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Settlements – In General.

Settlements are ALWAYS available. ALL tax agencies have laws allowing them.

The settlement LOOP is ALWAYS followed until a settlement is reached. Settlements may be successfully completed by executing the LOOP one or more times. The three steps in the settlement LOOP are:

Ø Deal With Collections.

Ø Settlement submission and negotiation (offer in compromise/payment plan/CNC status/etc.).

Ø Appeals, if necessary.

Internal Revenue Service.

The Internal Revenue Service requires extensive documentation for each stage in the settlement loop.

The Internal Revenue Service allows limited settlement options through collections.

The Internal Revenue Service allows unlimited settlement options through the offer in compromise group.

BOTH groups have different qualifying criteria so the Internal Revenue Service can be a quagmire of paperwork.

The Internal Revenue Service will allow settlements for small amounts – even for very large tax bills. There is a much larger pool of taxpayers at the national level so allowing small payments in settlement does not affect the national budget as much. However, the Internal Revenue Service makes qualification for small payments in settlement more difficult because they frequently give up a lot when large tax bills are at stake.

States.

The States require less paperwork in their settlement loops than the Internal Revenue Service because their logic for allowing settlements is generally simplistic in nature.

The States will generally not allow settlements for small payments like the Internal Revenue Service. The States do not have the same pool of taxpayers to draw from to balance their budget so they can not afford to give up any more than necessary. The States will generally try to collect the tax amount and forgive interest and penalties. Sometimes savings can include taxes too. It depends on numerous factors.

The bottom line is that the settlement loop must be executed until a settlement is reached AND:

· The Internal Revenue Service allows small payments when qualifications are met.

· The States do not give the big savings in settlement like the Internal Revenue Service but the States make settlements less difficult because of it.