As a CPA, tax professional, or enrolled agent, it’s vital to possess a deep understanding of income analysis when assisting clients with an IRS payment plan Offer in Compromise (OIC). In this extensive guide, we’ll delve into the nuances of income analysis, exploring the critical factors and calculations necessary for determining the most advantageous payment plan options for your clients. We’ll outline the key components of the OIC process, providing practical tips and expert advice to help you navigate the complexities of income evaluation while ensuring compliance with IRS guidelines. By mastering these techniques, you’ll be able to offer exceptional tax resolution services to your clients, enhancing your credibility and reputation within the industry.
A Taxpayer’s Income and Expenses
In today’s economy, individual taxpayers and businesses alike struggle to make ends meet. Accountants work with clients of all walks of life who often owe larger debts to the IRS than they are currently able to pay. Qualification for IRS payment plans like installment agreements, currently not collectible status’, and offers in compromise are all based on the individual’s unique income and expenditures.
Acceptable Financial Standards
Established by the IRS in 1997, the Allowable Living Expense Standards are expenses considered necessary to provide for the health and welfare of a taxpayer and their family. The IRS looks at the Allowable Living Expenses in relation to the taxpayer’s monthly income to dictate the amount of money a person should be required to pay each month. There are four categories of Allowable Expenses: Living Expenses, Healthcare, Housing/Utilities, and Transportation.
National Standards
Allowable Living Expenses (items such as food, clothing, and articles needed for basic well-being) and Healthcare (any medical costs ranging from copays to prescriptions and medical equipment) fall under the national standards which can be viewed HERE. Although these standards come with set allowances based on the national spending average, special circumstances will be considered if a taxpayer has warranted expenditures that exceed the national average. Additionally, even if your client spends less than the allowable national standards, they will still receive the full, standardized allotment.
Local Standards
The next two categories fall under local standards and are Housing and Utilities (allotments for mortgage or rent, insurance, taxes, and other costs) and Transportation (allotments for car payments, maintenance and repairs, and public transportation). Local standards, as opposed to national standards, are specific to the taxpayer’s county of residence. Plus, a taxpayer is required to prove their monthly expenditures for these categories and if they spend less than the local standards, they will only qualify for that lesser amount. To see the current local allowances in your area, check out the IRS website HERE.
Advocate For Your Client
A skilled accountant is prepared to advocate for a client whose expenses exceed the Acceptable Financial Standards. From medical considerations, to travel expenses or religious exceptions, there are many unique circumstances that might apply. For instance, you may have a client that suffers from Celiac Disease and has special dietary expenses that greatly exceed the IRS National Standards. To your client’s great relief, successful negotiation with the IRS could result in special accommodations for his or her condition. With expert counsel, creative problem-solving and solid proof of hardship, your clients could qualify for additional allowances that significantly lower their monthly IRS payments.
IRS Solutions Software Helps Calculate IRS Payment Plan Offer in Compromise
When dealing with IRS payment plans, IRS Solutions gives accountants the tools to navigate tax resolution services with ease. The client portal, for example, allows clients to enter their own information and calculates a taxpayer’s allowable expenses based on their data. The software warns users when expenses are exceeding IRS allotments, signaling the need for special accommodations. IRS Solutions Software is designed to make it easier for accountants to provide timely, accurate, confident services to their clients. Your success is their success, and with IRS Solutions Software, you have the power to provide life-changing tax resolution services for your clients.
