Carl Kim wrote:

- quote -

OK a multiple part question.

The IRS is "holding" your $200. If your offer isn't
accepted and you choose to not amend it (read increase it)
the IRS is obligated to return your $200 when you withdraw
the offer. Of course, they can restart collection action 30
days after the termination of your offer in compromise.

The refund is gone. The balance is reduced by that amount.
They will take any overpayment for 2003 also and if the
offer isn't settled until 2004 any overpayment for that year
as well. However, you are not obligated to pay one cent
more that the total tax, penalties and interest due.

They may issue a collateral agreement as part of their
acceptance of the offer in compromise. However, this one is
a first I have heard of in a long time. Also, issuing a
collateral agreement is usually part of the final stages of
the process. So I am perplexed that you haven't received
communications from the IRS discussing acceptance pending
the execution of the agreement. And such a document would
completely exclude the doubt as to liability issue. If they
(the IRS) plan on collecting they have disregarded any
issues you raised as to liability. Anyway, again the IRS
cannot collect more that the total due.

Options:

1. execute the collateral agreement (assuming that this is
the last piece the IRS needs to complete their acceptance of
your offer) and close out the offer. You will have to file
a report every year until the agreement expires or the
remaining obligation is paid. If your annual income is less
than the agreed upon amount you won't owe anything for that
year. There may be other terms in the agreement. Read it
carefully.

2. Amend the existing offer to argue only doubt as to
liability first. Yes you can do that - refile the 656 with
"amended" on top with the revenue officer that has your
case. If you don't win the liability issue you can file
doubt as to collectibilty where you can raise the economic
issues.

3. withdraw the existing offer and request an installment
agreement for a nominal monthly amount until you get on your
economic feet. You will probably have to fill out another
collection information statement to get a low enough payment
but the process is generally quicker than the OIC process.
Then you can pay off the balance later on. However, under
this option penalties (if any remain) plus interest will
continue to accrue.

Oh, and don't ignore any of the due dates in the letter(s)
you receive. The IRS is so backlogged with offers that they
will reject the offer immediately if you fail to comply.

Scott W Stevenson, CPA in CA
stevensonscott[at]yahoo.com

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Hello! I really need some help here.

OK, so based on my own research, I have submitted an offer
in compromise to the IRS. I did it based on both doubt as
to liability, and doubt as to collectability. First, the
tax liability was based on an error from my mother's mutual
fund company. They said I was the owner, when it should
have been under my mother's name. Second, I just graduated
from school (graduate level), and am currently unemployed.
My net worth is zero due to student loans ($40,000).

In submitting an offer of compromise, I sent all the
required documents, including bank statements, etc., and a
check for $200. The amount in dispute is about $2,500.
This turned out to be a mistake. They cashed my check
without accepting the offer (under consideration); and this
was after taking last years tax refund of $700. Ok, fine.
If they want to keep that money, and then settle the
account, I am willing to accept that.

However, they also sent me a collateral future income
agreement letter to sign, which states that I will pay 25%
of my salary over $28,000. Are they crazy? I live in
California, which is an expensive place to live, and a
guesstimate future salary of $40,000, I will pay far more
than the original disputed amount!

In total that would be $700 + $200 + $3,000 = $3,900.

And if by the grace of God, I get a better salary (after 6
months of unemployment), it would be even more.

Is there any thing that I can do? As a last resort, I would
rather find some way to pay the original dispute then sign
this crazy contract! Folks, believe me when I say that,
right now, I am hurting ($2,000 attached to my name as of
today) and no job.

Please, any suggestions would be appreciated. Tks!

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