Want to learn to solve any tax debt problem? In this week’s episode, Eric Green reviews the five simple steps to solve any taxpayer’s worst tax nightmare. From getting clients into compliance to navigating offers in compromise, Eric shares the exact process he uses to resolve cases and secure life-changing results for taxpayers. Whether you’re a tax pro or someone struggling with IRS debt, this episode gives you a clear roadmap to take control and finally put tax troubles behind you.
You can check out Eric’s mini-guide here: Get the Free 5 Steps to Resolving Any Tax Debt
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5 Steps To Solve Any Tax Debt
I get asked all the time, “How do you solve a tax debt?” Yes, I’m still in Miami. It’s easy to solve a tax debt. Five simple steps. That’s it. Do you want to know how to solve a tax debt? Do you want me to walk you through the five simple steps? No problem. Let’s do it. It’s Eric Green. I’m still in lovely Downtown Miami. If you’ve not been following that, at least all the stuff we are posting on the YouTube channel, I have been updating you on Trump and the IRS firings that have been going on.
We have gotten so many questions about this because of the automated enforcement and all that. How do you solve a tax stack? Five steps. Simple to understand. You need to know and understand what to do. I have created a PDF download for this. If you are interested, you can go download that. It’s free. If you are a taxpayer reading this, you can do most of this too. There are a lot of things that a taxpayer can do to solve their own problem. I’m not joking. I’m being serious.
Step 1: Ensuring Tax Compliance
Step number one, tax compliance. Is the taxpayer in tax compliance? What’s tax compliance? For the IRS, it means you have your tax returns filed for at least the last six years and you’ve made your current year’s tax payments. If you are an employee, you are having enough withholding. You will not owe money at the end of the year. If you are self-employed, you’ve made this year’s estimated tax payments. If you are a business, you’ve made this and the last quarter’s payroll tax deposits.
Tax compliance. If you are a non-filer, if you haven’t filed, let’s say for the last 10 years or 20, you haven’t filed since 2005, you haven’t filed twenty years of returns, am I stating for the record that you only have to file the last six years and you are in tax compliance? That’s exactly what I’m saying. It’s a policy Statement 5-133. You can look it up in the Internal Revenue Manual. It’s IRM 121618 going by memory and my memory is probably pretty good on that.
If you can get ‘19 through ‘24, you are in compliance. Does that mean you don’t have to file ‘18, ‘17, ‘16, ‘15, and ‘14? No, you don’t. You can if you want to. For instance, if you determine that it’s in your own best interest to file them, let’s say you want to claim net operating losses or large capital gain, loss carry forwards, you’d file those returns because it’s to your benefit and the IRS will take them, but you don’t have to do them. Step number one, get the taxpayer into compliance because without compliance, you can’t do an offer. You are not eligible for an installment agreement.
Step 2: Pulling Tax Transcripts
You could be deemed uncollectible, but any real resolution is off the table. That’s step number one. Step number two, you need to pull transcripts and we need to see how much time remains on the ten-year collection statute. People think that’s an urban myth. “Do you mean to tell me the IRS only has ten years to collect the tax debt?” Yes. It’s Code Section 60502. You can look it up. It’s ten years from the date of assessment. If they are late filed, ten years doesn’t start until they assess the tax, and then taxpayers have a tendency to do things that extend or told the statute. That’s why we want to see the transcripts.
Clients are going to come in and they are going to tell you a story and the story’s going to be exciting and tragic all simultaneously. I need to know at least what the IRS thinks happened. Pull transcripts. Why? I need to see the date of assessment. I need to see what else they have done that might have told or extended the statute.
Step 3: Performing The RCP Calculation
Why is that important? I need to know how much time is left because to do an offer and compromise, you cannot show an ability to full pay. How do I know if you have the ability to full pay if I don’t know how much time remains? I got to look at your income and your expenses all that, which is step number three. Do the RCP calculation. What’s RCP? Reasonable Collection Potential. It’s a formula. If you don’t know how it works, a tax rep, joint tax rep, I will teach you in a matter of hours how to be an RCP master.
The first step is to get the taxpayer into compliance. Without compliance, you can't do an offer. Share on XWe cover a lot of it in this free guide. The point is, we need to know how much time remains and we need to figure out what the client’s RCP is to see if they can full pay, and if they can’t full pay, we can do an offer. How much does the offer have to be? It’s not a random number or a set percentage. The RCP formula is going to determine how much the client has to pay. Pure and simple. It’s a formula. That’s why when I say that any CPA, EA, or an attorney can master this, I’m not making that up. I’m dead serious. Give me four hours and I will teach you how to do an offer.
Step 4: Gathering Required Documents
Step number four, we have them in compliance, and now we have pulled transcripts. We know how much time is left. We have done the RCP so we know what our client can pay and what an offer would be. Step number four, get the documents together. Do the 433. Get the 656 if you are doing an offer, and if you are doing an offer via 433A OIC, get the forms together. Make sure you have all the supporting documents with it because when we submit these packages, we need to support every number that’s on that 656 and 433. All the documents are going to go with it. We are going to draft a cover letter and explaining any special circumstances, anything we want the offer investigator to know. That is our opportunity to highlight that for them.
Step 5: Filing The Offer
Step number five, get it filed. If you are doing an offer, there’s a $205 application fee and you are either going to submit 20% of the amount offered with it if you are doing a lump sum offer or if you are doing a periodic or deferred offer, you are going to make the first monthly payment and keep making monthly payments until it’s either accepted or rejected.
To do an offer in compromise, you cannot show an ability to fully pay. Share on XUnderstanding Appeals In Tax Resolution
Last thing, and it’s not one of my five steps, but it is important. I get 93% of my offers done. Now I tell you that for three reasons. One to brag. Reason number two, I teach this stuff and I do this for a living. I’d like to think I know what I’m doing, but reason number three, I tell you that notice I said 93%, not 100%. My clients are the same as your clients. My clients don’t tell me everything. My clients fall out of compliance and void their offers.
I don’t have some special corner on the market of gifted clients. My clients are the same goofballs sometimes that you have to deal with. We talk to them, we explain to them, but they don’t listen. There’s a reason they are in trouble in the first place, and I say that because I have clients all over the spectrum. People who are criminals at one end of the spectrum. People on the other end who have had horrific things happen to them, I would never wish on anybody and everything in between. All we can do is try to educate the client, help them get this resolved and arm them for how to maintain and put this behind them so it’s just a bad memory.
The offer specialist doesn't want to take your client's offer. They're going to try to do everything they can to get rid of your client's offer. Share on XThey are going to listen or they are not going to listen, but of all those that we get accepted, half of them, we have to go to appeals. Going and taking the case to appeals is not only not uncommon, it’s quite common. You would imagine that the offer specialist would know how to do an offer. I’m going to let you in on a little secret here.
The offer specialist doesn’t want to take your client’s offer. They are going to try to do everything they can to get rid of your client’s offer. If they are not in compliance, gone. If they don’t include the checks, returned or if there’s something missing, if there’s an argument that they think your client might be able to full pay on. Having an offer rejected is not uncommon. You sit there, review what they have rejected. If you disagree, and I often do, we go to appeals.
We file the appeal, you have 30 days to request the hearing with an independent office of appeals and we go to appeals and the appeal is very simple. Bullet point” what you disagree with. We disagree with this.” Get to an appeals officer. They are going to review only the items you raised that you disagree with, and hopefully, you will get it resolved there. Get the offer accepted and put this to bed for your client once and for all. Five simple steps to resolve a tax debt. You can go download the PDF, which has more detail. Talk to you later.
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