How is an Offer in Compromise Calculated?

How is an Offer in Compromise Calculated? Denver Tax Lawyer

An offer in compromise should be considered a tax settlement with the Internal Revenue Service.  When a taxpayer owes money to the IRS, under certain circumstances the taxpayer can submit a proposal to pay less than the amount of tax due.  While many people know what an offer in compromise is, many taxpayers ask a tax attorney how much their offer in compromise will be- what will we offer the IRS?  How much will the offer be?  The answer a tax attorney must or should provide is, “it depends.”  While many people may expect this answer from a tax attorney, it is true.  An offer in compromise is calculated by the taxpayer’s reasonable collection potential, which is viewed as the taxpayer’s ability to pay.  Thus, because each taxpayer’s situation is different, there is no equation to use when estimating what a taxpayer will pay.  There is no general percentage to apply to the amount of tax owed by the taxpayer to estimate what the IRS will accept when submitting the offer in compromise.

When calculating an Offer in Compromise amount, a tax attorney should look at the following issues and figures.


–          Total Household Income; and,

–          National Standards for allowable living expenses

–          Other allowable expenses

–          Equity in assets including all property such as home, car, investment accounts, business interests and any other assets.

–          Available reductions in equity dependent upon the asset and use of the asset.

Based upon the above figures, a taxpayer’s disposable income can be calculated.  The taxpayer’s disposable income is then multiplied by 12 or 24 depending upon the repayment terms of the offer in compromise proposed by the taxpayer.  This figure is then added to the taxpayer’s equity in assets after applicable discounts are applied.  The total figure through this equation is considered the taxpayer’s ability to pay.  If the amount is less than the total amount due than our tax attorneys would consider the taxpayer to be a possible candidate for the offer in compromise program and discuss the options with the client.  If the amount calculated through the offer equation is greater than the total tax liability, then the taxpayer may not be a candidate for an offer in compromise.  However, if circumstances change, our tax attorney’s position may change regarding the possibility of submitting an offer in compromise.  Moreover, a taxpayer may be able to qualify for an effective tax administrative offer in compromise, whereby the taxpayer show the ability to satisfy their tax debt, but due to extraordinary circumstances, full payment would create an economic hardship on the taxpayer.

A tax attorney at The McGuire Law Firm can discuss the option of an offer in compromise to settle your tax debt.  Contact The McGuire Law Firm to schedule a free consultation with a tax attorney in Denver!

FATCA Application to U.S. and Foreign Financial Institutions by Tax Attorney

FATCA Application to U.S. and Foreign Financial Institutions Denver Tax Attorney

A Denver tax attorney at The McGuire Law Firm can assist you regarding the FATCA provisions and application of these provisions.  Below is information related to U.S. and foreign financial institutions.

U.S. Financial Institutions

United States financial institutions (USFIs) in addition to other United States withholding agents must withhold 30% of certain payments to foreign entities that have a United States source, if the USFI or withholding agent are unable to document an entity for purposes of FATCA.  An additional requirement exists for USFIs and United States withholding agents to report information relating to certain non-financial foreign entities with substantial U.S. owners to the Internal Revenue Service.

FATCA Registration applications can be submitted by USFIs online at the FTACA Registration website.

Foreign Financial Institutions

To avoid being withheld upon, under FATCA, a Foreign Financial Institution (FFI) can register with the Internal Revenue Service.  In registering, the FFI agrees to report to the IRS information regarding their United States accounts, which would include the accounts of certain foreign entities of which have substantial United States owners.

Foreign Financial Institutions that enter into an agreement with the Internal Revenue Service in regards to reporting account holders, may be required to withhold 30% on payments to foreign payees if the payees do not comply with FATCA.

Most government entities, non-profits, small financial institutions and retirement entities are likely to be exempt from the status of an FFI that would require registering and reporting.  FFIs would include banks & depository institutions, mutual funds, hedge funds, private equity funds, and certain insurance companies.  If an FFI is not exempt the failure to register could cause a 30% withholding tax on some United States source payments that are made to the FFI.  FFIs that register receive a Global Intermediary Identification Number (GIN) from the Internal Revenue Sevice.

A Denver tax attorney at The McGuire Law Firm can assist clients in regards to the FATCA provisions and regulations, as well as through the IRS’ voluntary disclosure program.

Contact The McGuire Law Firm to schedule a free consultation with a tax attorney in Denver!

IRS Action During Government Shutdown

IRS Action During the Government Shutdown Denver Tax Attorney

As we all know, the U.S. federal government “shutdown” on October 1, 2013 due to the house and senate’s inability to pass a short term spending bill that would continue to keep the government funded.  As a Denver tax lawyer, John McGuire has been paying close attention to the impact the shutdown will have on IRS action.

This government shutdown has impacted federal agencies including the IRS.  As tax attorneys, we represent a number of individuals and businesses before the Internal Revenue Service regarding tax audits, tax debts and other federal tax controversies.  Thus, we have received a number of inquiries from our clients regarding what the IRS is doing in terms of collection, enforcement and tax audits during the shutdown.  Additionally, in many circumstances, we have been unable to contact Internal Revenue Service revenue officers, and Internal Revenue Service departments such as the automated collection division and tax practitioner hotline.

In regards to IRS federal tax liens, the IRS announced that federal tax liens are not being issued and filed during the shutdown by revenue officers and nor are they being automatically generated.  Additionally, IRS bank levies are not being issued during the shutdown.  However, certain taxpayers may have received these notices with October 2013 dates, but these federal tax lien and IRS levy notices were issued prior to the shutdown.  Certain notice that a taxpayer may be subject to a federal tax lien or IRS levy may be automatically generated and issued to the taxpayer during the shutdown.

Regarding IRS enforcement action, the only enforcement action currently occurring in non-criminal cases involves cases and situations where action must be taken now to best protect the government’s interest.  For example, if a taxpayer owes a tax debt, and the collection statute on the tax liability is in jeopardy of expiring in the immediate future, the IRS may be taking enforcement action at this time.  Regarding criminal cases, the majority of criminal tax cases continue to be prosecuted by the applicable criminal investigative departments and units.  This corresponds with the fact that most federal law enforcement agencies have continue to operate and function during the government shutdown.

If you have a tax debt with the IRS or an ongoing tax audit and have questions regarding the impact of the government shutdown, it is recommended that you contact a tax attorney to discuss your situation and circumstances.  A tax attorney at The McGuire Law Firm can assist you with  tax matter or tax problem before the Internal Revenue Service.

Contact The McGuire Law Firm and schedule a free consultation with a Denver tax attorney to help resolve your IRS tax matters.  A free consultation is offered to all potential clients.

5 Reasons to Hire a Tax Attorney

5 Reasons or Situations of Which You Should Hire a Denver Tax AttorneyDenver Tax Attorney

 1) If you are being audited by the IRS or owe taxes to the IRS, you should contact a tax attorney.  An experienced tax attorney can represent you before the IRS and often prevent enforcement action such as bank levies, asset seizures and wage garnishments.  Further, your tax attorney can help you resolve the tax issue, as well as help educate you to hopefully prevent the issues from occurring in the future.  John McGuire is an experienced Denver tax attorney at The McGuire Law Firm and has successfully represented hundreds to thousands of businesses and individuals before the IRS.

2) If you are starting a business, a tax attorney can educate you on the tax issues and implications regarding the taxation of different business entities, and tax affects to the business owners.  Further, if your business will have employees, a tax attorney can help you understand your requirements regarding withholding taxes, 941 returns and federal tax deposits. A Denver tax attorney can assist you with the formation of your businesses and in understanding your tax responsibilities.

3) If you are considering gifting or transferring property to loved ones or other parties, a tax attorney can help draft the necessary documents and advise you regarding the federal tax implications.  A tax attorney will often work with clients regarding the advantages of gifting within their estate plan and execute these gifting strategies within the estate planning documents.

4) Your considering buying a rental property, but do not understand depreciation and how the rental property will impact your individual income tax return.  A tax attorney can help you understand these issues and thus allow you to take full benefit of the federal tax code and likely reduce your personal income tax.  A Denver tax attorney at The McGuire Law Firm can outline the tax implications and issues to consider when purchasing rental properties, in addition to other issues such as liability.

5) You have not filed tax returns in a while and are scared of the IRS.  Call a tax attorney immediately.  The longer you wait, the worse the situation will become.  A Denver tax attorney at The McGuire Law Firm can contact the IRS on your behalf, obtain information & transcripts and help you prepare and file returns with the IRS.  If the tax returns once filed result in a tax debt, we can help you resolve your IRS debt with an offer in compromise, installment agreement or other resolution option.


Call us at 720-833-7705 to speak with a Denver tax attorney and schedule your free consultation.