IRS: An Offer In Compromise

IRS Audits:

The IRS Audit process can involve a number of stages. These stages can include (in no particular order): the IRS audit selection process; initiation of an audit; incurring additional tax liability, interest, and penalties; disputing an audit findings with the auditor or their superior, disputing the audit findings in court, and attempting to negotiate for an Offer in Compromise.

Although the entire IRS audit selection process is unknown, it is known that each return is assigned a DIF (Discriminant Function) Score. This score is then put into a system and the ones with the higher scores are commonly selected for an audit. Many factors go into determining a DIF Score, these factors can include the proportion of income and expenses,

This is used when a taxpayer has an outstanding tax bill due to filing and/or payment issues or due to adverse audit findings. An Offer in Compromise is an attempt by the taxpayer to have their bill reduced. The IRS may accept such a reduction in one’s tax liability if: full collectability is highly unlikely and/or the statute of limitation on collections, which is typically three years, is almost up. On Form 656 only doubt of full collectability or exceptional circumstances (which make the taxpayer unable to pay the necessary amount) are considered justifiable explanations for such an offer. The IRS will not accept ones offer if it is solely on the grounds that the taxpayer would like a reduction; the IRS needs to believe that the offer is being made in their best

These resources were used in prior modules, but their use in this module further exposed the value that they hold for tax research. Specifically, IRS.gov provides access to a plethora of forms available to taxpayers including the documents that provide taxpayers with the information on the forms available, instructions in how to properly fill out the form, and/or when to use a given form. In addition to the forms and associated documentation, many IRS publications are available on the site as well. Although these publications were available on IRS.gov, one may turn to RIA Checkpoint for this portion of the assignment. The main reason that this tool may be selected, as opposed to using IRS.gov further, is because of the search feature and capabilities of RIA Checkpoint. Specifically, RIA’s search features are extremely straightforward and user friendly. Beyond that, RIA allows for the researcher to search for given material in a variety of ways. This enables the researcher to receive information in a quick and efficient manner, which can be extremely valuable. Therefore, the variety of features available and the convenience of the system may encourage some people who are unsure if they want to invest in a membership with RIA checkpoint, to ultimately make the