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Offer in CompromiseTax Debt

Lawsuit Claims the IRS Not Offering Promised Fresh Start

In May of 2012, the IRS expanded its Fresh Start Initiative with the goal of making it easier for delinquent taxpayers to reach an Offer in Compromise (OIC) and repay tax debt.

IRS Fresh Start

The IRS indicated it was making the terms of the OIC program more flexible by using a different calculation to determine future income and allowing partial or full payment of delinquent state and local taxes.. Revisions to the OIC program also permitted taxpayers to repay certain student loans and expanded the allowable living expense category and amount so more taxpayers would potentially be able to qualify for the program.

Those who need Boca Raton back taxes help can consider taking advantage of options to negotiate an Offer in Compromise with the IRS to settle their total outstanding tax liability for less than the full amount owed. Taking this step should be a fresh start, as the IRS calls it — giving taxpayers the opportunity to move on without further IRS collection efforts. Unfortunately, one lawsuit by a high-profile tax evader shows the IRS doesn’t always fulfill its promises.

Snipes’ Claims  

A lawsuit filed by actor Wesley Snipes claims the IRS is making arbitrary determinations of the amount of back taxes he owes and the agency is abusing its discretion.  Snipes avoided paying $7 million in taxes between 1999 and 2001 before being convicted of three misdemeanor counts of failure to file tax returns. Upon his release from serving three years in prison, Snipes began to try to resolve his tax debts.

Although his criminal case was over, the IRS was still pursuing civil actions to obtain more money from him and the IRS was demanding millions in tax assessments upon his release from prison. In response, he requested a Due Process Hearing to seek an offer-in-compromise or installment agreement so he could repay what he owed and resolve his legal issues with the IRS. The Offer-in-Compromise Program is designed to allow tax debtors to do just that: resolve their tax issues and avoid ongoing r collection efforts by negotiating a deal to pay.

To determine if a taxpayer has submitted an acceptable offer-in-compromise, the IRS assesses how much money can potentially be collected (using the new, looser guidelines established in 2012).  Based on a determination of future income and allowable living expenses, along with any equity in your assets, the IRS determines your reasonable collection potential (RCP). In most cases, your offer must be equal to your RCP in order for it to be accepted by the IRS.

Snipes felt he should be able to negotiate an offer for the amount due, and in early 2014, he made the IRS an offer to settle back debts from 2001, 2003, 2004, 2005 and 2006 for just over $6.4 million. The IRS seemed close to accepting, but then upped the amount to more than $18 million and filed more notices for his delinquent tax debt without continuing to negotiate a compromise.

Snipes believes the IRS should keep its promises in offering a fresh start as part of its Fresh Start Initiative, and accordingly, he has initiated a lawsuit against the IRS.  The outcome of this case remains to be seen.

If such a high-profile and wealthy individual faces this level of challenge in negotiating an offer in compromise, average taxpayers can also expect difficult dealings with the IRS. You do not have to face the Internal Revenue Service on your own. Get help with your back tax issues from East Coast Tax Consulting Group today.

Contact Us 

You deserve the best in IRS tax representation, tax preparation, and tax planning services. At East Coast Tax Consulting Group, you’ll work with a licensed CPA who will handle your case from beginning to end. We invite you to contact our team to schedule a free, confidential consultation.