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1. File all tax returns.
Without filed tax returns your offer in compromise can not
be processed.
2. Order a transcript containing income tax information
for all the tax years which you may owe taxes for from the
IRS. This transcript will tell you how much you owe
and the periods with outstanding balances.
3. The offer in compromise
Form 656 must be accompanied by Form 433A and possibly
Form 433B if you own a business. These Forms (433A and 433B)
require that certain documentation be attached. Without
this documentation the IRS will not consider your offer.
To send in an offer without these documents is a waste of
time.
4. Gather the following
documents:
A. Proof of any self employment income
for the prior 3 months (e.g. invoices, commissions,
sales records, income statement, ect.) If you are
using Quick Books, Quicken, or some other accounting
software then print out an income statement for the
last 3 months.
B. Proof of gross earnings and deductions for the
past 3 months from each employer. If this is a joint
liability between husband and wife then proof for
each employer of each person is required. (e. g. pay
stubs, or earning statements). If year-to-date information
is available, send only 1 such statement for each
employer as long as a minimum of 3 months is represented.
C. Proof of pension/social security/other income for
the past 3 months from each payor, including any statements
showing deductions. If year-to-date information is
available then only one statement is required from
each payor as long as 3 months are represented.
D. A statement from all life insurance companies who
have issued policies which are owned by you. These
statements must show what type of life insurance (Whole,
variable, universal, term) and the cash surrender
value or loan amounts. If there are policy loans then
documentation of the date of the loans and amounts.
E. For all vehicles (include cars, trucks, boats,
trailers, motorcycles, ect.) which you own, you must
provide documents from the lender which show the amount
of the monthly payments and the balanced owed. The
IRS has access to your states department of motor
vehicles and the UCC filings and can determine which
vehicles are registered to you, so don’t “forget”
any. For lease vehicles you need a copy of the lease
and documents which show the monthly payment and the
duration of the lease.
F. For each piece of real estate that you own, which
is mortgaged, you must provide a current statement
from the lender that shows the monthly payment and
the balance due. You will also need a copy of
the deed and the mortgage.
G. You will need to present 3 months of your utility
bills, include, telephone, electric, gas, water, etc.
H. You will need to provide proof of your monthly
health insurance premiums if they do not appear on
your paycheck stubs or employment documentation.
I. If you have any recurring medical expenses, you
need to document the average monthly costs of these
bills.
J. If you pay or receive alimony or child support,
you will need to provide copies of the court orders
requiring payment and proof of such payments, (e.g.
cancelled checks, money orders, earnings statements
showing such deductions, etc,) for the prior 3 months.
K. You have to provide a copy of your latest tax return
Form 1040 and all schedules and attachments.
L. Proof of all current expenses that you paid over
the last 3 months, rent, utilities, insurance, property
taxes, etc.
M. Proof of all non-business transportation expenses,
( i. g. car payments, fuel, oil, insurance, parking,
registration, etc., non-business includes the cost
of commuting back and forth to work) for the prior
3 months.
N. Print out the Offer Package. This package consists
of instructions, the Form 656 Offer in Compromise,
and Forms 433A and Forms 433B You will need to read
the instructions carefully and understand them. The
IRS instructions will show you how to prepare an Offer
the IRS way. |
Even though the IRS instructions
will show you the IRS way, you need to gather the right
income tax information and understand these instructions
and forms to understand how to work the offer to your advantage.
I have written
a book on Offer in Compromise. My book shows how to
prepare an offer in compromise for the least amount the IRS
will take.
Several chapters
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to use attachments and explanations
to reduce the amount you will be required to pay to settle
your taxes. This information could save you thousands of
dollars. If you would like to learn how to document
your offer in compromise
in such a way as to reduce the amount you will have to pay,
you owe it to yourself to get my book
Offer Secrets Revealed.
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