Add Debt Settlement Agreement Template Mark with airSlate SignNow

Add Debt Settlement Agreement Template mark

guys my name is anthony fontana i'm an irs enrolled agent with ea tax and today i'm going to be going through this irs form 433a oic for the offering compromise this is a collection information statement for either wage earners and or self-employed individuals if you're going to file an offer you will need to start with this form here and this is kind of the meat and potatoes to the offer and compromise and it's going to determine if you qualify for this offer and what your offer is going to be so i'm going to be going through one that i filed for a client of mine that actually did get accepted and the exact numbers that i used on his return um we're gonna be obviously making up some names here uh but nonetheless going through kind of everything with his situation and some of the i guess rules behind some of the numbers that we used and uh the information that we use to determine those numbers okay uh so the first section here is pretty straightforward i think anyone should be able to fill this out but it's just you know name date of birth social his marital stat he's not married his address he did rent his house um he lives in orange county in california here phone number right we didn't put milling because it's the same does not have a spouse he claims his two daughters and his mother okay and those are both on the 1040 which is the tax return and they do not earn income so we put no there he is not a wage earner so we do not fill out this section for him now as far as personal assets goes he had two bank accounts one was a checking the other was a savings and these are the numbers that he had on the bank statements uh the last statement that i had before we filed the offer this is what was in there okay um so we have a 300 in the checking and a thousand bucks in the savings he didn't have any other bank accounts so we don't put anything there but if you do you know you'd add an attachment and list those out just like this um so you're gonna add everything together right one b one a b c and then minus a thousand bucks so that's what we get here the bottom line is the 441 okay then we go down the list here didn't have any investment accounts stocks bonds nothing like that so we skip this sections we put zeros when we don't have that you don't want to leave anything blank here and kind of leave it up to the irs to to guess here okay we just we tell them hey we don't have anything so we put zeros in there didn't have any virtual currency none of that so everything's a zero in uh in the second part here in retirement accounts again didn't have any retirement accounts so i'm putting zeros in there for him no cash value life insurance policies nothing here zeros so zeroing that out in the personal assets continued real property he did not own a home again he did rent so we put zeros there vehicles he did have a car okay uh so i did fill this out he owned this car so we didn't have a payment on the car but i did have to get the fair market value of the car here the current market value the way i did this is i go on a kelly blue book and i look up his car and i get um a fair conditioned price for that car and his mileage so i did that and that's what that 5 000 iris gets gives us the 80 allowance here so that's what the 4 000 comes to that comes straight across and then we get the minus they give us another allowance 34.50 so i did the 4000 minus the 3450 to balance the 550 okay he doesn't have any other cars so that 550 drops straight down okay that's the total for his cars um other valuable items he didn't have any of these artwork collections jewelry safe deposit box nothing like this i did not fill that out so then we had to add uh we had to total up the available individual equity and assets so we're looking lines one through seven so really all we have is the car the 550 and the banks four four one so again one through sevens one two three four five there's that six and seven so that's the 991 is total available uh equity in the assets for this offer okay he is self-employed so this is where i had to start filling things out okay uh i just put you know he doesn't actually have in a a registered business he just files a schedule c sole proprietorship on his tax return the name of his business is his name he doesn't have a tax id or ein so i don't fill that out he just uses his social so it's pretty straightforward he is a mechanic doesn't have any employees kind of just works for himself uh business name same here but nonetheless okay just this uh sole proprietorship is all i'm filling out here the business assets okay he doesn't even have business bank accounts he uses his personal account as like his business bank account too uh which is probably not the right thing to do but nonetheless i mean that's in reality so we didn't actually have any business bank account so i just put zeros in there now he did have assets business assets uh as far as what he uses in his business right he's a mechanic and he uses tools so he's got all the different types of tools that he uses to you know to do his business and those actually totaled up five thousand dollars okay i ended up creating a statement of all the various tools that he had i had him kind of fill that out whatever power tools he had wrenches toolbox lights all that type of stuff and we valued it at about a five thousand dollars now you'll see here iris allowed deduction for professional books and tools of trade right line ten um this sample here online does not let me fill this out but nonetheless i put in there five thousand dollars and the reason i did this and you'll see this this comes from the sorry wrong one yes the what they call the internal revenue manual for the offering compromise and i will include links to these uh sections here on from the iris's website but you'll see right ir's website here it is for income producing assets this is for the business okay and this is uh has to do with the offering compromise uh but when you'll see here this is his situation there are both equity in the assets right the five thousand dollars that are determined to be necessary for the production of income and available for income stream produced by those assets then compare the value of the income stream produced by the income producing assets to that equity that is available and determine if there's an adjustment to income or expenses is there's a lot of jargon here okay but what i am essentially arguing to the irs is that that 5 000 in assets that he has that potentially who could sell and you know give that 5 000 to the irs but i said you know if he sells that then he's no longer able to produce income moving forward so that's what this is saying is that is that it is necessary for the production of income to move forward buy these assets okay so that's that's what i'm arguing these are what they call income producing assets nonetheless i'm not hiding anything i'm telling the irs hey here's all the assets he's got five thousand dollars worth these are all the different types of assets these are what they individually are worth if you were to sell them but he can't sell them because then he's no longer able to produce income moving forward so what i do there is i put iris allowed deduction for the professional books in tools of trade i put that 5 000 enter the values of line 9 minus line 10 0 right 5 000 minus 5 is zero so that's what i did for him long-winded here uh let's see moving along notes receivable he's on a cash basis doesn't have notes receivable accounts receivable nothing like that um so we're just adding line 8 and 11 and enter that here so we're looking at line 8 up here line 11 right there zero business income and expenses for self-employed so if you provide a current p l statement for the information below enter the total gross monthly income on 17 and monthly monthly expenses on line 19 below do not complete all the other lines with that same so that's what i did i created a p l for my client and i just did that for him made it look nice for the irs when they got kind of go through it's kind of limited with all these categories so for him you know i made it uh real specific to his business but nonetheless he's got some income and some expenses bottom line he's got some income okay that was his monthly income monthly household income and expense information so he so here's all other types of income uh if he were to have wages uh any other type of income here interest distributions from businesses he didn't have anything here so which i should do on this example here we're marking fat zeros on all these lines anything you don't have you mark a zero on okay so that's what we're doing so he had zero there total household income ad lines 30 through 38 he's got nothing there okay so now we're doing here [Music] monthly household expenses this is very crucial here so gotta pay attention okay these are a lot of these are what the irs kind of gives some of them they don't there's a lot of rules involved on what we can use as expenses okay so we know what the income is for my taxpayer eight thousand dollars a month right but what does he get to exclude from this offer because he's gotta live so they're gonna give him an allowance for food clothing miscellaneous and what we do is we go to the iris website collection financial standards okay and they give us the standard for the food clothing another item so we look at the national standard and we know in his case there's him his two daughters plus his mother so there's four people on this okay so we got a total of 1740 is what we get to use in that column 1740 okay uh he's also got to pay for housing and utilities so again the iris is going to give us here on this collection financial standards what he's able to use go to california he's in california okay we look at a family of four and the county that he's in is i cast it where is it oh geez right there orange county 35 58 so that's what i'm putting here okay vehicle loan payment he doesn't have one he owns his car vehicle operating costs same thing we go to our oops let's go back here collection financial standards and we're going to look here local standards for transportation okay ownership if he had if he owned a car and he was making payments he gets to deduct that but he doesn't because he doesn't he's not making any payments he owns it outright okay but we do get the operating costs this is for like gas tires maintenance registration yada yada they give us for one car and we look at where we are and for us this was in la 254 is what we got here um and here's kind of a pro tip that i actually missed with his his offer and compromise gonna look back to our [Music] oh jeez there it is this is again back from the internal revenue manual in situations where the taxpayer has a vehicle that is currently over eight years old or has a reported mileage of over a thousand a hundred thousand an additional monthly operating expense of 200 will generally be allowed per vehicle so they give an example right taxpayer who has a 2009 vehicle with 90 000 miles will be allowed uh the standard of 231 like we just saw well in his case it's 254 right depends on where you're at in the in the nation okay so we get the 231 at least in this case that they're giving us geez where it is there it is 231 plus the 200 because it's over a hundred thousand miles or over eight years old okay his car is over eight years old so i did miss that we could have probably got 454 here but i missed it so nonetheless pro tip make sure if you have an old car to add that on to whatever's on this collection financial standards the local uh local standards for transportation okay see public transportation cost since he has a car we can't use that if you don't have a car you can use that and again that is on the financial collection financial standards page okay health insurance premium he actually does not pay for health insurance so he didn't get anything there if you are paying for health insurance whatever you actually pay for health insurance you get as a deduction there obviously you got to prove that though okay out of pocket health care costs this is just another gimme we're gonna look back here oh let's go forward here okay collection financial standards out of healthcare uh out-of-pocket healthcare we're looking fifty-six 224 is what we got here okay current monthly taxes this was uh calculated based on what he's paying quarterly and just dividing that by three okay to both the fed and the state is what he's getting here secured other debts okay actually that's wrong this one was actually goes here so this this uh s line here is for actually government guaranteed student loan that's that's actually really popular student loan payments if you're making those those go there enter the monthly delinquent delinquent state and or local tax payments that's what we have so he also owed the state and before i filed an offer in compromise generally speaking i and the taxpayer owes with the state i'll get the i'll get the taxpayer on a state uh payment plan first so then we can use part of that as a deduction here to get our disposable income so what i did is i got him on i believe it's like 500 some odd dollars a month but i you can't use the full amount i believe he owed just over nine thousand dollars to the state and the irs what they allow again back to the revenue manual here we're going to go yes here it is right so when the taxpayer owes both delinquent fed and state taxes right so this is the section on how this works and you'll see here the taxpayer has an existing agreement so again i did get the taxpayer on a a payment plan that's the existing agreement with the state which was established after the earliest irs date so yes his state taxes were after his irs desires were first the payment plan amount on the agreement is more than the calculated percentage amount so we're going to kind of brief over that because most people can kind of get around this okay because of this right here advise the taxpayer that he or she can use the amount iris allows for miscellaneous expenses under national uh standards to pay the additional amount due so what does that mean we go back here to our infamous collection financial standards and we go down here the six-year rule for repayment of tax liability right the irs allows let's see where does it say this they basically allow six years for the repayment of your state taxes so he owed about nine thousand dollars nine thousand divided by six equals and then monthly divided by 12. so we got that 125 a month is what he got now he was actually paying 580 i believe a month with the state but he actually got 127 and that's what we got to put on the 433 here so now what we do is we add all these expenses up together we get 7 000 total household expenses remaining monthly income so then we're doing the total income here business net income the 8 000. minus the 7 000 is what we get the 345 and that's and that's what this is explaining over here okay so that's what we get the 345 is what's left over after he pays for his uh necessary living expenses what the irs would say this is um then we keep going now we uh calculate the offer so enter the the total from box f there it is the 345 times it by 12 4140 ah okay so we have two options here you can either do the uh this is what's called the like the lump sum offer here this times 12 and this here is like what they call the periodic payment offer so generally speaking the lump sum offer is going to be cheaper right times 12 it's the multiple whereas the periodic payments times 24. now the times 24 is more because you have to pay off every month after you submit the the offer every month you're making this payment here the lump sum is generally what i'm doing with with clients because it's a cheaper cheaper amount here now you'll find out in another video when we do the 656 that this has to be paid within five months after the offer accepted which is usually about a year to two years after you file this paperwork so you have some time to come up with this money nonetheless this is what we decided to do the 345 again uh remaining monthly income times 12 to 4 000. and we're entering that here box g or uh h which is here so whichever one we decided to do so we got the 4000 there and then enter the amount from box a plus b if applicable so that is we have to go to the start here a right available uh individual equity in assets 900 bucks plus b business assets zero so that's what we have down here is the 900 so we have the 900 plus the 4 000 our offer amount was 5 000 bucks now there is the section nine here there's other other information in in his case you're just gonna have to go through this are you and and you do have to answer all of these questions so in his case none of these applied so it didn't it didn't throw his offer into into question at all um but nonetheless we did do the offer for the five thousand bucks this taxpayer actually owed over 130 000 uh so he had a huge savings once we got to the end of this again this one probably took about a year and a half from start to finish to get this done uh but nonetheless he's already paid the the offer and he's good to go but that's how we fill out the the 433 and um oh this is also very important obviously you got to sign this here and you got to uh include the applicable attachments here so with in his case we did the the bank statements um which is here right copy of the individual banks and it's three months worth and then we did the the verification of delinquent state taxes so i had to show uh a statement that from the from the state of how much he owed and the fact that he was on a payment plan i was the power of attorney so i attached that um and then you've got to attach the form 656 which i'll go over in another video but i also touched that that p l and the which is not here and so i didn't check those boxes and the uh the list of business assets for him well i hope you found this information this video helpful uh in filling out your offer and compromise if you could do me a huge favor like like the video share it subscribe to our channel uh for more videos coming up which will i'll be doing more of these uh 433 and going through actual examples of clients that i've had offers accepted for well thanks again guys uh we'll see you soon