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Offer in Compromise FAQs: Your Guide to Tax Relief

We’re all responsible for paying our fair share of taxes each year. But what happens when the amount you owe is simply out of reach? If your financial circumstances have shifted to the point where your cumulative debt is beyond your ability to pay, your best option for dealing with the IRS may be an Offer in Compromise (OIC).

The Goal of the Offer in Compromise

The Offer in Compromise, or OIC, was created to accomplish two goals:

✅ It allows American taxpayers who are unable to pay the full amount of their tax debt a way to negotiate a payment that aligns with their ability to pay.
✅ It provides the IRS with the ability to collect at least a portion of the amount owed to them.

The process is neither simple nor fast—it generally takes one to two years for both sides to agree on an amount to be paid. Even so, it has certain advantages for both sides.

An Offer in Compromise generally allows for a resolution to be accomplished outside of court, with the agreed-to payment reflective of income and assets rather than the actual amount of debt that has accrued. Though it may seem a loss for the IRS, the agency often recovers more through settling than they might through aggressive collection efforts.

Understanding the Available Offer in Compromise Options

Taxpayers interested in pursuing an Offer in Compromise generally have three different options available to them under federal law:

💡 Question the Debt: You can argue that you don’t owe the tax debt.
💡 Inability to Pay: You can show that your assets and income aren’t enough to cover the debt.
💡 Exceptional Circumstances: You can seek a compromise based on economic hardship or special circumstances, even if you owe the full amount. This falls under the category of “effective tax administration.”

🚩 Applying for an Offer in Compromise

The OIC process is both time-consuming and complicated. Applications require specific forms as well as extensive documentation, and all must be accurately prepared in keeping with IRS regulations. When mistakes are made or forms are incomplete, the applications are quickly returned without the benefit of a review. To minimize both delay and frustration, it is strongly suggested that taxpayers looking to avail themselves of an OIC employ tax professionals for both the preparation of their paperwork and the negotiation of its terms.

🚩 Not Every OIC Application is Approved

It is also important to remember that an application for an OIC by no means guarantees the desired outcome.

🚩 Use a Qualified Tax Professional

Submitting the specifics of your situation to a qualified tax professional will provide you with the ability to have your case reviewed by an expert who understands the process and the IRS criteria for approval, and who will be able to give you a reasoned perspective on the viability of your request.

Working with a professional will also provide you with reasonable expectations regarding the amount of time that the process will take and what your chances are of having your initial offer accepted. The program generally takes about two years from start to finish, and it is common for the IRS to make a counteroffer when the agency believes it will be able to collect more than the amount proffered by the applicant.

❓ How Much the Taxpayer is Able to Pay

In evaluating your case, the Internal Revenue Service will likely pay less attention to the actual amount that is owed than the amount that the taxpayer is able to pay. This determination will be made on the basis of numerous factors, including income, assets, previous earnings capacity, and anticipation of your earnings capacity in the future. Living expenses will also be taken into consideration.

💡 The Good News

The good news is that from the time that an application is sent in and while an IRS evaluation is taking place, most collection efforts are frozen. This generally provides tremendous relief from stress for taxpayers who have fallen behind in their payments and who feel unable to submit the amount that they owe.

Take the Next Step—Consult a Tax Expert Today

If you’re considering an Offer in Compromise, navigating this complex process on your own can be overwhelming. Contact us today to discuss your situation with a knowledgeable tax professional.

We’ll help you understand every step of the OIC process, prepare your application with precision, and advocate on your behalf during negotiations. Let’s work together to find the tax relief you need in 2024.

Why Traditional Accounting Still Matters in 2024: Beyond QuickBooks and TurboTax

Intuit promotes their products like QuickBooks and TurboTax as quick fixes for your tax needs. And sure, if you’re a seasoned pro, handling your own taxes might work out just fine.

But for business owners, this DIY approach often falls short compared to the deeper insights traditional accounting can offer.

Rise of Intuit

With the rise of Intuit’s user-friendly software, the invaluable role of a licensed CPA has been overshadowed.

Yet, the real value CPAs offer—like legally lowering taxes and equipping businesses with the insights they need to make pivotal financial decisions—can’t be replicated by software alone.

Bridging the Gap

A return to traditional accounting isn’t just nostalgic; it’s a return to real, value-driven expertise that a licensed CPA brings to your business.

At Insogna CPA, we bridge the gap between cutting-edge technology and the irreplaceable human expertise that business owners need. While Intuit’s tools are great for some tasks, they can’t replace the strategic advice and personalized service that we provide. We’re here to help you maximize deductions, build your business, and grow your personal wealth.

Ready to take your accounting beyond the basics?

Contact us today to discover how our expert team can bring a personal, human touch to your business’s accounting and taxes. Because in 2024, traditional accounting is anything but outdated—it’s essential.

Tax Prep vs. Tax Planning

If you run a small business or are self-employed and pay taxes annually, you might be missing out on savings due to inefficient tax planning. Paying your tax bill all at once at the end of the year might seem straightforward, but it can lead to poor cash flow and those dreaded IRS penalties.

In this article, we’ll explore the difference between proactive tax planning with a Certified Public Accountant (CPA) and the more reactive process of tax preparation. If you’re not sure where to start, a CPA can help you get organized and ensure you’re not overpaying—or underpaying—your taxes.

❓ What Is Tax Preparation?

Tax preparation is the annual ritual of getting your tax return ready. It involves gathering all your financial documents and organizing them according to the latest IRS guidelines. This once-a-year task is purely transactional and doesn’t offer ongoing advice that could help lower your taxes, especially when compared to the continuous nature of tax planning.

Depending on your industry and experience, tax preparation can be time-consuming and stressful. It’s best to start early, but even then, tax prep often doesn’t give you the flexibility to maximize your savings. If the complexities of tax prep leave you frustrated and overwhelmed, you’re not alone.

❓What Is Tax Planning?

Ever find yourself filing taxes in the spring and hearing, “You should’ve called me last year to save some money”? That’s where tax planning comes in.

For those owning a pass-thru business, your tax bill is tied to your personal IRS1040 return, based on your business profits. Many businesses wait until taxes are due and pay in a lump sum, but this approach is far from efficient. It can even lead to penalties if you owe a significant amount.

Tax planning is a proactive approach, where you estimate your tax liability throughout the year by tracking income and expenses. This ongoing process allows for regular adjustments and recommendations that can reduce your taxable income before the year ends. Regular consultations with your CPA throughout the year are essential for staying ahead of the game. Efficient tax planning can boost your cash flow and keep more money in your pocket.

For instance, if a company waits until the end of the year to prepare taxes, it might have overspent throughout the year. In contrast, ongoing tax planning allows you to manage taxable income wisely, pay only what’s required, and maintain better cash flow for wealth planning.

❓ Why Is Tax Planning Beneficial?

Tax planning is crucial for any business. As mentioned earlier, ongoing planning alleviates cash flow stress when taxes are due in April and maximizes tax efficiency by legally lowering your taxable income throughout the year.

Moreover, tax planning gives you control over when and how you pay taxes, potentially reducing the overall tax burden. When done correctly, tax planning is the most reliable way to manage your business finances.

❓ What Can a CPA Firm Do?

Certified Public Accountants (CPAs) are experts in all things tax-related. They stay up-to-date with the latest IRS regulations and work closely with businesses like yours to offer ongoing tax planning strategies. With a CPA by your side, you can ensure you’re only paying the taxes you owe—and not a penny more—while also exploring tax deferral strategies to save even more.

CPAs are well-versed in federal tax laws and can offer guidance that helps you avoid missed deductions or costly penalties. By outsourcing your tax planning to professionals, you can focus on your day-to-day operations while knowing your finances are in good hands.

Tax planning isn’t just about meeting your tax obligations; it’s about creating a financial strategy that supports your business goals. With a qualified CPA team, tax planning can lead to significant savings and even help grow your wealth.

Why give the IRS more than you have to?

At Insogna CPA, we believe tax planning is a year-round strategy. Don’t wait until the last minute—reach out to us today and start saving with a personalized tax strategy that works for your business in 2024 and beyond.

How to Create a Business Budget for Your Startup

As you piece together your budget, it’s not just about the numbers—it’s a chance to gain a deeper understanding of how your startup operates. Once you can better identify how much money you have on hand and where it’s going, you start to better understand things like:

✅ The actual money you’re spending on labor and other materials necessary for your products and services.
✅ Your overall costs of operations.
✅ The level of revenue you’ll need to generate to support your business moving forward. A realistic idea of how much money you can expect to make in terms of profit, and when.

So, as you work to come up with a budget that is more specific to your growing startup, you also begin to better understand how that startup works. At that point, you’re not just in a position to make accurate, informed decisions about things like hiring or materials spending ‒ you can also go back and reconfigure your budget to account for any trends or patterns that you’ve discovered. This cyclical process is also a great way to make sure that you always have the cash necessary to take advantage of opportunities as quickly as possible, even ones that you didn’t necessarily expect.

The “Day One” Budget

Let’s say you’re building a budget for a startup that hasn’t launched yet. Your focus here is simple: make “Day One” happen. While every business is unique, a few critical factors should be top of mind to ensure a smooth opening:

💡 Facilities Costs

Where will your business call home? Whether it’s a rented storefront, commercial office space, or a warehouse, consider all expenses—from security deposits to necessary renovations and signage.

💡Fixed Assets

These “capital expenditures” are the tools your team needs to get the job done. Think work vehicles (if applicable), office furniture, and essential equipment like computers—after all, your team needs a solid workspace.

💡Materials and Supplies

This includes everything from basic office supplies to marketing materials. Stocking up on these essentials will help your business hit the ground running.

💡Miscellaneous

Finally, there are those other expenses that don’t fit neatly into the above categories. Legal fees, financial consultations, licenses, permits—all these add up and are crucial to your startup’s foundation.

Remember, these are just the startup costs to get your doors open, not the long-term operating expenses.

🚩 Get It Right from the Start

Feeling stuck or overwhelmed?

We’re here to assist. We can help craft a budget that not only supports your startup today but also positions you for growth in the future. Let’s ensure you’re ready for both the present challenges and the exciting opportunities that 2024 will bring.

Take the first step towards securing your startup’s future—schedule a consultation with us today!

11 Business Tax Deductions in 2024

When tax season rolls around, every business owner starts looking for ways to minimize their tax bill and keep more of their hard-earned money. Knowing which business tax deductions you can claim is key to ensuring you’re not overpaying. While office supplies are a given, there are several other deductions that might surprise you and significantly reduce your taxable income.

Whether you’re a seasoned entrepreneur or just starting out, these deductions can make a real difference in your bottom line. In this post, we’ll break down 11 essential business tax deductions you should consider claiming on your taxes this year. Taking advantage of these deductions can help you lower your tax liability and reinvest those savings back into your business.

Pro Tip: Don’t forget to check out our 2024 Business Tax Prep Checklist for a smooth tax season.

💡 Here's other things you might be able to claim on your taxes

✅ Retirement Plan Contributions
✅ Health Insurance Premiums
✅ Marketing Your Business
✅ Business-Related Insurance Premiums
✅ Legal and Professional Services
✅ Home Office Deductions
✅ Auto Expenses Related to Your Business
✅ Office Supplies
✅ Licensing and Taxes
✅ Your Cell Phone
✅ Self-Employment Tax

Need Help?

Taxes can be tricky, but they don’t have to be. Let’s talk about your specific tax needs and find every business tax deduction you’re eligible for. Schedule a free consultation today, and let’s make tax season as stress-free as possible.

How to Deduct Meals and Entertainment in 2024: What Every Business Owner Needs to Know

In 2024, businesses can still deduct 50% of the cost of business-related meals. The temporary 100% deduction that applied in 2021 and 2022 is no longer available, so it’s back to the usual rules. If you’re a business owner looking to cut down on business expenses, understanding these deductions is key.

To qualify for the deduction, the business owner or an employee must be present when the food or beverages are served. And keep in mind, the expense can’t be lavish or extravagant. The IRS defines a restaurant as a business that prepares and sells food or beverages to retail customers for immediate consumption, whether on or off the premises.

What's Excluded?

Meals bought at grocery stores, convenience stores, or any place that mainly sells pre-packaged goods don’t count. Even if your company operates an eating facility, it might not qualify as a restaurant, especially if it’s run by a third party under contract.

And remember, meals for personal reasons, even while traveling, aren’t deductible. However, if you’re on a business trip, most meal expenses can be classified as business costs, provided the trip is primarily for business purposes. If the trip is mainly personal, only those expenses directly related to the business activity are deductible.

How to Qualify?

Starting in 2024, your business can generally deduct 50% of the cost of business meals if:

✅ The business owner or employee is present.
✅ The meal cost isn’t “lavish or extravagant.”
✅ The meal involves a business contact, such as a customer, employee, vendor, or consultant.
✅ The meal has an “ordinary and necessary” business purpose.

Remember, entertainment expenses aren’t deductible, so if you’re at a sporting event, for instance, you can only deduct the meal costs if they’re billed separately, like a catered meal delivered to a skybox.

For more details on these rules, including recordkeeping requirements for business meals, check out IRS Publication 463, Travel, Gift, and Car Expenses.

Need Help?

Struggling to navigate the maze of meal and entertainment deductions for your business? Contact us today. We’re here to help you trim down your business costs and keep more money in your pocket—legally. Let’s make your 2024 tax season a breeze!