If you owe a tax debt that you cannot afford to pay, you may be able to reduce the amount you have to pay through an IRS offer in compromise.
What Is An Offer In Compromise?
The IRS offer in compromise is an option that allows you to eliminate your tax bill while paying less than what you actually owe. In order to utilize this program, you must meet certain requirements established by the IRS. You must also make an offer that the IRS finds acceptable.
Two different payment options are available under this program: periodic payment and lump sum payment.
- If you choose periodic payments, you will make equal payments each month until the balance is paid in full.
- If you choose the lump sum option, on the other hand, you will pay 20 percent of the entire offered amount when you submit the application and the remainder after the offer has been accepted.
How To Qualify For An Offer In Compromise
To qualify for the offer in compromise program, you must show that you are unable to cover the full amount of tax you owe or that paying your entire bill would create a legitimate financial hardship. The IRS will determine whether you meet these requirements by analyzing your owned assets, liabilities, income, expenses and your overall ability to repay the debt.
Offer in compromise applicants must also be current with all IRS filing requirements. If you have not filed all of the required tax returns, the IRS will return your application, along with all accompanying fees. You are not eligible to submit an offer in compromise if you are involved in an open bankruptcy case.
To request an offer in compromise, you must complete a few forms, including Form 656-B which includes Form 433-A and 433-B. Form 433-A is designed for individual applicants, while Form 433-B is designed for businesses. Most applicants must also submit an application fee and an initial payment, both of which are nonrefundable. The amount of your initial payment will depend on the payment structure you are proposing in your offer. If you have chosen the periodic payment option, you should also make periodic payments while the IRS is considering your offer.
Keep in mind that not every person who applies for an offer in compromise will be required to submit an application fee or an initial payment. If you meet the IRS’ Low Income Certification Guidelines, you can submit your offer without either of these fees. Applicants who meet these guidelines are also exempt from making periodic payments prior to offer approval.
How Will I Know if My Offer In Compromise (OIC) is Accepted?
After receiving and reviewing your application, the IRS will typically send a decision back to you in writing. If the IRS does not respond to the offer within two years after receiving it, the offer is automatically accepted.
In general, the IRS will approve an offer in compromise if the amount you have offered is equal to or greater than the amount the IRS expects to be able to collect from you within a reasonable amount of time.
What Happens After My OIC is Accepted?
After your offer is accepted, you must meet all of the terms included in the offer. If you receive a tax refund during the calendar year in which the IRS accepts your offer, it will be applied to your outstanding tax debt. Once all of the terms of your offer have been satisfied, any federal tax liens related to the debt will be released.
What Can I Do if My Offer is Rejected?
If your offer in compromise has been rejected by the IRS, you can appeal the decision by submitting Form 13711 (Request for Appeal of Offer in Compromise) within 30 days.
Tips For Obtaining An Acceptable Offer in Compromise
To give your offer the best possible chance of being accepted by the IRS, follow these tips:
- Make sure you qualify. The IRS has several requirements you must meet before applying for an offer in compromise. Make sure you meet all of these requirements before you waste your time and money completing and submitting an offer.
- Understand how the IRS analyzes cash flow. Even if you think that your expenses make it impossible for you to repay your tax debt, the IRS may not agree. The IRS has specific guidelines that it uses to analyze your tax flow. These guidelines outlined in the tax code must be followed to calculate your offer amount.
- Seek professional help. Making an offer in compromise that the IRS is willing to accept can be difficult. To ensure that you aren’t spending time and money unnecessarily and that you don’t pay the IRS any more than you need to, consider consulting an Enrolled Agent, such as the team at Samaritan Tax Relief, who have experience with this program.
Samaritan Tax Relief Tax Offer In Compromise Representation
One of your most important rights as a taxpayer is your right to have a qualified tax resolution professional, such as an Enrolled Agent (EA), represent you in front of the IRS and/or States and provide tax resolution for your offer in compromise (OIC).
When you hire Samaritan Tax Relief to assist you with your OIC offer, we will guide you through the process while advocating on your behalf and protecting your interests.
Samaritan Tax Relief is here to help you because when you’re dealing with an IRS tax liability, the worst thing you can do is to do nothing at all? The best decision is to take the necessary first step and to address your tax liability now!
Click on the “Get Help” button at the top of the page to take that first step.