The Road to Tax Debt Relief with IRS Offer in Compromise
- November 10, 2019
- Posted by: asal
- Category: Tax Resolution
Often, a taxpayer carrying a large sum of tax debts would feel walking on a desolate, unending road. With the Internal Revenue Service (IRS) knocking on the door, it’s acceptable to believe you’ll never be able to repay your accumulating debts. But this only happens if you are unaware that there are ways that could help you out in your current tax situation. One of which is the Offer in Compromise (OIC), allowing you to settle IRS tax debts at an enormous discount. Once qualified, you could be a few steps closer to total IRS debt forgiveness.
As that may sound way too good, OIC does exist and even worked for some taxpayers. But, it is a need to know that the IRS won’t merely take words or a handwritten letter to assure you’re eligible for the program. You have to submit the right and enough documents that the government agency would require. Apart from that, the 40.03% IRS’ approval rate on OIC is making the whole process more challenging. The paperwork and math are just too complicated for someone who doesn’t know the rules of the tax game.
The help and advice of a reputable tax resolution firm are crucial before filing an OIC. Qualified professionals are best to assess your tax situation and determine if OIC could be the best solution for your tax relief. You should avoid tax experts promising an offer in compromise without proper knowledge of your situation. In these cases, our team of tax pros would be more than willing to provide you a free, reliable consultation. Remember that the longer you go without responding to the IRS, the harder your tax issues would become.
To start your tax relief journey, here’s all the stops and gos of IRS Offer in Compromise.
Stop 1: Know If You Are OIC Eligible
With taxes and money involved in the process, the IRS has strict pre-qualifiers to qualify for any tax settlements. The agency can accept OIC requests when they determined that you can’t pay your tax debt in full. Another acceptable factor could be the doubt that you actually withhold liability. If they can see that the settlement is reasonable, they inevitably consider your submission. You may also qualify if you have the capacity to pay, but doing so can result in economic hardship. Such a situation denotes an effective tax administration.
On the other way, you won’t be eligible for OIC consideration if you haven’t filed all your federal tax returns. Regardless of your ability to pay, it is still a must to fill your taxes. The IRS also rejects Offer in Compromise with businesses having late tax deposits. Of course, those who are in bankruptcy proceedings won’t qualify the program. If you faced criminal prosecutions on tax crimes, expect no chance of benefiting from OIC.
Stop 2: Learn the Key to Successful OIC Offer
It is very significant to take note of the existence of Form 656 if you feel confident about your OIC eligibility. This booklet includes the recent updates, news, instructions, and regulations to submitting an OIC. Yet, this could be very overwhelming for an ordinary individual. The best people to walk you through the form could be the tax professionals. They can give you adequate guidance and support to avoid mishaps if you are to submit an OIC.
Aside from knowing the essence of Form 656, you should know by now that financial analysis is your key to successful OIC. Through thorough analysis done before submitting, there is a huge chance of qualifying to IRS standards. An in-depth examination of your situation and searching for the soundest offer amount can put you in the best light. The best offer should be higher than your reasonable collection potential (RCP). While you can do the math on your own, a finance or tax professional is more capable of getting the best results.
Go: Proceed to the OIC Process
The process of submitting an OIC offer is a formal, decent process. You cannot just set an appointment with the IRS and made an easy deal. It could be a long waiting game if you don’t know the process.
The first step of the course is completing the mentioned Form 656, Offer in Compromise. In this form, the IRS would require you to answer basic information about you and your tax liability. Then, you would need to select one of the two payment options. Choose a lump sum for one big-time payment or a periodic payment plan for split payments. Of course, there’ll be an application fee that would costs you $186. However, take note that if you’re below the poverty guidelines, the IRS could exempt you from paying.
If you are making an offer for your business, your next step is to fill out the Form 433-A. This particular form would demand to disclose all your assets. You should also state your expenses as well as your income. In completing 433, you need to be extremely careful. Just so you know, the IRS would use the form to review your details and determine whether to approve or not the offer. You can utilize a tax resolution software, or ask a professional’s help for a much accurate process.
Stop 3: The IRS Might Reject Your OIC If . . .
You can hope that submitting OIC is as smooth as driving to an asphalt road. But, with IRS rigid guidelines, that won’t go that way. The revenue agency could reject your offer if you don’t pay much attention to the submission details and process. Some of the reasons why the IRS might reject an offer are:
- You have a shallow offer. The government and the IRS are wise enough to know if you don’t take time filling out details. Their suspicions get even higher if they saw that you have the ability to pay the tax debt in full with your earnings. Thus, you really need to take careful considerations.
- You failed to settle your tax in the current year. This specific situation can get the IRS thinking that you aren’t capable of paying your taxes in the coming years. They would, perhaps, realize that there might be just risks if you have the chance for the program.
- You have lots of blank spaces. Of course, you need to provide enough information as the IRS would want to know your exact financial situation. Missing and unsure details won’t do you good when offering an Offer in Compromise.
- You committed a severe illegal crime. Related to tax or not, the revenue service won’t be easy for people who got and may get against with the law.
Before being in miserable with a rejected OIC, you might want to know the good news. You can file an appeal within 30 days of receiving your letter of OIC rejection. However, if you don’t act immediately, the IRS might suggest a resubmission of the application. So, know whether you can appeal or not an Offer in Compromise, call out for a tax expert’s advice.
Go: There’s Still Chance, Appeal Your OIC!
If you qualify to appeal an Offer in Compromise, you should understand the need of gearing up for defense. The IRS won’t seriously deal with you if you cannot support your appeal with viable arguments and facts. You should be able to defend yourself why the IRS might have misinterpreted particular details of your application.
If you are to submit an appeal within the 30-day gracing period, you don’t need to fill out another Form 656. Instead, you have to submit the IRS Form 13711, Request for Appeal of Offer in Compromise. The non-submission of new Form 656 only applies if there is a small difference finance situation or your offer. You can write a letter to which you should state that you want to increase your offer. Otherwise, you are to fill out a new Form 656 if you’ll have an immense change to your offer.
Continue Going: Understand IRS’ Fresh Start Initiatives
In 2012, the IRS decided to take a considerable step in expanding its Fresh Start Initiative. This move has led to a significant increase in the OIC acceptance rate by 25-30% range. For background info, the IRS Fresh Start Initiative aims to process for taxpayers paying hefty tax debts. Substantially, the program would help them avoid the detriments of tax liability, including:
- Tax Liens
- Tax Levy
- Wage Garnishment
The Fresh Start Initiative increased chances for taxpayers to qualify for Offer in Compromise and get the tax relief they’ve wanted. If you are not eligible for the OIC program, you can still try entering to installment plans to pay your debts. At excellent agreement, it may take you only six years to fully pay your IRS tax debts. If you’re still wondering if you qualify for the Fresh Start program, have a tax relief expert to assess your situation.
Finish Line: Experience Tax Debt Relief with PTD’s OIC Help
The Offer in Compromise process can be a quite bumpy road to take. Applying for one is overwhelming with the extensive amount of documents that the IRS demands. Aside from that, the time involved is even arduous to imagine. It could take up to a year, and some more months if the IRS rejected your first offer.
As you can see in every step of the whole OIC process, a tax resolution professional can play a big part. So, for better or even the best offer and deal, do consider hiring one. With an excellent record of IRS settlements, you won’t doubt Platinum Tax Defender’s capability of resolving your tax problem. Just a tip, you don’t have to face the IRS alone! We got experienced tax professionals to deal with the IRS on your side. Get the best and fastest drive to the road of OIC and tax freedom! Call us for a free consultation today!