We just received notification from the IRS that a Doubt as to Liability Offer in Compromise (“DATL”) we submitted on behalf of our client earlier this year was accepted resulting in a savings of approximately $225,000.
If you qualify the DATL is a powerful tax settlement tool that is available to taxpayers with unpaid back taxes.
The IRS assessed the taxpayer more than $225,000 in taxes, interest and penalties and was pursuing enforced collection against our client. Based upon the facts of the case our client was unsure if the IRS was owed any of the taxes it claimed were outstanding. After consulting with our client and reviewing the available evidence we determined that the taxpayer did not owe the amount of tax assessed by the IRS and quickly filed a DATL to stop enforced collection activity by the IRS.
A doubt as to liability exists when a taxpayer has an honest and real disagreement as to the amount of the correct tax debt due for a particular tax year. When submitting a DATL you must provide adequate documentation that will assist the IRS in identifying the reasons you doubt the correctness of the tax debt. You are also required to provide a written statement detailing why all or a portion of the tax debt is erroneous. You must complete Form 656-L, Offer in Compromise (Doubt as to Liability) when submitting your request to settle a tax debt based on doubt as to liability.
A DATL is often used in the following circumstances:
• Audit Reconsideration
• Administrative Abatement of Interest
• Missing Payment Application
• Erroneous Reporting of Income
• Disagreement on under-reporter
If you don’t dispute the amount of tax owed but simply are unable to pay it, you may be a candidate for an Offer in Compromise-Doubt as to Collectability (“DATC”). A DATC allows you to settle your IRS back taxes for less than what you owe. With a DATC, the IRS takes into account your monthly income and allowable living expenses along with a percentage of the equity in your assets to determine your reasonable collection potential. Unless exceptional circumstances exist you must offer to pay your reasonable collection potential.
If you would like to learn more about either of these programs or other tax resolution alternatives call the tax professionals at East Coast Tax Consulting Group today at 866-550-7655 for a free consultation.