Duluth, GA/Gwinnett County CPA Provides Sample Offer in Compromise Letter for Offer in Compromise Appeal
Duluth, GA/Gwinnett County CPA Provides Sample Offer in Compromise Letter for Offer in Compromise Appeal
Below please find a sample Offer in Compromise Letter that one Might Use for an Appeal. All letters to the IRS should be drafted with an means to an end, build empathy, create trust and cite tax law. Helping processing agents understand a tax case can do much to have an Offer in Compromise accepted saving thousands of dollars, avoid unnecessary fines, penalties, levies and garnishments. Working with the IRS and within the confines of “the system” with a CPA who is well versed about such matters will do much to aid and albeit the Offer Process. Ensuring that you follow the IRS Appeals Process to the letter of the law is a critical component of a satisfactory IRS experience.
I am writing you in a good faith attempt to come to terms over the above taxpayers’ present predicament and to process an Offer in Compromise on their behalf. I am willing/eager to supply you with any information that you might need in order to process the Offer. Pursuant to your last letter I am forwarding you information for you to reconsider as I disagree with your findings. The amount offered is not less than what would be their reasonable collection potential. If you do not agree with our findings, then please note that I would like to have their Offer forwarded to the Office of Appeals.
1. My name is John C. Dillard, CPA, of His CPA PC.
2. If you fail to agree with our findings, I would like to appeal their Offer in Compromise to the Office of Appeals.
3. Enclosed please find a copy of your 5-8-09 letter.
4. The tax years/period involved is, 2005, 2006, 2007.
5, 6 & 7. The facts supporting our position that we do not agree with and why we do not agree with each item are presented below. The law, and all other authorities we are relying on are submitted below. I believe their Offer amount is reasonable because:
Code Section 5.8.5.5 (as drafted 9-23-08) Covering Dissipation of Assets details the rules and regulations surrounding consideration of when Dissipated Assets should be included for Offer Calculation Consideration. The below items are in alignment with my client’s case and directly contravene with IRS stated guidelines when Dissipated Assets should be considered. Therefore all of the below items support non-inclusion of these monies in any Offer Calculation or Consideration:
- IRS Code Section 5.8.5.5 paragraph (3) states that the “inclusion of the value of dissipated assets must clearly be justified in the case file and documented…[based upon] an analysis of the following facts.” These factors include the below items, which would bare fact and testimony, to the fact that these transfers should not be included for consideration in determining the Offer amount assessable:
-The taxpayer did not make an illegal conveyance or one specifically excludable by tax law.
-The taxpayer did not realize any funds or rights of any type from the transfer of the assets.
-The taxpayer did not realize any benefit either in goods, services, or future value from the disposition of the assets nor did they have any control, of any type whatsoever, as to how the monies were used.
-The taxpayer had no future value in any of the assets and the taxpayer accordingly has had none and continues to have no further interest in those assets.
-Based on a fair and just analysis of these facts alone there is no value, which is appropriate to be assessed to the taxpayer for these monies. The intent of IRS Code Section 5.8.5.5 regarding Dissipation of Assets as detailed in section line paragraph 5 (see attached) was to add value to the calculation for the “Sale of real estate and “gifting” the funds from the sales to family members. The client has assured me that there are no such illegal/reportable transactions and that these monies were give only to qualified charitable organizations. I believe assigning a value to these charitable donations is not in accordance with tax law in both its legality and its moral turpitude. IRS Code Section 5.8.5.5 states in paragraph 6 (see attached) that “The value of dissipated assets should not automatically be included in the calculation of RCP. Each particular case must be evaluated on its own merit, and meeting the facts stated in paragraph (3).” For the above reasons as detailed above in paragraph 3 and as detailed above the rules of Dissipated Assets and their inclusion in this case are not appropriate and are not applicable.
-Furthermore there is one exception to the clauses above as detailed in paragraph 8 (see attached) of IRS Code Section 5.8.5.5, which states that “if the taxpayer does not provide information showing the disposition of funds from transferred assets, [the IRS can] consider including all of these amounts in an acceptable offer amount”. This exception is not applicable to the client as they have been straightforward, made no illegal conveyances, and have offered full and complete disclosure. Accordingly, applying this exception, that is otherwise allowable, does not pertain to the client and is therefore not appropriate for consideration.
In addition to the items which make the rules of Dissipation of Assets not applicable, I believe their Offer in Compromise as drafted is fair and just because:
-It is my understanding that the Offer process is intended to help people to get back into the system who otherwise are not able to pay their total tax obligations including taxes, penalties and interest. The taxpayers have been for the past two tax years, 2007 & 2008, been current with their filings and their payments. As we discussed their being both ready and able to file and pay their taxes as they go to as a key concern surrounding the payment of their tax monies.
-Based upon the IRS OIC Monthly Low Income Guidelines (See Form 656 Instructions) the client’s 2008 AGI is substantially (over one-third) below the $33,000 Low Income threshold, based upon their family unit size. Therefore, using IRS criteria the client has a low income and is available for special consideration when making/paying their application fee. Though these guidelines do not pertain to the Offer calculation determination process itself, it shows that in accordance with IRS guidelines that taxpayers are on the lower spectrum in terms of their income level.
-Assigning a value to an asset that is no longer available has the “net affect” of creating an “artificial asset” It is my understanding that the Offer in Compromise process is intended to help those get back into the tax system who otherwise do not have the ability to ever “catch up” allowing them to get their tax obligations and payments current. As such there payment of past charitable donations were legal conveyances that should be reviewed the same as any other business or personal expense. For example, if these monies were utilized to pay valid business expenses or personal tuition the net effect of this, as well, would be that the monies incurred and paid have been spent and are now not recoverable.
-Whether past expenditures were prudent or ill timed the expenditures incurred were valid legal conveyances and as such should be treated accordingly. If these monies were spent for example for tuition monies I believe that assigning a Offer value to these monies would not be includable in the determination of any Offer amount. As such, with all past expenditures, these past spent monies are now gone and there is accordingly no hope, valid recourse, expectation or anticipation of recovery.
-The conveyances were valid, legal and were not fraudulent. Though it can be argued the monies spent should not have been incurred, they did it, the monies are gone, and assigning a value to them will not “bring the money back” or create any assignable net worth. Whether an independent party sees these money conveyances as prudent or not, the payments are gone either way and are not available to preserve or create value of any type. Regardless of the correctness of this economic decision, they did not purposely make themselves poor. How the taxpayer got to where they are today, was not illegal. Indeed the Offer in Compromise process is to help those taxpayers get back into the system who have either made prior poor financial choices or who have suffered through poor economic times or unforeseen circumstances. Since they have no substantive liquid assets, I have suggested that they borrow as much as possible from their friends and relatives. With great difficulty, they have arranged to borrow an amount that exceeds their personal net worth. They have arranged to borrow these funds after the acceptance of their Offer in Compromise. These monies would otherwise not be available as evidenced by the prior correspondence.
-The monies they have obtained so far and the monies being committed to under the Offer to date have been borrowed from family members. Please be advised that the taxpayers have gone back to these family members and have discovered there is no substantive borrowing ability available.
-The taxpayer does not have the money that they are Offering you and absent the family funding they would not be able to do so. The predicament, as with all Offers, is based upon past economic choices for which they are now fully aware of their need to pay their taxes as they go in full as the monies are due and payable.
-It is my goal to help in their efforts to return to compliance. Since I have assumed the role as their financial advisor (they had no advisor previously), I have consulted with them, and in good faith I would like to make and Offer in Compromise for the taxpayers to pay as much of the balance of the tax liability as they possibly can.
-Please note that I have advised the taxpayers that after the acceptance of their Offer that they must stay in compliance by keeping all of their filings and payments current for five years. They have further been advised that in the event they do no maintain the above that the previously accepted offer would be voided and the previously abated monies would be reinstated.
8. As the clients Power of Attorney I have submitted the protest and accompanying documents and I know personally that the facts stated in the protest and accompanying documents are true and correct.
Please cease all collection efforts while this Offer is being resubmitted. Please accept this Offer in Compromise as submitted.
John Dillard is a Christian Speaker/Author and Certified Public Accountant (All Rights Reserved). To See how he takes Christ along with him to work visit http://www.hiscpa.com/ (An Atlanta CPA firm) and for his latest book Overcoming Life’s 9/11’s: Job’s Journey and to learn about his ministry visit http://www.john-dillard.com/
Sphere: Related ContentRelated posts:
- Atlanta CPA on Preparing a Cover Letter for Your Georgia Offer in Compromise
- Duluth CPA on Submitting an Offer in Compromise by Utilizing a Offer Cover Letter
- Atlanta CPA on Sample IRS Representation Letter to File Power of Attorney & Offer in Compromise
- How to Process an Offer in Compromise with the IRS: Determining the Offer Amount
- Processing an Offer in Compromise Taught by Christian CPA
