What You Should Know about "Offer in Compromise"
- November 1, 2019
- Posted by: Platinum Tax defenders
- Category: Tax Resolution
Do you have an enormous tax debt that you think is impossible for you to pay off? Do you want to get even but lack the resources to do so? The solution is Offer in Compromise, a program instituted by the Internal Revenue Services (IRS). Taxpayers who can’t settle their tax debt could be eligible for an Offer in Compromise. Taxpayers who face financial ruin when they pay the full amount of their tax debt can also be candidates for the program.
This program is a settlement that allows taxpayers to pay their tax debt with less than the amount they owe. The only ones determining eligibility for the program is, of course, the IRS.
How does an Offer in Compromise (OIC) work?
The IRS accepts not everyone who applies for an Offer in Compromise. Some applications may get declined. In fact, the IRS considers only a few lucky applicants. You have to be very careful when filing for an OIC. A professional tax resolution firm can help increase the chances of getting approved for an “offer in compromise” program. They are the only professionals who can aid you in finding the best settlement offer before filing.
The reason for the IRS’s powerful filtering is that most of the applicants can afford what they owe with their current resources. Another case that the IRS also observe is taxpayers having a payment plan over time. The OIC program is intended for taxpayers who can never pay the full amount of their tax debts before the IRS’ tax collection time runs out. It generally applies a decade after the tax assessment. In the IRS’s perspective, it is better to get a fraction of the amount owed than nothing at all.
How much should you offer in an offer in compromise?
Maybe the most critical question to ask when applying for an Offer in Compromise program is, “How much should I offer to the IRS?” Well, that directly depends on the total amount of your tax debt.
According to statistics, the average accepted OIC offer amount to the IRS in 2015 is $8000. Of course, that number dramatically varies from situation to situation. The Internal Revenue Service would evaluate your assets and cash flow. This is the first step they are taking before coming to a conclusion on the amount for settlement. Generally, the IRS uses a standard formula to calculate a compromise. This formula usually adds up to annual income minus your annual expenses plus a percentage of all your owned liquidated assets. This formula varies from different cases but would give you a reasonable estimate of the accepted OIC offer. But for more accurate calculations of this, you should seek tax resolution services.
The IRS would be determining the maximum amount you can pay monthly to an installment agreement. To have a proper calculation, the IRS may require bank statements, payslips, or if you own a business, your profit and loss statement.
Do I qualify for an offer in compromise?
To qualify for an Offer in Compromise, the taxpayer should adhere to the following requirements:
- Filing all the necessary tax returns for previous years
- Evaluating all estimated tax payments for the current year
- Submitting federal tax deposits for the current quarter (If you own a business and manages employees)
Usually, a taxpayer would submit a fee to continue with the application. Put in mind that the fee can be subject to repeal if the IRS recognized the applicant for low-income. The decision observes the Federal Poverty Guidelines or the OIC on doubt of liability case.
Does an Offer in Compromise affect your credit?
If you are applying for the OIC program, you might worry that this would affect your credit score. But the truth is, an OIC settlement does not affect your credit. It is more likely that credit services were not fully aware of your financial situation. Usually, they do not have any idea that you are seeking for relief and have filed an Offer in Compromise.
The vital matter is to get your offer accepted. By the time that the IRS allows your offer and you’ve already settled your tax payments, they should have released your tax liens.
Moreover, your credit companies should state your released lien on your credit report.
Who qualifies for IRS Offer in Compromise?
Millions of Americans are applying for an OIC program, but the IRS only accepts thousands per year. The easiest way to asses an applicant is through their qualifications. Here is a basic guideline on who qualifies for the program:
- No filed Bankruptcy
You are not qualified for compromise programs if you’re already dealing with an open bankruptcy proceeding.
- Complete Tax Returns
Even if the IRS assessed that you could pay for an OIC settlement, you are not yet eligible for the program. You must have already filed all federal tax returns that the IRS requires to be a potential candidate for the program. If you have missing returns, the IRS may disregard your paying abilities. They can also decline your application if you don’t file these tax returns immediately.
- On-time Tax Deposits
The IRS requires quarterly payroll tax deposits from business owners. If you want to apply for an OIC, your tax deposits should be up to date for the present and two previous quarters. Failure to do so means ineligibility for the program.
How long does Offer in Compromise take?
The processing time for an OIC application may vary from case to case. The process ultimately depends on the Offer in Compromise that fits your situation. On average, it takes six months to about a year for your case to undergo assessment and approval. But sometimes, the process would take longer if the IRS rejects your offer. In that case, you have to file an appeal or reevaluate the examiner’s findings.
Choosing Platinum Tax Defenders to Help You with Your OIC Filing
Due to the high number of rejected applications for an OIC, it is best to seek a tax resolution expert’s assistance. Don’t ever take your chances and make an offer without anyone’s expert advice just to get rejected. Boost your chances with Platinum Tax Defenders! Our team boasts a high OIC acceptance rate, and we have experts that would be more than happy to assist you in the whole process.
Reach us at 1-800-385-6840 or visit https://platinumtaxdefenders.com to get the best tax resolution assistance available!