Nowadays, everyone wants the best deal possible. This frugal approach to shopping, dining and other services or experiences is why coupons and competition exist in the retail world. Some people even look for discounts and ways to make their tax debt balances more affordable. It may seem sometimes that there is no room for negotiation when it comes to the IRS or state tax agencies, but the Offer in Compromise is one method that many tax practitioners have used to get clients into resolution programs and provide them significant savings. This settlement plan involves a single payment at a small percentage of the original balance.
The ability of an Offer in Compromise to drastically reduce an individual or business’s tax debt is dependent on many factors, including ability to pay, expenses, income and age and status of the balance. This is why IRS Offer in Compromise help from a professional tax company is always recommended. The average taxpayer does not have the knowledge to go it alone against the federal government and may not be able to negotiate well for a reasonable balance payment. They may end up paying more they would with a tax professional’s help or have their Offer in Compromise rejected overall.
To ensure the best chances of success, taxpayers with IRS debt should look up the Offer in Compromise to determine whether they think they might qualify and then get in touch with a tax negotiation specialist to get the proposal created and submitted to the IRS. This IRS Offer in Compromise help is best obtained through a group of tax practitioners, enrolled agents and CPAs like those at Community Tax. They make the entire settlement process smooth and stay with clients through the entire case to guarantee the best results. Anyone with mounting tax debt would do well to get this kind of help and get their tax debt resolved quickly! Call us today for more information about how your tax debt can be resolved 1-800-444-0622.
Check out our Frequently Asked Questions section and get the lowdown on all of your Offer in Compromise queries.
What is an IRS Offer in Compromise?
This term refers to a tax settlement option offered by the IRS to taxpayers who cannot pay the full amount of taxes owed. It is only offered if the IRS deems the full debt owed unpayable, and impossible to pay off through payment plans, and will only be accepted if the IRS believes the offer being made is greater than or equal to a sum they could ever truly expect to receive from said taxpayer.
Do I qualify for an Offer in Compromise?
There are three main qualifications that the IRS will consider.
Doubt as to Collectability
This qualification comes about if the IRS assumes reasonable doubt that the amount owed can be collected in the foreseeable future through usual collection procedures. To determine eligibility under these terms, the IRS considers several facets.
First, they decide whether they would be able to collect a higher amount through forced collections than if they accepted the Offer in Compromise. If the OIC won’t garner them a higher amount, then it will likely not be accepted.
To prove you cannot pay the amount owed, the IRS will look at your net equity in assets along with your projected monthly disposable income—this is known as reasonable collection potential, or RCP. If your RCP won’t see your debt paid in full before the collection statute expires, the IRS is more likely to accept your offer. The IRS will also consider the likelihood of the taxpayer’s financial situation improving. If it looks likely that it will, they may reject the offer and wait for the full amount to be paid.
Doubt as to Liability
This refers to doubt that the assessed tax liability is correct. This may be due to examiner error of the tax code, it may be that the examiner neglected to utilize all the evidence presented, or it could be that the taxpayer has found new documents to prove the debt assessed was incorrect.
Effective Tax Administration
Unlike the aforementioned causes for OIC approval, in the case of effective tax administration, there is no doubt regarding the stipulated tax amount owed. However, there may be individual circumstances that would mean forced collection would cause financial hardship, in which case the IRS would more likely consider accepting a taxpayer’s offer.
To qualify, you must be up to date with your tax filing, and not be involved in an open bankruptcy proceeding. You’ll also be required to describe your financial situation in details, which may necessitate pulling spousal financial reports.
How long does an Offer in Compromise take to process?
This varies based on the situation, but most OICs are processed within several months’ time. There is no guaranteed timeframe for an IRS Offer in Compromise proceeding. It can take the IRS up to seven months to fully process your request, whether the outcome is acceptance or rejection.
During this decision process, taxpayers are still expected to make payments on any pre-existing plan, including the plan offered within your request. You will also still receive penalties during this period, but collection processes are paused during the deliberation time.
Can I request an Offer in Compromise on my own?
Filing for an IRS Offer in Compromise is complex; as such, it behooves those looking to find the best arrangement with the IRS to use a tax professional. There are various forms required, and the huge levels of documentation can make the process more complicated for those not well-versed in tax filings.
Beyond the multiple forms required, you’ll also be required to provide documentation of at least three months’ worth of income and expenses, including, but not limited to, housing costs, credit card statements, pay stubs, tax returns, health care, dependent care, and more. This gets even more complex should the Offer in Compromise refer to a business taxes.
The IRS doesn’t make securing an Offer in Compromise easy, but experienced tax professionals can help taxpayers determine the best course of action and immensely improve their chances of receiving an offer. Community Tax can guide you through every step of the way.
How do I pay an Offer in Compromise?
There are various payment plans to utilize should an Offer in Compromise be accepted, and your preferred payment option must be specified when you place your offer. These plans include a lump sum payment, or a periodic plan in which payments are made each month until the new agreed upon balance is paid off. A tax professional can help you determine which plan would work best for your circumstances.
What if I also owe state back taxes?
Not all states have Offer in Compromise deals in place and if they do, the requirements are generally different from those imposed by the federal government. If you would like to file for an Offer in Compromise from the state, you will have to do so separately. If your IRS OIC is accepted, it’s likely your state request will also be approved, but this is not assured.
Can my Offer in Compromise be defaulted?
Yes. If your offering is accepted, you are expected to file your taxes and stay up to date on payments for five years following. Failure to do so could result in an OIC default, making you liable for the original debt, along with any additional fees and penalties that may have accrued in the time since.
What if my Offer in Compromise is rejected?
If your OIC is rejected and you believe the IRS is wrong about your case, you can appeal the decision for up to 30 days after the initial rejection. If you have come into more evidentiary support for your case in the time following your original request, you’ll likely want to appeal and include this new information.
Is filing for an OIC expensive?
If your Offer in Compromise is accepted, the money saved by using a tax professional’s help is more than any fee you can expect to pay for filing services.
Is an Offer in Compromise the best solution?
Filing for an OIC is not without its drawbacks. It requires copious amounts of documentation, can take a while to process, and involves high levels of scrutiny, making it a potentially difficult and intrusive process. Despite these roadblocks, an Offer in Compromise can and has made a huge difference in the lives of many facing insurmountable debt.
Hiring a professional is the best way to determine whether or not you qualify for OIC provisions, and gives you the best chance of settling your debt in a timely and reasonable manner. Community Tax has helped many clients receive fair and due IRS Offer in Compromise deals, erasing thousands of dollars in debt and ensuring our clients get out of hot water with the IRS.