Tag Archive for IRS Form 656
Here are 5 things I learned through experience regarding TFRP:
1. An IRS Revenue Officer makes a determination to “assess” or “not assess” the Trust Fund Recovery Penalty (TFRP). Bankruptcy does not stop the Assessment Statute even though it can stop the Collection effort. One of the major reasons why an IRS Revenue Officer won’t assess the TFRP is doubt as to collectability. If you are filing bankruptcy you are showing everybody including the IRS that collectablity is a problem and maybe the TFRP should be not be assessed. However Revenue Officers and their managers can and sometimes will pursue the penalty even with doubt as to collectability.
2. Appeal the determination under CAP, CDP. When an IRS Revenue Officer sends you the initial letter (L1153) it contains appeal rights. Ultimately if you go to IRS Appeals you take the case out of the hands of the IRS Revenue Officer and his or her Manager who are trained to advocate aggressively on behalf of the government’s position and into the hands of an IRS Settlement Office who approaches making a determination from a neutral perspective taking into consideration the hazards of litigation. Generally speaking I have found that most IRS Settlement Officers are impartial and very good at what they do. To date, I rarely have had a problem with a Settlement Officer’s knowledge and fairness. Be sure to know what is expected of you in terms of timely responding as your rights expire if you do not respond within the required parameters. Appealing under Collection Appeal (CAP) won’t stop enforced collection action and you loose the right to petition Tax Court if an adverse determination is made by the Settlement Officer. The CAP basically gives you the opportunity to tell your side of the story.
3. Ask for your trust fund recovery penalty file under the Freedom of Information Act (FOIA). With this you will be able to verify the evidence the IRS has accumulated in order to assess you as a willful and responsible party for failure to pay Trust Fund Taxes. Be sure to ask for the main file not just your tax file. The main file will have the bank information and alledged evidence against you.
4. To prove doubt as to liability file IRS Form 656-L Offer In Compromise – Doubt as to Liability. Show that you did not have control or shared control particularly of the checkbook or payroll. The risk is that unless you have a solid case you will receive a judgment that will be good for 20 years instead of an assessment good for 10 years. Additionally if claiming this doubt exists you do not have to submit financial statements or pay the application fee.
5. To prove doubt as to collectibility according to Internal Revenue Manual Section 184.108.40.206.1. Basically if you are disabled or about to retire on Social Security and have little in terms of liquid assets you have a case. If you have the opportunity to get back on your feet or have reasonably substantial assets, you usually don’t.
The Offer In Compromise (OIC) is prepared on IRS Form 656 and must include a detailed statement of financial position with substantiating documentation (bank statements etc.) prepared on one of the many IRS Form 433′s. To know which 433 to fill out I suggest reading the OIC booklet produced on IRS Form 656-B.
Not every taxpayer is a candidate for the Offer in Compromise program. So do not get lured by those late night commercials on television or a call center phoning you at all hours promising settlement for “pennies on the dollar.” The key to any Offer in Compromise resolution is strategic planning which can only be accomplished with detailed interviews and careful analysis of facts. Someone soliciting you with a pitch to settle with the IRS for “pennies on the dollar” without first knowing the specifics of your particular situation are ’hucksters selling snake oil’ as my English teacher used to say. Many taxpayers will never qualify based on doubt as to liability, doubt as to collect-ability or effective tax administration; the three main focuses of the OIC.
The Offer in Compromise program has become more challenging in recent years. Yet it is still a viable mechanism to seek relief particularly upon appeal. Meticulous planning combined with aggressive advocacy throughout the entire process will greatly increase the likelihood of a successful Offer in Compromise resolution.
The IRS has revised Form 656, Offer in Compromise. When submitting an offer use the March 2011 revision of Form 656.
Beginning July 5, the IRS will not accept outdated forms. If an offer is submitted on an outdated form, the IRS will return it.
Here’s the rub though, the IRS will only return Form 656, not the other forms contained in the offer. This is not a rejection of the offer, but rather a request that you submit the offer on the most current form.
The Internal Revenue Service issued a consumer alert advising taxpayers to beware of promoters’ claims that tax debts can be settled for “pennies on the dollar” through the Offer in Compromise Program.
Some promoters are inappropriately advising indebted taxpayers to file an Offer in Compromise (OIC) application with the IRS. This bad advice costs taxpayers money and time.
An Offer In Compromise is an agreement between a taxpayer and the IRS that resolves the taxpayer’s tax debt. The IRS has the authority to settle, or “compromise,” federal tax liabilities by accepting less than full payment under certain circumstances.
The OIC may be considered only after other payment options have been exhausted. If taxpayers are unable to pay their taxes in full, there are other payment options, such as monthly installment agreements, that must be explored before an OIC can be submitted.
IRS Publication 594 contains complete information on the collection process and payment options. 594, The IRS Collection Process, also provides helpful information on the options available to taxpayers.
Form 656 provides detailed instructions for submitting an offer and includes all of the necessary financial forms.
Some taxpayers may be exempt from the $150 OIC fee depending on income or whether the OIC is based solely on doubt as to tax liability.
Taxpayers who claim the poverty guideline exception must certify their eligibility using Form 656-A, Income Certification for Offer in Compromise Application Fee. The poverty guideline exception applies only to individuals.