Offer and Compromise IRS
A large number of taxpayers find themselves facing past due balances with the Internal Revenue Service (IRS) because of unpaid taxes. While many factors contribute to outstanding tax debt, the goal of most individuals who have tax debt is to fully discharge their overdue tax liabilities. The goal of the IRS is to get past due tax balances cleared. To clear tax balances; the IRS offers many options for those with tax debt. One of these options is referred to as an Offer in Compromise (OIC).
What is an Offer in Compromise?
OIC is a cooperative agreement between the IRS and the taxpayer. If an OIC is reached, the IRS agrees to accept a lesser amount as payment in full. By using an Offer in Compromise, individuals find relief in two ways. They resolve the burden of their outstanding tax debt and avoid having to deal with IRS collection efforts. An OIC is a very helpful option for taxpayers. However, the actual process of entering into an agreement with the agency is a complicated one and taxpayers have to meet tough guidelines. Because of these reasons, we advise tax-debt holders to contact tax professionals who will determine if they meet OIC guidelines and who will assist them in negotiating with the IRS.
An IRS Offer in Compromise is available to those with outstanding tax debt who fall into three categories – Doubt as to Collectability, Doubt as to Liability and Effective Tax Administration.
Doubt as to collectability means that the IRS agrees that it is extremely unlikely that some individuals will ever have the financial resources to repay their debt, even through reasonable efforts. For taxpayers to fit into this classification, they will need to undergo a comprehensive examination of their assets and income.
Doubt as to liability simply means that individuals have enough financial evidence to convince the IRS that they have enough reasonable doubt to show they may not be responsible for their outstanding tax balance. This type of situation may occur if an IRS agent misinterprets a tax law, if an IRS agent fails to take into consideration evidence submitted by taxpayers or when taxpayers present new evidence to refute earlier findings.
Effective tax administration status means that the IRS concluded that an individual is responsible for tax debt and that the taxpayer has the financial ability to pay the total amount owed. However, because of certain reasons, the IRS agrees to accept a reduced amount as payment in full. This usually applies to situations where a taxpayer faces a special circumstance that would result in significant consequences if that person had to pay the entire amount of the owed outstanding tax liability.
How is Offer in Compromise Paid?
Individuals have many payment options available when they apply for an IRS OIC. Individuals should discuss their payment options with a tax professional to determine which payment option fits their needs. Our tax lawyers have the ability to evaluate financial situations and they provide expert advice so people choose the plan that is most beneficial to them.
Taxpayers have the following payment options:
• Lump sum cash offer – This is when the total tax debt is paid in five or fewer installments over a maximum period of 24 months.
• Short-term periodic payment offer – This is when the total tax debt is paid in regular installments over a 24-month period.
• Deferred periodic payment offer – This is when the total tax debt is paid in regular installments over a timeframe that encompasses the statute of limitations for collection.
Getting Help with an Offer in Compromise
The IRS places the burden of proof for establishing eligibility for an Offer in Compromise with the taxpayers. Individuals have the responsibility to prove they qualify for an OIC. In this situation, taxpayers must scrutinize all details before they submit an application for an Offer in Compromise. Therefore, we strongly encourage individuals to obtain help from our tax professionals who understand how to analyze all financial information. When people are faced with tax debt, our tax lawyers advise them on how to best receive IRS tax help. Please contact us for immediate assistance.