OFFER IN COMPROMISE
If you can't pay your tax debt in full, or if paying it all will create a finacial hardship for you, an Offer In Compromise (OIC) may be an option.
An OIC is an agreement between you and the IRS, where the IRS agrees to accept less than th full amount you owe.
3 main reasons the IRS may agree to accept less than the full amount you owe:
1-DOUBT AS TO COLLECTIBILITY. This means you don't have enough income or assets to pay your balance due in full
2-EFFECTIVE TAX ADMINISTRATION. You can pay all your balance due, but it would create an economic hardship, or would be unfair or unequitable.
3-DOUBT AS TO LIABILITY. You don't believe you owe the tax, or you don't believe the amount is correct.
NOTE: You can't submit an OIC if your debt has been established by a final court decision or judgment about the tax or rhe amount.
There are 2 kinds of payment options for an OIC. You must select one of them and include payment with your offer. The amount of the first and follwoing payments will depend on the total amount you offer and which payment option you choose.
1-LUMP SUM OFFER. You'll be required to pay 20% of the total amount you're offering when you submit the OIC. You'll need to pay the rest in 5 or fewer payments, within 5 or fewer months of the date the IRS accepts the offer.
2-PERIODIC PAYMENT OFFER. You'll make the first payment when you submit the OIC and the rest within 24 months, according to the terms of your OIC.
For the IRS to accept an OIC, you must file ALL tax returns due and be current with estimated tax payments or withholding. If you own a business and have employees, you must file ALL returns and be current on all your federal tax deposits.
If you or your business is currently in an open bankruptcy proceeding, you're not eligible to apply for an OIC. Any resolution of your debts generally must take place within the context of your bankruptcy proceeding.
If the IRS rejects your OIC, it won't return the application fee or any other payments you made with the offer. The IRS will apply the non-refundable fee and payments to your tax liability. You have a right to appeal, if the IRS rejects your OIC.
The OIC process can be lengthly. Watch the dates. If the IRS doesn't reject, return, or you don't withdraw your OIC within 2 years of the date the IRS receives it, then the offer is deemed accepted.
Submitting an OIC doesn't guarantee the IRS will accept it. It starts the process of evaluating your situation, your ability to pay, and the amount you're offering.
You can submit an OIC on taxes owed individually and for your business.
Before you submit an OIC, you should be aware of several things:
1-You'll have to pay an application fee of $205 and make OIC paymentSubmitting an OIC doesn't guarantee the IRS wills (based on the method you choose) with your OIC submission, unless you meet certain low-income guidelines (whch are in the IRS OIC booklet).
2-Submitting an OIC doesn't mean the IRS will accept it.
3-The IRS will not process your OIC if:
A-You are currently in bankruptcy
B-You didn't pay the application fee
C-You didn't pay the required initial payment with your OIC
D-You don't have a balance due
E-The IRS can't enforce your tax debts because the time the IRS has to collect has expired
F-Your case is in the jurisdiction of the Dept. Of Justice
G-You have past due tax returns.
If the IRS processes but closes your OIC without accepting it, it will not return your application fee or any other payments you made with the OIC. The IRS will apply these non-refundable fees and payments to the amount of tax you owe.
The IRS usually has 10 years from the date of assessment to collect a tax debt. Filing an OIC will extend the time the IRS has to collect all your debt.
The IRS may still file a Notice Of Federal Tax Lien to protect its lien interest in any property you own and to notify other creditors of that interest. You have a right to appeal any lien or levy collection actions.
The IRS will keep any refund, including interest, for tax periods extending through the calendar year that the IRS accepts your OIC. The refund isn't a payment toward your OIC.
The IRS is required to explain how it calculates your ability to pay and how much it could potentially collect from you.
If the IRS rejects your offer, you have a right to appeal the rejection, but mus t do so within 30 days of the date of the IRS's rejection letter. Use Form 13711, Reques tfoe Appeal of OIC.
If the IRS accepts your offer, you'll need to abidt with the terms you agreed to and stay current with filing and paying taxes for 5 years after that.
The IRS may return your offer after it is processed, if you don't timely file your tax returns, make estimated tax payments, properly adjust your tax withholding or make federl tax deposits. The IRS may return your OIC if your application fee or offer payment is dishonored, or if you don't provide information the IRS requested. If your oIC is returned, you won't be able to appeal. The IRS will send you a notice providing you with 30 days from the date of the notice to respond to the IRS asking for reconsideration of the decision to return the offer.
If the IRS accepts your OIC but you don't file and pay all your taxes on time for the 5 years after the acceptance, the IRS will notify you your OIC is in default and may terminate the offer and you'll owe your full federal tax debt (not the reduced amount of the offer).
Form 656B Boklet OIC contains detailed information.
Form 13711 Request For An Appeal Of An OIC
BEWARE OF WHAT THE IRS CALLS "OFFER IN COMPROMISE MILLS":
These are the TV ads you see where these firms will get you to settle for pennies on the dollar. They generally charge large upfront or ongoing fees and often have little success. A successful OIC is not easy and requires your to meet and comply with very strict guidelines.
NOTE: IRS tax problems do not go away by themselves. The longer you wait, the more expensive it will be. Taking immediate action to try to reslove your tax problems is the first step.
CALL NOW 561-746-1926 or 561-339-8102 if you have any questions or concerns or would like to schedule a FREE, Confidential, No-Obligation Tax-Saving Consultation.