How does an offer in compromise work?
Taxpayers with liabilities are constantly seeking for the best ways to settle their debts. Of all the vehicles made available by the IRS for tax reduction, one of the most considered options is the Offer in Compromise. An offer in compromise always seems too good to be true because it is often described as a legal way of settling your debts by paying way less than you owe.
But is this really all an offer in compromise is about?
In this post, we will attempt to tell you all you need to know about an offer in compromise and how it works.
What exactly is an Offer in Compromise?
An offer in compromise is actually a great way to settle your tax debts. It is a program laid down by the IRS for people who have tax liabilities that they are unable to resolve because of their financial situation. And yes, it allows you to settle it by paying way less than you owe.
You may be wondering “If it is so good, why isn’t everyone going for it?” That is because an offer in compromise is not for everybody. To get it, you must first meet certain specifications prescribed by the IRS.
The IRS will only settle for an offer in compromise only if they are certain that your financial state is bad and you are actually unable to pay your taxes. They will consider your assets and if it is clear that you may not be able to pay the amount that you owe in delinquent taxes before the statute of limitations expires, they will be ready to reach an agreement with you based on what you can afford, and many times this leads to you paying way less than you owe in tax debts to the IRS.
Before considering applying for an offer in compromise, you should get a tax professional to look at your tax history. You may not owe as much as you think you do and you may not even need the offer in compromise at the end of the day. Contact us to help you figure it out.
To get an offer in compromise, you will have to work with the IRS and prove that the amount you’re offering is the highest they can get within a reasonable amount of time.
Three types of Offer in compromise exist. They are:
- Doubt as to collectibility: This is the most common as it applies to people who are simply unable to pay their complete tax debts.
- Doubt as to Liability: This is for people who think they do not actually owe the amount being pinned on them.
- Effective Tax Administration: This is for people who can afford to pay their liabilities but will be left in a terrible financial state if they do so.
To get your request for an offer in compromise considered, you must be in filing compliance; you must file all your back taxes including the ones you have not paid. You must also prove to the IRS that you will not owe the next year’s return and that you can pay the offer amount.
An OIC is a great option for taxpayers with liabilities but it is certainly not the best option for everybody. There are other options available that may be more appropriate for you to settle your tax debts. We can look into your tax situation and help you find them. Contact us today.
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We are a tax relief firm dedicated to giving you the best results regarding resolving your tax debts. Our team of qualified professionals is available round the clock to provide you with the assistance you need to overcome your tax debts and be well on your way to financial freedom. Contact us now at 888-585-8629 or 617-430-4674 or send us an email at [email protected].
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