The Confessions of a Consigliere to Goombas
The IRS has many similarities to the Mafia:
1. Though they are rarely seen in public, they are everywhere.
2. If you try to hide something from them, they will find it.
3. If you lie to them, you will regret it.
4. If you do not pay them, you will pay dearly.
5. If you do not play by their rules, you will lose everything.
6. If you fight them, you will lose.
7. If you run from them, they will find you.
8. When they catch you, make a good act of contrition because the consequences are deadly.
Recall the fates of Al Capone and Luca Brasi.
You do not want to insult either the IRS or the Mafia, unless you have a death wish and require the thrill of living on the edge for excitement in an otherwise dreary life (a not all too uncommon syndrome suffered by CPAs). Consequently, when making an offer in compromise or partial payment installment agreement with the IRS, first do the math to determine the reasonable collection potential substantiating your offer. Don’t just low ball any amount. About 90% of the offers in compromise are rejected because the offers are simply ridiculous, lacking any credibility. And you know what happens to those who insult the Don: they are found hanging on a meat hook in some remote, abandoned warehouse or enshrined in concrete in some bridge abutment. Neither is a very pleasant prospect.
In addition, when dealing with the Mafooch, bear in mind that offers in compromise consisting of a lump sum payment of cash ordinarily require good-faith blood money upfront: a 20% payment of the offer in addition to the $150 processing fee along with the submission of the offer. Similarly, an offer in compromise consisting of monthly installment payments require the first month’s installment payment plus the $150 processing fee along with the submission of the offer. Moreover, although it often takes two years to receive an acceptance of the offer, the taxpayer is, nevertheless, required to continue the proposed monthly payments of the pending installment settlement to keep the offer open. Of course, under either scenario, neither the 20% cash lump sum payment or the two years of monthly installment payments, nor the $150 processing fee, are refundable in the event that the offer is rejected. The IRS adopts a very hard bargaining posture with the offerers, not unlike that of Don Corleone with his business associates.
When considered altogether—a 10% acceptance history, a two year waiting period, a 20% non-refundable down payment or twenty-four non-refundable monthly installments, plus an expensive accounting or legal bill—the offer in compromise may not be an offer that you wish to make at all. After dragging its heels for two years before making a decision and requiring you to shell out 20% of your total offer upfront, the IRS can deny your offer and keep your money in true Mafioso fashion. When dealing with the IRS, you’re dealing with an all powerful, ruthless mob, insensitive to your personal concerns, wishes, problems, and reasons. Either you pay up or you swim with the fishes. It will seize your home, money, autos, personal possessions, anything of value. With the dexterity of a Mafioso cutting your heart out with a stiletto, it'll rip the money right out of your bank account without any advance notice before you can plead for mercy. So proceed with extreme caution.
And, as Michael Corleone advises, if you do decide to make an offer, make an offer that cannot be refused.
In bocca al lupo!
This article is provided for informational purposes and is not intended to be construed as legal, accounting, or other professional advice. For further information, please consult appropriate professional advice from your attorney and certified public accountant.
Have a tax or an accounting question? Please feel free to submit it to William Brighenti, Certified Public Accountant, Hartford CPA Accountants. For information and assistance on any tax and accounting issue, please visit our website: Accountants CPA Hartford. For assistance in making an Offer in Compromise, please see the article: How to Calculate an Offer in Compromise that Cannot Be Refused.