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Gary Bode, CPA is a Master's Degreed, nation wide accountant offering tax and business services. Member of AICPA and NCACPA. Our virtual office provides excellent service to long distance and international clients. Call (910) 399-2705 for a free phone consult.

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I became totally and permanently disabled after a working for 44 years. I returned to college late in life (while working full-time) to fulfill my dream of becoming an RN and at that time found it necessary to secure student loans. Three years after being declared totally and permanently disabled my student loans were discharged. In January 2013 we received a 1099-C form declaring said student loans that were discharged however that amount could be considered as income for 2012. This was a large amount of money and we live on two pensions and social security income.

I started looking on the internet for information regarding 1099-C and felt that this was something that we could not handle alone. I made phone calls locally to a very reputable tax group in a city near us and they said it would cost $500 for an appointment and that they really prefer to do corporate taxes and they referred me to a local person who had worked for them at one time, we called and explained the situation and an appointment was made and then the comment was made that "I will have to do some research on this" and flags immediately went up and we called back and cancelled that appointment. I had been researching the IRSwebsite and every place else I could think of and I was not comfortable doing our own taxes this year. We called another local tax preparer that we had used in the past and made an appointment, however prior to the appointment, while still seeking information regarding our situation,

I came across a website for Gary l. Bode, MSA, CPA, PC in Wilmington, NC. I called Mr. Bodeand explained our situation and asked if he could help. He spoke very knowledgeably regarding the situation and stated that yes; he felt he could help us. As Mr. Bode was in North Carolina and we were in New York I scanned all of our documents including back-up documents for all of our claims and forwarded all to him. Mr. Bode kept in touch with us via email; we have spoken on the telephone several times and have become very comfortable with his knowledge and professionalism. Also, as I am a true "worrier" I have continued looking into information regarding our tax situation and I came upon another web page for Mr. Bode that included testimonials which spoke of his experience with this type of tax situation as it became prevalent during the recession. This reinforced in our minds that we had made the right decision in hiring this person as our tax preparer.

I share all of this as our taxes are now ready to be filed (we do owe tax for 2012 but not the astronomical figure we thought we were facing), and we are confident that they have been prepared with the utmost care by a gentleman who has an excellent working knowledge of the situation we faced and the tax laws that were applicable to said situation.

 

Bill and Carol

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Wilmington NC CPA discusses IRS Form 656, IRS Form 433-A and IRS Form 433-B | Offer in Compromise

CPA Wilmington NC discusses Form 656, 656-L, 433-A and 433-B

Gary Bode, CPA: if you find yourself needing help with an Offer in Compromise, consider calling us for a free initial phone consult at 399-2705.

An Offer in Compromise, submitted on Form 656, is the infamous “pennies on the dollar” technique for reducing the amount of money the IRS will accept, for back taxes, as payment in full.  The technique can be used for both companies and individuals.  Use IRS Form 656 or 656-L to submit the Offer in Compromise.  Use Form 433-A or Form 433-B to provide collection information to the IRS.

Does Form 656, Offer in Compromise, Really Work?

The answer is a qualified yes.  If it works, how well it works depends on your particular circumstances.  Sometimes your position can be better optimized with long range planning.  Most CPAs take a preliminary look at Form 656 with every back tax case.  Because, if it can be applied successfully, results can be dramatic.  The IRS clearly delineates what it will accept and it is usually obvious when folks don’t meet the Offer in Compromise requirements. 

Stricter Parameters now exist for Form 656, Offer in Compromise, Acceptance

Public outcry over the leniency of the Offer in Compromise guidelines in the past paved the way for stricter parameters today.  Obviously, the IRS doesn’t want to accept less than what they think your company owes in back taxes.  And they have great reduced the number of  Offers in Compromise accepted, via Form 656, despite the advertising seen on late night TV.  Here’s a post on these offer mills delineating governmental action against them.  In fact Roni Deutsch just surrendered her law license to California. 

Companies also file IRS Form 433-B, Collection Information Statement for Businesses, along with Form 656

Form 433-B just presents financial information about your company to help gauge collectability of back taxes.  Definitely read the IRS instructions before preparing it.  Both Form 656 and 433-B have pitfalls, despite the best intentions of the IRS.  These are complex issues which managers rarely encounter.  Don’t just rely on this posting as guidance.  Pay particular attention to allowable exemptions.

Individuals file IRS Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, along with Form 656

The IRS is pretty thorough on 433-A, which gives them a good handle on how much they might actually collect from you.  Definitely read the IRS instructions. Sometimes your position can improve if there is enough time for planning.

Form 656, Offer in Compromise: Qualifications

So what are the IRS qualifications?  Three basic approaches exist.  Sometimes they can used simultaneously on Form 656-L, or be “bent” to some degree.

  • Doubt as to collectability: The IRS may settle for an amount of back taxes that leaves you with zero net worth. This reflects the current, more stringent requirements for the IRS accepting Form 656. In the past, people paid “pennies on the dollar” and walked away with much of their wealth intact.
  • Promoting Effective Tax Administration: Generally this approach uses financial hardship. This is different than insolvency (Form 982). Sometimes a CPA can make the case for exceptions IE raise the level of what constitutes financial hardship. Sometimes, like in case of grave medical circumstances, the IRS will settle so as not to be seen as heartless.
  • Doubt as to Underlying Tax Liability: Sometimes this allows the CPA another chance to further argue your tax position without going to tax court. Sometimes the IRS will settle to avoid the cost of tax court.

Alternatives to Form 656, Offer in Compromise

  • Installment agreement: Form 9465 may allow monthly payments to the IRS.
  • Collateral Agreement: a customized agreement to pay more of the taxes you IF certain circumstances, like more earnings, occur in the future.  Use Form 2261.

Although we’re a CPA firm in Wilmington NC, we serve a broader geographical base.  Distance should not dissuade you from calling us for a free initial consult.  We advocate self preparation of tax forms when reasonable.  But Forms 656, 656-L, 433-A and 433-B all involve complex issues, and it may be prudent to seek help.  If so, we’d like you to call us at (910) 399-2705.  This post, and others on the site, should help you gauge our expertise and proactive philosophy.

So we’ve discussed that the Offer in Compromise technique can be effective IF you qualify.  And we’ve stated the guidelines for qualifying are well delineated.  So you should be aware of hucksters touting Form 656 as a universal cure for back taxes.  State governments have sucessfully shut down or won large awards against the offer mills seen on late night TV.  We’ve also discussed that if you qualify, the result depend on you particulars circumstances.  And that the IRS investigates those circumstances on Form 433-B, Form 433-A, Form 656 and/or Form 656-L.  Given adequate time, you may may be able to mold your circumstance before sumitting Form 656, Offer in Compromise.

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