offers. If the IRS denies a Hawaiian taxpayer’s OIC offer, the taxpayer may be able to appeal the decision, but they will not have any other legal recourse against the IRS.

If the IRS denies an OIC offer they will send written notification to the taxpayer identifying the reason for the denial. If the IRS determines the OIC offer is too low, they may be willing to provide a counter offer or negotiate with the taxpayer to find an offer which is agreeable to both the government and the Hawaiian taxpayer. If the IRS does not provide Offer in Compromise information to the taxpayer this information can be requested under the Freedom of Information Act.

Appealing an Offer in Compromise in Hawaii

Informal negotiations can often be done by contacting the IRS administrator who made the first OIC denial decision. If a taxpayer wants to make a more formal appeal they will need to send written notice to the IRS within thirty-days from the date of the OIC denial letter.

The formal written request for an OIC appeal must have the following information:

• Social Security number, telephone number, name and address
• A statement that the taxpayer is appealing the IRS ruling to the Appeal’s office.
• A copy of the letter sent to the taxpayer and the taxpayer’s proposed changes or items that the taxpayer wants changed and what the taxpayer does not agree with and why.
• Document the tax periods or years in question.
• Identify any tax laws or other authorities which may support the position.
• Identify any facts that may support the position with which the taxpayer disagrees.
• The taxpayer must sign the written protest under penalty of perjury.

Hawaiian taxpayers may represent themselves for all OIC appeals, but taxpayers may want to talk to a tax professional such as a tax attorney, certified public accountant or enrolled agent who can answer OIC questions.

Completing an Offer in Compromise

Hawaiian taxpayers must complete the following tasks:

• Hawaiian taxpayers must complete all OIC forms and submit them to the Internal Revenue Service.
• Hawaiian taxpayers must submit all requested financial data to the Internal Revenue Service. Financial information includes: taxpayer’s pay stubs, banking and car information.
• Hawaiian taxpayers must complete and send all federal tax returns to the Internal Revenue Service on or before the federal tax deadline for the next five years.
• All self-employed Hawaiian taxpayers must pay their estimated IRS taxes and submit their federal tax returns every quarter.
• All tax payments (except the amount outlined in the OIC agreement) must be paid by Hawaiian taxpayers for the next five years.
• Hawaiian taxpayers must pay the amount outlined in the Offer in Compromise agreement.
• The IRS will apply any federal tax refund to the Hawaiian taxpayer’s tax debt for the calendar year that the OIC is approved.

The IRS has the authority to terminate an Offer in Compromise if all the terms and conditions of the agreement are not met. If the Offer in Compromise is terminated, the IRS can charge the taxpayer the original amount of tax debt.

Offer in Compromise Forms

1. IRS Form 656- Offer in Compromise. Hawaiian taxpayers must submit IRS Form 656 to the Internal Revenue Service to provide detailed financial information about the taxpayer and their ability to pay their tax debt.
2. IRS Form 443 A- Collection Information Statement for Wage Earners and Self-Employed Individuals. Form 443-A provides additional information about the Hawaiian taxpayer and their ability to pay their federal tax debt.
3. IRS Form 443-B- Collection Information Statement for Businesses. Hawaiian taxpayers will need to submit IRS Form 433-B to the Internal Revenue Service if a taxpayer’s business tax debt is included in the Offer in Compromise.
4. IRS Form 656-A- Income Certification for Offer in Compromise Application Fee and Payment. Hawaiian taxpayers who request an Offer in Compromise fee waiver must submit Form 565-A.

The IRS offers a variety of tax settlement options for Idaho taxpayers who are unable to pay IRS tax debt and Offer in Compromise is one of the most popular options.  Offer in Compromise or OIC allows an Idaho taxpayer to make an offer to the IRS to settle past IRS debt. If the IRS considers the offer reasonable, they will accept the offer and the past tax debt will be considered settled. The IRS has the incentive to accept Offer in Compromise offers because it will eliminate the need for a protracted installment agreement, can help them avoid declaring debt as currently not collectible and help taxpayers pay their future tax liability.

The IRS does not accept all Offer in Compromises. The IRS will only accept an offer if they believe the debt is not collectible, the debt may cause a taxpayer unreasonable hardship or the amount of debt is potentially miscalculated.

The Internal Revenue Service is the government entity tasked with tax collection. The IRS is authorized to collect the tax dept by the federal government. Idaho taxpayers who fail to pay their tax debt can face aggressive debt collection tactics by the IRS including: wage garnishment, repossessions, and bank account levies. Offer in Compromise may be one method taxpayers have to avoid debt collection actions.

Offer in Compromise can be expensive and time consuming. The IRS will need large amounts of detailed financial data from the taxpayer to process the OIC. Penalties and interest will continue to accrue while the OIC offer is under consideration. A tax professional should be contacted by the Idaho taxpayer if they are considering an Offer in Compromise.

Qualifying for Offer in Compromise in Idaho

Approximately 25% of initial OIC offers are accepted. Not all Idaho taxpayers who want an OIC will qualify. To qualify for an OIC the Idaho taxpayer must meet one of the following conditions:

Doubt as to Liability - The IRS must believe there could be a miscalculation in the amount of debt the taxpayer owes. This can occur if the IRS made a mistake in assessing the tax liability or the taxpayer has more financial documentation that can clarify the amount of debt owed. The IRS does not use this condition very often.

Doubt as to Collectibility -  The IRS believes they will not be able to collect the tax debt either now or in the future. Under this condition the amount of tax debt owed is not in question, only the ability of the IRS to collect the debt.

Effective Tax Administration- If payment of the tax debt may cause “an inequitable or unfair hardship for the taxpayer” the Internal Revenue Service may be willing to accept an Offer in Compromise (most frequently used by the elderly and the disabled).

Rejection of Offer in Compromise in Idaho

Most Offer in Compromises are denied. The IRS has been granted the authority to deny or accept offers by the federal government and the Idaho taxpayer does not have legal recourse against the IRS. The IRS however, does frequently negotiate to give the taxpayer the ability to meet future tax obligations.

If the IRS denies the OIC, they must send written notification to the Idaho taxpayer outlining the reason for the rejection. If the IRS denied the Offer in Compromise because the offer was too low they should be able to provide a counter offer to the taxpayer which they would consider reasonable. If the IRS refuses to provide information the Idaho taxpayer has the legal authority to request it under the Freedom of Information Act.

Appealing an Offer in Compromise in Idaho

Negotiations for the Offer in Compromise can often start by contacting the IRS administrator who made the first OIC decision. If that does not work, a more formal appeal can be made by sending written notice to the IRS within 30 days from the date of the OIC denial.

Idaho taxpayers will need to resubmit their OIC forms only if the OIC deadline has expired or if their financial situation has dramatically changed.

Completing an Offer in Compromise

Idaho taxpayers will also need to complete the following tasks for an Offer in Compromise:

• All Offer in Compromise forms must be completed and sent to the IRS.
• Idaho taxpayers must submit their financial data to the IRS in a timely fashion. Financial information may include: Idaho taxpayer’s pay stubs, banking and car information.
• Idaho taxpayers must complete and file tax returns on or before the tax deadline for the next five years.
• All self-employed Idaho taxpayers must pay their tax estimates and file their tax returns every quarter.
• All tax payments (except the amount outlined in the OIC) must be paid by Idaho taxpayers for the next five years.
• Idaho taxpayers must pay the amount outlined in the Offer in Compromise.
• All refunds will be applied to the Idaho taxpayer’s tax debt before the Offer in Compromise is accepted.
• The Internal Revenue Service will apply any federal refund to the Idaho taxpayer’s tax debt for the calendar year that the Offer in Compromise is approved.

The IRS can reinstate the full tax amount and cancel the Offer in Compromise if taxpayers fail to follow all the OIC requirements.

Offer in Compromise Forms

1. IRS Form 656- Offer in Compromise. IRS Form 656 provides financial information to the Internal Revenue Service detailing the taxpayer’s ability to pay their tax debt.
2. IRS Form 443 A- Collection Information Statement for Wage Earners and Self-Employed Individuals. Form 443-A provides additional information to the Internal Revenue Service about the ability of the Idaho taxpayer to pay their debt.
3. IRS Form 443-B- Collection Information Statement for Businesses. Form 433-B provides information to the IRS about the Idaho taxpayer’s business. This form will only need to be submitted if the business tax debt is included in the OIC agreement.
4. IRS Form 656-A- Income Certification for Offer in Compromise Application Fee and Payment. This form must be submitted if the Idaho taxpayer is requesting an Offer in Compromise fee waiver.

The difficult job market provides a great time to consider furthering your education, yet also a terrible time to experience wage garnishment due to delinquent student loan payments.

If federal loans helped you reach your college education goals, the U.S. Department of Education has every right to expect you will meet your agreement to pay off your loan. While it may feel like a financial burden to repay your student loan, missing an extended period of loan payments will only increase your economic hardships.

By becoming delinquent on your federal loan payments, the government has the right to require your employer to send a portion of your salary as compensation. They could also take you to court or apply your federal tax refund toward the loan payments you owe.

While these tactics may seem harsh, imagine how you would feel if your employer neglected to pay you for the work you performed. Your hard work deserves compensation, and the government’s loan deserves repayment as well.

As a borrower, do you know your rights? What amount of advance notice should you receive before wage garnishment begins? What are your opportunities to object in a court hearing? How can you provide proof of a financial hardship which should prevent the wage garnishment?

An attorney familiar with both state and federal garnishment regulations can advise you in your options and help you renegotiate student loan payments that are advantageous to both parties. Garnishment is the last option that both you and the government want to take.

When you need objective counsel regarding repayment of your student loans, turn to an attorney who is educated in both state and federal wage regulations.

You may already be aware that avoiding an IRS settlement for your past due tax returns could lead to serious consequences if unaddressed, including garnishment of wages, a reduced credit rating or claim to your property. But did you know filing for back taxes could put money in your pocket?

If you were due a refund from a previous year’s taxes, you only have three years from the return due date to file, and subsequently claim the return. You could be throwing money away that the government owes you.

Whether you’re facing a tax debt or the IRS owes you, filing your back tax is the financially wise thing to do. Resolving past due tax returns with the IRS will give you the financial freedom to pay your monthly expenses and enable achievable financial goals for your future.

The IRS has a history of collecting on back taxes, and in its recent strategic plan for 2009 - 2013, the government branch reaffirmed its goal to quickly collect past-due taxes.

Your best option is guidance from an experienced tax attorney who has helped many people just like you get their prior year’s taxes filed. You need an attorney who will factor every situation you faced during the year for which you are filing, including whether or not you were searching for a job during that year.

Federal tax laws change yearly, and how much expertise your tax attorney has with these laws will ultimately translate to the best financial agreement you can make with the IRS.

Don’t hesitate to contact an experienced tax lawyer before the IRS contacts you.