Dissipation of Assets
The Dissipation of Assets saga continues. Lets take a little refresher course on the concept of dissipation of assets. Generally during an offer investigator the IRS may discover that specific assets or a portion of certain assets have been dissolved, sold, spent, disposed of or are otherwise no longer available to pay the tax liability and have therefore not been included in the proposed offer in compromise amount. When this happens what should a diligent Offer Examiner or Offer Specialist do?
First it Should be noted that the Offer examiner or Offer Specialist should expand its investigation in an attempt to find dissipated assets. I happen to believe that COIC is doing just that to find excuses to reject offers.
Now once it is determined that an asset has been dissipated, the investigation should address whether the amount of the dissipated asset should be included in the offer amount. Now this is a little tricky, because if one were to include the amount of a dissipated assets (an asset that is no longer available for payment of the tax liability) in the amount of the offer then the amount of the offer will exceed the Reasonable Collection Potential.
Now the concept of Reasonable Collection Potential is that the IRS will accept in an offer in compromise the amount that it could collect now and in the next five years. This is a difficult number for most taxpayers because they don't have access to 5 years of future income.
Now when the IRS adds to the amount of the Reasonable Collection Potential the amount an asset that is no longer around to arrive at the amount of an acceptable offer in compromise, they will make the case impossible to settle.
It is a catch 22. The IRS is saying we will settle your tax liability for an amount which is the most you can pay plus however much money you had when you got in trouble with the IRS. Duh.
I am not sure where this logic came from but I am not convinced it came from the top. I am trying to run it down.
More on the dissipation of assets saga later. My next blog will discuss when a dissipated assets should be included under the manual and the apparent abuse of Centralized Offer in Compromise in use of the dissipated asset issue to reject offers in a wholesale fashion.
To learn more about offer in compromise you can check out IRS-Offer-in-Compromise.com
I have also written a book on Offer in Compromise which you might find helpful in your dealings with the IRS.
First it Should be noted that the Offer examiner or Offer Specialist should expand its investigation in an attempt to find dissipated assets. I happen to believe that COIC is doing just that to find excuses to reject offers.
Now once it is determined that an asset has been dissipated, the investigation should address whether the amount of the dissipated asset should be included in the offer amount. Now this is a little tricky, because if one were to include the amount of a dissipated assets (an asset that is no longer available for payment of the tax liability) in the amount of the offer then the amount of the offer will exceed the Reasonable Collection Potential.
Now the concept of Reasonable Collection Potential is that the IRS will accept in an offer in compromise the amount that it could collect now and in the next five years. This is a difficult number for most taxpayers because they don't have access to 5 years of future income.
Now when the IRS adds to the amount of the Reasonable Collection Potential the amount an asset that is no longer around to arrive at the amount of an acceptable offer in compromise, they will make the case impossible to settle.
It is a catch 22. The IRS is saying we will settle your tax liability for an amount which is the most you can pay plus however much money you had when you got in trouble with the IRS. Duh.
I am not sure where this logic came from but I am not convinced it came from the top. I am trying to run it down.
More on the dissipation of assets saga later. My next blog will discuss when a dissipated assets should be included under the manual and the apparent abuse of Centralized Offer in Compromise in use of the dissipated asset issue to reject offers in a wholesale fashion.
To learn more about offer in compromise you can check out IRS-Offer-in-Compromise.com
I have also written a book on Offer in Compromise which you might find helpful in your dealings with the IRS.
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