Are you stuck in an IRS tax debt situation? You’re not alone. Many Americans are facing similar problems, and some are in desperate need of tax debt relief. Fortunately, there is a way out! The IRS offers a variety of methods for taxpayers to resolve their debts outside of bankruptcy and garnishment.
This article will cover the most effective practices people can work with the IRS to get back on track financially and regain control over their finances by eliminating or reducing their outstanding tax debt owed to the government agency.
What is an Offer in Compromise?
An Offer in Compromise is a legally binding contract between the taxpayer and the IRS. It can be used to settle tax debt, or it can be used to reduce it.
Taxpayers who fulfill the tight requirements can significantly benefit from an Offer-in-Compromise, one of the most excellent options provided under the Fresh Start Program. Most taxpayers who use an IRS Offer-in-Compromise (OIC) to resolve their tax liability pay less than 20% of the total amount owing to the IRS.
How Can You Be Qualified For Offer In Compromise Program?
Ensuring that you comply with the IRS is a prerequisite for being eligible for an Offer in Compromise (OIC). The IRS evaluates an Offer in Compromise (OIC) in three essential circumstances, but additional factors should be taken into account.
- Doubt as to Collectability
This signifies that you don’t have enough money or other resources to satisfy your entire amount due.
- Doubt as to Liability
This means you disagree with whether you owe the tax or that the amount is accurate.
- Effective Tax Administration
You can pay the whole amount, but doing so would be unfair or cause financial hardship.
You should be aware of a few things before deciding to submit an Offer in Compromise.
If you want the IRS to accept your offer, you must submit all unfiled tax returns and stay consistent with estimated tax payments and withholding.
You are ineligible to qualify for an offer if you have an open bankruptcy case right now. In principle, any debt settlement must occur within the context of your bankruptcy case.
Even if you submit an offer, the IRS may still reject it. It begins the process of assessing your circumstance, your financial capacity, and the amount you are prepared to offer. You have the option of presenting an offer for both your personal and corporate tax liabilities.
If you comply with the terms of the offer agreement, your total tax liability will be settled once the IRS notifies you that it has accepted your offer and you pay the reduced amount you have agreed to.
What Happens If the IRS Returns Your OIC Offer
If you failed to timely submit your tax returns, pay expected tax payments, correctly adjust your tax withholding, or make federal tax deposits, the IRS might return your offer once it has been processed. Additionally, the IRS has the right to reject your request if you fail to submit the appropriate documents or if your application fee or offer payment is not fulfilled.
There is no appeal option if the offer is returned. However, the IRS will notify you in writing and give you 30 days from the date of the notification to petition the IRS to reconsider its decision to reject the offer.
What Happens If the IRS Rejects Your OIC Application
Following receipt of the IRS’s letter of rejection, you have 30 days to file an appeal. Use IRS Form 13711, Request for Appeal of Offer in Compromise, to dispute a ruling.
The IRS will not reimburse the application fee and any other payments you make with the offer if it rejects your appeal. The IRS will apply the non-refundable charge and expenses on your tax debt. If the IRS rejects your bid, you have the right to file an appeal.
Offer in Compromise Payment Options
You must choose one of the two available payment methods and submit money along with your offer. The total amount you offer and the payment method you select will determine the amount of the first and succeeding installments.
- Lump Sum Payment
When you submit your offer, you’ll often need to pay 20% of your entire sum. After the IRS accepts your request, you must pay the remaining balance in five or fewer installments within five months.
- Periodic Payment
According to the terms of your offer, you will typically make the first payment when you submit the proposal and the remaining payments over the next 24 months.
When Should I Apply for an Offer in Compromise?
The IRS does not have a determined time frame for when you should apply for an Offer in Compromise (OIC). You can seek an OIC at any time, but it’s best to do so before the IRS forwards you a Notice of Intent to Levy or Notice of Your Right to a Hearing.
- If you receive one of these notices, the IRS is ready to begin garnishing your wages or taking funds from your bank account. These actions could result in serious financial consequences and would likely make it extremely difficult for you to settle your tax obligation within three years—the time the IRS will accept an OIC application as valid.
- If you believe that paying off your tax debt over three years is feasible (meaning that keeping up with payments is realistic), then applying now may be a good idea. It might prevent further collection efforts by allowing more time to develop funds.
Frequently Asked Questions
- Is there an additional fee on top of the tax dues I owe in applying for an Offer in Compromise?
Yes! To request the said tax debt relief option, you must pay a $205 application fee. It’s worth remembering that if you are approved of the lump sum payment method, you are required to settle 20% as the offer amount.
- Is it possible to lift the lien or levy on my account?
If the IRS accepts your offer in compromise, the lien on your account will be released. However, if the levy was issued on your account before you applied for an offer in compromise, the IRS is not obligated to remove it.
- If I’m going through bankruptcy, can I apply for an offer in compromise?
Unfortunately, no. If you’ve previously filed for bankruptcy, you cannot apply for an offer in compromise. You may submit an application when your bankruptcy is discharged.
If you owe the IRS over $10,000, it’s time to consider applying for an OIC.
If you’ve been thinking about how to get out of your tax bills, an Offer in Compromise might be the best option for you. But even if it is, you need to make sure you’re applying with a certified tax professional who knows what they’re doing! Before making any decisions, you must be informed of all the details about your situation, which means talking with someone who knows all the ins and outs of IRS tax relief programs.
Just no one can negotiate an Offer in Compromise—you need a certified tax professional trained by the IRS. That way, you can be confident that your application will be handled correctly and follow all the rules set down by the IRS itself.
833IRSHelp is a company that specializes in helping people like you get tax debt relief. We know exactly how to handle your case, so you don’t have to worry about the details. You can rest easy knowing that our team will take care of everything—and you’ll be able to breathe again!
It’s important to remember that if your tax liability is large enough and you qualify for an OIC, then it may be worth applying for one. You should always consult with an experienced tax attorney before submitting your application to make sure the IRS will approve it. This tax debt relief could save you thousands of dollars in penalties and interest payments over time if agreed.
Start your debt-free life today together with our solutions-oriented tax experts from 833IRSHelp! Contact us at 833-477-4357 for a FREE tax consultation.