Common mistakes taxpayers make while negotiating an Offer in Compromise
The IRS offer in compromise agreement makes it easier for taxpayers to gain access to tax relief by giving them an opportunity to pay less than the amount they owe in taxes.
The program was instituted to serve taxpayers whose income is not sufficient to bear the cost of their tax liability and allows these taxpayers to negotiate favorable payment agreements with the IRS. The IRS in turn will not levy interests and penalties on the accounts of taxpayers whose appeals for an offer in compromise have been accepted.
Taking advantage of an offer in compromise agreement with the IRS is an excellent tax relief vehicle. Out of the total number of taxpayers who apply for an offer in compromise agreement with the IRS, only a total of about 41% get accepted. What’s worse is that only a handful of the taxpayers who get accepted for an offer in compromise agreement with the IRS know how to avoid common mistakes and pitfalls. We will be discussing such mistakes in this article, as well as giving you tips about how you can avoid them.
Common Mistakes taxpayers make with an Offer in Compromise
- Acquiring more tax debts:
Despite the fact that you may have already applied for tax relief or had it accepted, you are still expected to keep up with your current taxes. This is a vital ingredient to get your offer in compromise accepted by the IRS because they are less likely to accept it if you keep piling up tax debts in the present.
- Mathematical errors:
Making a mathematical error in your calculations is one of the easiest ways to get your offer rejected by the IRS. Doublecheck everything to ensure that the facts and figures are in line with reality.
- Not filing returns:
You need to be compliant with your taxes if you want the IRS to approve your appeal for an offer in compromise. File all your taxes for both current and previous years. This wards off the possibility of a “failure to file” penalty.
- Blank spaces:
Leaving blank spaces on your Forms 656 or 433 is an immediate red flag for the IRS. The act will look suspicious and may lead the IRS to believe that you are concealing information. To avoid this and the possibility of a tax audit, ensure that all the spaces on your forms are filled out correctly and completely. When in doubt, seek the services of a qualified tax attorney.
- Ignorance:
Most taxpayers do not get accepted for an offer in compromise because an offer in compromise is not the best option for their unique situation. This is why it is extremely important to carefully weigh all the options available to you before settling for an offer in compromise.
- Giving up after an offer was rejected:
If your appeal for an offer in compromise is rejected, it is not the end of the road. You have thirty days to appeal the IRS’s decision and negotiate an alternative deal. It also helps to have your documents arranged properly, as this improves your chances of getting approved by the IRS.
Do you need help getting your offer in compromise approved? We can help you! Reach out to our team of qualified professionals today, and we will be happy to put our knowledge to work on your behalf.
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