An offer in compromise (OIC) is a program administered by the IRS which allows taxpayers to settle their tax liabilities for less than the full amount they owe. However, not everyone is eligible to use the offer in compromise program to pay back their unpaid taxes.
There are many people that are unable to pay a full tax liability, and when they do it results in more financial hardship. An offer in compromise can be a legitimate solution for taxpayers. However, there are certain qualifications and requirements that must be met. Before filing for an OIC, one must be aware of the requirements and expectations during the entire process. OIC’s are procedure specific with many rules and limitations, Kentner Law will work to straighten your tax affairs and will work to obtain the IRS’ approval of our OIC, and attain the tax relief you need.
Consider the following tips to get an offer in compromise approved by the IRS and improve your chances of qualifying to receive the needed relief from a substantial tax burden.
Preparations
Explore all payment options first. Before considering filing an offer in compromise, the IRS encourages taxpayers to explore the other available options first. The IRS determines the individual’s financial capability, and the IRS’ decision to accept or deny the OIC request is driven by their findings. If one can pay taxes without encountering financial difficulties, it’s preferable to check the other alternatives.
Take stocks of future assets and future income. A taxpayer must scrutinize their finances before filing an OIC. Determine of the fair market value of assets and income for two years. Once these amount are established, estimate the amount to promise to pay.
Don’t lowball the IRS. The amount you set for paying the offer in compromise must satisfy the IRS and your budget for daily living expenses. If you face economic hardship, you can lower the amount you pay monthly. However, setting the bar too low might cause the IRS to reject your request, especially if they are able to find some extra space in your budget for tax payments.
During The Application
Bring a downpayment of your offer. An individual must bring an initial offer payment to show the IRS they are willing to pay their tax debt. This amount will apply to the unpaid or underpaid taxes, and the taxpayer can state exactly which year the IRS will apply the amount to.
Don’t wait for the IRS’ approval. It takes about 6 to 24 months for the IRS to review your application. Meanwhile, you must remain patient and keep paying your taxes accordingly while your offer is being reviewed.
After The Application
Appeal if you’re rejected. The IRS’ Office of Appeals will appeal for reconsideration within a 30 day time frame. It is recommended to cooperate with a tax professional to turn things around. Avoid skipping payments once your offer is accepted. Taxpayers who are eligible for the offer in compromise program are encouraged to remain disciplined with their payments for as long as 5 years. This means filing tax returns on time is essential, in addition to diligently reporting any changes of address or pertinent information to the IRS.
NEED TAX RELIEF?
Have you received a notice from the IRS, or if you have years of unfiled tax returns, reach out to our office. We’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem. Click here to schedule your no cost consultation. We charge a flat fee for our services and will stop the IRS collection efforts.
Jace Kentner
Tax Attorney
573-708-7870
jace@kentnerlaw.com
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