Offer In Compromise: IRS Criteria

Should the IRS determine that a taxpayer is unable to pay the liability in a lump sum or through an installment agreement and has exhausted the search for other payment arrangements the last option would be to file an Offer in Compromise (OIC).
An OIC allows taxpayers to settle their tax liabilities for less than the full amount. Taxpayers should use the checklist in the Form 656, Offer in Compromise, package to determine if they are eligible for an offer in compromise. The objective of the OIC program is to accept a compromise when it is in the best interests of both the taxpayer and the government and promotes voluntary compliance with all future payment and filing requirements. See IRS Policy Statement P-5-100 for the complete OIC policy statement.
Major Changes to the OIC Program
The Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA), created major changes to the IRS OIC program as it relates to lump sum offers, periodic payment offers, and a determination as to when an offer is accepted. These changes affect all offers received by the IRS on or after July 16, 2006.
TIPRA, section 509, amends Internal Revenue Code section 7122 by adding a new subsection (c) “Rules for Submission of Offers in Compromise" which establishes the following:
A taxpayer filing a lump sum offer must pay 20 percent of the offer amount with the application (IRC 7122(c)(1)(A)). A lump sum offer means any offer of payments made in five or fewer installments.
A taxpayer filing a periodic payment offer must pay the first proposed installment payment with the application and pay additional installments while the IRS is evaluating the offer. A periodic payment offer means any offer of payments made in six or more installments.


Payments are Non-refundable:



The IRS considers the 20 percent payment for a lump sum offer, and the installment payment on a periodic payment offer, as "payments on tax" and are not refundable regardless of whether the offer is declared not processable or is later returned, withdrawn, rejected or terminated by the IRS.
Taxpayers May Designate Payments:


Taxpayers may designate the application of the required TIPRA payments. The designation must be made in writing when the offer is submitted and must clearly specify how the partial payments are to be applied to a particular tax period(s) and to specific liabilities (e.g. income taxes, employment taxes, trust fund portions of employment, excise tax, etc.) Taxpayers may not designate how the $150 application fee is applied. The application fee reduces the assessed tax or other amounts due.
TIPRA and Application Fee Payment Exceptions
A taxpayer who qualifies for a low-income exception waiver or is filing a doubt as to liability offer is not required to pay the application fee, the 20 percent payment on a lump sum offer, or the initial payments required on a short term or deferred periodic payment offer. To determine low-income eligibility, refer to the section titled Application Fee Required for OIC.

Tax Exempt Organization Form

The Internal Revenue Service released the revised instructions that tax-exempt organizations will need to fill out the redesigned Form 990, which must be filed starting with tax year 2008 (filed in 2009).
Most charities and other tax-exempt organizations must file an annual informational return with the IRS to maintain their tax-exempt status. Information reported on Form 990 is made available to the public.
“These instructions are the final step in a tremendous effort to bring the Form 990 up to date and to reflect the diversity and complexity of the tax-exempt community,” said IRS Commissioner Doug Shulman. "The revised form will give the IRS and the public a much better view of how exempt organizations operate. The improved transparency provided by these changes will also benefit the tax-exempt community.”
Form 990 had previously not seen major revisions since 1979. The revised instructions and redesigned Form 990 can be found on this Web site.
The revised instructions feature several new tools that make it easier to answer questions line-by-line and that facilitate uniform reporting. Input from the tax-exempt community played a major role in how the new instructions were designed.

The needed 990 form can be found at the following link http://www.irs.gov/pub/irs-pdf/f990.pdf

Taxpayers Assistance

In 2005, Congress requested the IRS develop a five-year plan for taxpayer service. The IRS implemented the Taxpayer Assistance Blueprint (TAB) project as a two-phase effort designed to answer questions about the service needs and preferences of individual taxpayers. TAB is a collaborative effort of the IRS, the National Taxpayer Advocate and the IRS Oversight Board.
TAB Phase 1 included significant stakeholder and employee engagement, as well as preliminary research relative to taxpayer needs, preferences and behaviors. The TAB Phase 1 report, delivered to Congress in April 2006, included a baseline of current taxpayer services and outlined key strategic improvement themes.
TAB Phase 2 built on the themes identified in Phase1 with extensive additional research, including taxpayer surveys. The significant stakeholder engagement begun in TAB Phase 1 continued throughout Phase 2. The TAB Phase 2 report was completed after careful analysis of a large body of research and a rigorous quality review process to ensure that conclusions and recommendations were supported by the data. Because of the extensive research completed for the Blueprint, IRS now knows more than ever before about taxpayer needs, preferences and behaviors.
Delivered to Congress in April 2007, the TAB 2 report outlines the Strategic Plan for taxpayer service that will help us enhance the services we deliver to taxpayers and partners. The Strategic Plan includes:
A comprehensive portfolio of service improvement recommendations.
A sound implementation strategy to ensure that taxpayer service remains a key consideration in IRS budget and strategic planning processes.
A recommended set of future research studies to further enhance understanding of taxpayer and partner service needs, preferences and behaviors.
A governance structure to facilitate and monitor implementation of TAB recommendations.

Deduction Mortgage Payments if jointly owned following a divorce/separation

Did you know that you could deduct mortgage payments and other household costs paid on a home jointly owned following divorce or separation?

If the terms of the divorce/separation require you to pay the entire amount of each mortgage payment (both principal & interest) and or other household expenses, such as real estate taxes, property insurance, and utilities under what is defined as "alimony" , then you can deduct half of these as alimony. You former spouse will have to include these alimony payments as income.
Secondly, you will only be able to deduct mortgage interest and real estate taxes if you itemize deductions.

Deducting a Mortgage That Is Rent-Free By a Former Spouse

Did you know that you could deduct a mortgage payment and other household costs paid on a home you own and that is lived in rent-free by your former spouse following divorce or separation?

You will not be able to deduct the the mortgage or real estate tax payments you make as alimony, nor you are allowed to claim the fair rental value of the home as alimony, nor are you allowed to claim the fair rental value of the home as alimony, you can deduct qualifying mortgage interest and real estate taxes, if you itemize deductions.
While the mortgage and real estate tax payments do not qualify as deductible alimony, you can however make up for it utilities on behalf of a former spouse who is using the home under the specified terms of the separation/divorce. However, your former spouse will have to include these utilities payments in income.

Alimony Payments

Did you know that you can deduct mortgage payments and other household costs paid on a home owned by your former spouse post a divorce or separation?

You can deduct payments you make in cash to your spouse or former spouse under a divorce or separation agreement if those payments meet the definition of alimony, aligned with the tax law. The deduction is allowed as an adjustment in figuring your adjusted gross income; therefore it reduces your taxable income, whether you itemize or not.
Alimony includes payments made both directly to your spouse or former spouse and even to a third party on behalf of your current or former spouse. However, your current or former spouse will have to include these alimony payments in income.

If you have any questions pertaining to taxes and in accordance to divorce and separation, contact a professional tax consultant who can serve you on even the smallest nuances that the average taxpayer may not know.

Sell Of Property

Worthless Securities:
Did you know that you can claim a capitol loss on a security, such as stocks, stock rights and bonds that become worthless during the year? The security is treated as if it had been sold on the last day of the year for purposes of determining whether your loss is short-term or long-term. You are permitted to claim the loss only in the year the security actually becomes worthless. However if you hold securities that are on the verge of becoming worthless, consider selling them and now and take your capitol loss in the new year you sell, rather than have to discover proof that securities have in fact become worthless. According to the IRS your the securities need to be sold to an unrelated buyer, otherwise your loss may be disallowed.

Non Business Bad Debt:

If you are owed money and you can no longer collect on that debt, you may be able to deduct the amount still owed to you as bad debt. If the debt came about from operating your trade or business, the bad debt deduction is an ordinary loss. An non business bad debt on the other hand can only be deducted as a short-term capitol loss. You are entitled to claim a bad debt deduction only in the year the debt becomes totally worthless. As a result, you should claim the bad debt deduction at the earliest time you believe the debt to be worthless.