IRS Collections Archives - Page 4 of 9

IRS National Standards

May 25, 2026December 16, 2013 by Brotman Law

IRS National Standards

The IRS has developed IRS national standards as guides for taxpayers responsible for resolving their tax liabilities. The IRS national standards (or IRS Collection Financial Standards) are defined as five categories of necessary expenses developed and used by the IRS to calculate a taxpayer’s payment potential. The standards are used for the purpose of calculating repayment of federal tax liability. “IRS National standards have been established for five necessary expenses: food, housekeeping supplies, apparel and services, personal care products and services, and miscellaneous” (IRS.gov, “IRSNational Standards: Food, Clothing and Other Items,” 8/25/2013). For example, under the category of food, the IRS allows for calculations of both food at home and food away from home. “Food at home refers to the total expenditures for food from grocery stores or other food stores. . . . Food away from home includes all meals and snacks, including tips, at fast-food, take out, delivery and full-service restaurants” (“National Standards: Food, Clothing and Other Items”).

Key Takeaways

The IRS has developed IRS national standards as guides for taxpayers responsible for resolving their tax liabilities.
The IRS allows taxpayers to calculate their respective IRS national standards by family size.
The IRS Collection Financial Standards are also extended to local territories.

Income and Expense Table and Future Income

May 25, 2026December 16, 2013 by Brotman Law

The IRS Income Expense Table

Key Takeaways

The IRS Income Expense Table
Future Income Potential

Similar to the asset/equity table, the IRS income and expense table (IET) outlines necessary living expenses, where the taxpayer lists both total income and expenses. The IRS income and expense table is divided into two major categories where the taxpayer eventually calculates the net difference multiplied by one or more amounts to get to “amount that could be paid from future income” (IRS.gov, “Income and Expense Table,” 8/25/2013).

IRS Offer in Compromise Rules

May 25, 2026December 16, 2013 by Brotman Law

IRS Offer in Compromise Rules – Salability of Assets

Salability, or marketability, is defined in terms of liquidity, “the ability to quickly convert property to cash or pay a liability” (IRS.gov, “Discount for Lack of Marketability: Job Aid for IRS Valuation Professionals, September 25, 2009, page 5” 8/25/2013). Under the IRS offer in compromise rules, liquidity is essentially the ability to convert an asset into cash without losing the principal. Conversion is not only specific to the term asset; it may include business, business ownership interest, and/or security.

Key Takeaways

IRS Offer in Compromise Rules – Salability of Assets
IRS Offer in Compromise Rules – Current Assets: Cash and Cash Equivalents
IRS Offer in Compromise Rules – Monthly Cash Flow

IRS Financial Analysis

May 25, 2026December 16, 2013 by Brotman Law

IRS financial analysis is conducted by the IRS in order to both analyze and verifies financial information. When conducting an IRS financial analysis, the IRS evaluates the income and expenses of the taxpayer to calculate for disposable income. Disposable income is defined as gross income less all allowable expenses. During their IRS financial analysis, the IRS also analyzes assets to resolve balance due accounts. To do this, the IRS will request that the taxpayer makes full, immediate payment if their cash on hand is equal to the total liability. In addition, the IRS will identify key sources of funds, “liquid assets which can be pledged as security or readily converted to cash” (IRS.gov, “Part 5. Collecting Process, Chapter 15. Financial Analysis, Section 1. Financial Analysis Handbook,” 8/24/2013). Identification of key sources of funds is also extended to considering unencumbered assets, interests in estates and trusts, and lines of credit (“Section 1. Financial Analysis Handbook”). When analyzing assets to resolve balance due accounts, the IRS will also determine the priority of the Notice of Federal Tax Lien.

Key Takeaways

IRS financial analysis is conducted by the IRS in order to both analyze and verifies financial information. When conducting an IRS financial analysis, the IRS evaluates the income and expenses of the taxpayer to calculate for disposable income.
Part of the IRS financial analysis process, the IRS will also verify financial information by conducting interviews, asking pertinent questions, and documenting the results.
Under each major category, the taxpayer lists information concerning different types of assets.

IRS Form 433-A Breakdown

May 25, 2026December 16, 2013 by Brotman Law

IRS Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals is used to collect financial information about the taxpayer and the taxpayer’s ability to repay a current tax liability.

Key Takeaways

Section one of the IRS Form 433-A requests general information specific to the taxpayer. Request for information includes full name, marital status, address, and phone numbers.
Questions located in section three of the IRS Form 433-A center on other types of non-wage earning information.
In section five of the IRS Form 433-A , the taxpayer must disclose wages, salaries, pensions, and social security; net income from business; net rental income; other income (i.e.

Offer in Compromise Requirements

May 25, 2026December 16, 2013 by Brotman Law

Offer in Compromise Requirements- Choosing Between the Types of Offers

Lump Sum Cash Offer

A taxpayer may choose the lump sum offer, which is defined as an offer where the taxpayer makes five or fewer installment payments within 24 months after the offer is accepted. “If a taxpayer submits a lump sum offer, the taxpayer must include with the Form 656, Offer in Compromise a nonrefundable payment equal to 20 percent of the amount. This payment is required in addition to the $150 application fee” (IRS.gov, “Topic 204 – Offers in Compromise,” 8/22/2013). Under the offer in compromise requirements, the nonrefundable amount cannot be returned to the taxpayer if the offer is either rejected or accepted. Instead, it will be applied to the taxpayer’s liability.

Key Takeaways

Offer in Compromise Requirements- Choosing Between the Types of Offers
Lump Sum Cash Offer
Periodic Payment Offer
Appealing a Rejected Offer in Compromise
Offer in Compromise Requirements – Collateral Agreements

Pros and Cons of Offer In Compromise

May 25, 2026December 16, 2013 by Brotman Law

You must weigh the pros and cons of offer in compromise in light of the other options available to you. When considering whether to choose this option, you must also consider the advantages and disadvantages. The offer in compromise allows you the opportunity to reduce your tax liability relative to your current financial situation. However, settling with the IRS by way of offer in compromise might be the second-best option. For example, the requirements for accepting an offer in compromise are stringent. Taxpayers are required to have low monthly income and practically no assets. The OIC process is demanding: financial disclosures, Form 656, a detailed collection information statement, and months of waiting. When the IRS rejects the offer—which happens frequently when assets or income exceed the threshold—that preparation time and application fee could have gone toward an installment agreement, Currently Not Collectible status, or another resolution that actually fit the taxpayer’s situation.

Key Takeaways

You must weigh the pros and cons of offer in compromise in light of the other options available to you. When considering whether to choose this option, you must also consider the advantages and disadvantages.
In addition, keep in mind several other keep in mind that the IRS cannot collect on your federal tax liability forever.
On the upside of the pros and cons of offer in compromise, choosing to pursue an offer in compromise may be worthwhile in terms of reducing your tax liability to a level that is consistent with your current ability to repay.

What is an Offer in Compromise?

May 25, 2026December 16, 2013 by Brotman Law

An offer in compromise (OIC) is a type of agreement between both the taxpayer and the Internal Revenue Service outlining and settling the taxpayer’s tax liabilities for less than the current balance due owed. If the taxpayer’s liabilities can be fully paid through the utilization of an installment agreement or any other related means, then the taxpayer would not ordinarily be eligible for an OIC.

Key Takeaways

To be eligible for the offer in compromise program, the taxpayer must have already filed all tax returns, made the required estimated tax payments for the current year, and made also all required federal tax deposits for the current quarter (IRS.
The IRS provides all of the tools necessary for taxpayers to pursue multiple options with regard to settling taxpayer liability.
Taxpayers currently in an open bankruptcy proceeding will not be eligible for an offer in compromise. Tax liabilities and other financial debts are resolved through the process of bankruptcy only.

Abuses of the IRS Offer in Compromise Process

May 25, 2026December 16, 2013 by Brotman Law

J. K. Harris

J. K. Harris is one such company plagued with the woes of consumer complaints and subsequent lawsuits. JK Harris & Company, LLC was a tax representation firm. Founded in 1997, the company specialized in solving IRS and state tax problems. The founder, John K. Harris, penned three books on the subject and grew his company to national recognition. Although the company grew from 450 sales offices to eight regional operations centers, it still suffered under the burden of battling lawsuits where customers complained about misleading business and advertising practices. Lawsuits from past customers claimed that J. K. Harris charged exorbitant fees for resolving tax problems only to discover that the company failed to deliver on its promises. The company was also charged with engaging in deceptive practices. The company’s founder ushered the company through bankruptcy and the company was later shut down.

Key Takeaways

J. K. Harris is one such company plagued with the woes of consumer complaints and subsequent lawsuits. JK Harris & Company, LLC was a tax representation firm. Founded in 1997, the company specialized in solving IRS and state tax problems.
Tax Masters is another company accused of committing fraud. A Texas jury found TaxMasters, a tax advisory firm, guilty of using deceptive practices in its bid to lure customers and . ..

What to Do If the IRS Rejects Your Installment Agreement

May 25, 2026December 16, 2013 by Brotman Law

The IRS typically rejects an installment agreement for one of three reasons. For example, if the IRS determines that your living expenses do not fall under the category of necessary, your agreement will more than likely be rejected. The IRS considers extravagant expenses as those that include charitable contributions, private school funding, hefty credit card payments. In addition, if you fail to provide accurate information on Form 433-A, Collection Information Statement, you can expect your agreement to be rejected. Lastly, if you defaulted on a previous installment agreement, your new proposal may receive skepticism and be subsequently rejected.

Key Takeaways

The IRS typically rejects an installment agreement for one of three reasons. For example, if the IRS determines that your living expenses do not fall under the category of necessary, your agreement will more than likely be rejected.
To resolve this hurdle, contact the collection manager and speak with him or her directly. “Just making this request is sometimes enough to soften the collector up.
Taxpayers can appeal most collection actions. The main options for appealing collection actions include: Collection Due Process (CDP) and Collection Appeals Program (CAP).