Korntved & Associates
Your Place For Solutions To Tax Problems.
Preparation For Settlement - The Optimal Solution.
Keep in mind that a settlement is almost always one or more of the types below:
1. Offer in compromise.
2. Payment plan.
3. CNC status (currently not collectible).
Most taxpayers will go through two or three of the settlement types at some point before they are completely done with their tax problem. Some taxpayers will go through all three types before they are completely done.
There are usually TWO requirements that have to be met before any settlement type can be accomplished.
1.
The most critical element of ANY settlement type is COMPLIANCE.
Get in compliance and stay there!!
Compliance is filing all tax returns. If they are not filed they will need to be filed.
Compliance is deposits and estimated payments. Start doing them on time or earlier and never do them late again.
All tax agencies will not allow settlements to be initiated if taxpayers are not in compliance. All tax agencies will immediately reject any settlements in process if taxpayers do not remain in compliance. Most tax agencies have post settlement compliance periods requiring taxpayers to stay in compliance or prior settlements can be voided.
Tax returns have to be filed so ‘everything is under the hood’ when a taxpayer goes to settlement. Then, compliance must be maintained for payments and deposits to prevent future issues.
2. Financial statements must also be prepared before settlement.
Financial statements are used by collections as a tool to try to force payment plans before submission of a settlement offer. They are also the same statements or a subset of the same statements used in settlement. The most commonly requested documents are listed below.
The tax agency financial documents (e.g. 433-B/A, BOA-5/4, etc) with the items below attached as support.
· Tax returns.
· Bank Statements.
· Loan balance amounts for secured debt such as home and auto. Other loan balances may include student loans, etc.
· Proof of payments for mortgage or rent and utilities, car payments, medical premiums and co-payments.
· Current income verification.
· Statements and proof of any extenuating circumstances for which relief is requested (severe medical, etc.).
When taxpayers have done everything above they are ready
to submit a settlement proposal.