Offer in Compromise Software and Evaluating OIC and PPIA
As a tax pro, it’s your job to know what’s best for your clients, and that involves more than filing tax forms. Your clients may have other concerns, especially when they are in trouble with the IRS, and they’re counting on your sound advice. Part One of our series will shed some light.
If you don’t know how to respond or give them the wrong advice, you’ll be letting them down. Worse than that, you could also pull unnecessary funds right out of their pockets.
In Part Two of this series, we’ll give you the pros and cons. For now, let’s discuss the difference between an OIC and a PPIA and what you do when a client with a tax liability is contacted by the IRS by mail.
NOTE: Be sure your clients are aware that the IRS does not contact by phone or make threats. Read more here about what the Justice Department is calling the biggest scam in history.
When your clients receive letters from the IRS because of tax delinquency or liens it’s important to act quickly on their behalf. Time is definitely of the essence. Will you know what to do?
For instance, do you know the difference between an Offer in Compromise (OIC) and Partial Payment Installment Agreement (PPIA)? You’ll come across this issue many times in your career and knowing the difference is essential. Choose wisely.
Basically, a Partial Payment Installment Agreement (PPIA) requires your tax delinquent clients to give a part of their earnings to the IRS, and an Offer in Compromise (OIC) requires your clients to give a part of their assets to the IRS.
See the difference? Sometimes, an Offer in Compromise is better than an IRS Partial Payment Installment Agreement and sometimes not. For now, let’s talk about which to use when.
Partial Payment Installment Agreement
Generally, if a taxpayer has insufficient assets to liquidate, and income is too low for a full payment plan, the IRS accepts PPIA applications. Are there specific qualifications? Of course. You’re dealing with the IRS. The Internal Revenue Manual will tell you what they are.
Okay, we know you’re busy. Here they are:
- Limited disposable monthly income
- Owe over $10,000
- File Forms 433 and 9465
- No outstanding returns
- Not in bankruptcy
- No offer in compromise in force
- Limited assets
How Do You Calculate Payment?
Calculate your client’s payment based on his or her disposable income in Form 433. The IRS expects the maximum, but if you go too high you risk your client defaulting on the agreement. The filing fee is $225. However, if your client elects the direct debit option, it’s $107. That’s a big savings.
Want a quick fix for OIC calculations? No problem. As an IRS Solutions Software member, you can even toss your calculator. Our OIC feature with ‘Negotiation Intelligence’ will help you calculate the percentage of the total tax bill payable in an IRS settlement. In fact, our software offers step-by-step guidance for solving the toughest IRS disputes including Installment Agreement and Currently Not Collectable.
This may sound simple, and it’s pretty straightforward, but keep in mind there are advantages and disadvantages to both a PPIA and OIC. An OIC is attractive because it wipes out a good portion of tax liability, but just as there are pros, there are cons. Part Two in our series will clarify.
In both cases, there are IRS Dealings, lengthy phone calls, and paperwork. Be sure to get the training you need to simplify the processes.
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