How Do You Calculate OIC Reasonable Collection Potential?
In an earlier blog entry, we wrote about the IRS Offer in Compromise ("OIC"). One of the most misrepresented items in an OIC is the minimum offer. This amount is determined by the reasonable collection potential.
Your reasonable collection potential (RCP) is your magic number. This "RCP" is the amount that, based upon IRS's standards, is the amount of money that the government believes it can collect from you. Your offer amount must equal or exceed this reasonable collection potential amount. This amount is a combination of two separate calculations:
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Your would-be clients use these dishonest preparers by the thousands, because the dishonest tax return yields a much bigger refund than your honest return. You, on the other hand, prepare returns with integrity, accountability, and accuracy. And often, that accuracy does not yield the large refunds achieved by those "other" preparers. So your potential clients seek out those preparers willing to cheat to get large tax refunds. This unlawful practice creates, for you, unfair competition during tax prep season. But IRS could actually correct this unfair competition. Please read further.
There are lots of companies that try to trick you to get your business. One sure scam tactic is the misleading mail piece. Yes, I have details, to help you spot these scams.
Typically, during an IRS examination, the auditor wants to do a full, thorough review of the taxpayer's items on the tax return. That review could probe whether there is undisclosed (unreported) income. Then, when the exam is nearly complete, the IRS agent seeks a closing agreement with the taxpayer on the amount of tax increase, if any. So why does IRS need to receive a Personal Living Expenses statement? Well ...