Don't fret if you find yourself wondering what an offer in compromise agreement is because you are likely not alone. An offer in compromise allows you to settle a tax debt with the IRS for less than the amount owed. It is a valid option for people when paying the entire balance will create a hardship. The IRS considers many things when reviewing an Offer in Compromise such as:
• Income and Expenses
• Ability to Pay
• Past Earnings
Individuals and business owners must fill out forms and submit them before an arrangement with the IRS can take place. If you are in bankruptcy you are not eligible. Necessary forms such as 656-B, 433-A, and 433-B are needed. The jargon is complex, and the paperwork can be overwhelming. So, continue reading to learn some tips that will make the process less tedious. Make no mistake, there are things one can do to get an Offer accepted and reduce the amount of an Offer.
Avoid Letting Tax Debt Grow
You must stay current on your taxes while the IRS reviews an OIC. The IRS will not allow you to 'pancake' more debt on top of existing. Things like quarterly estimated taxes must be paid on time. If you are successful in getting a settlement you must file your returns and pay all taxes due for five years.
Don't Forget About The Initial Payment
The IRS requires a $186 application fee for the OIC. This payment is non-refundable. However, if you are low income you can request a waiver. When you request an OIC you can agree to pay in 6 months or 24 months. With a 6-month payment plan, you must submit a payment of 20% of the offer amount. With a 24-month payment plan, you make monthly payments of 1/24 of the amount offered during the review process. An OIC can take between 6 and 18 months to get a decision.
Give the IRS A Credible Reason
Going into the OIC unprepared will likely end in a denial. The IRS uses formulas and expectation of repayment to determine if they will accept an OIC. The IRS will carefully look at all aspects of income-past, present, and future. Age is important. This is one instance when older is better.
Don't Do It Yourself
Unless you are a slam-dunk OIC you may want to talk to an experienced tax settlement group (check out About Us on our website). At Tax Relief Advisers, we are experienced in negotiating and structuring OIC. Give us a call and discover the difference. Mention this blog and we will waive our $350 consultation fee.