Tips on how to get an Offer in Compromise approved
The offer in compromise program was developed for taxpayers who can not pay their tax liabilities without incurring severe financial difficulties.
Initially, the offer in compromise acceptance rate was really low, as the IRS accepted only about 25 percent of offers at around 2010. However, in 2018, the acceptance rate rose up to 41 percent which is still fairly low. These acceptance rates just show the need for a taxpayer to be very critical and careful when building their application for an Offer in Compromise.
One thing is certain: the IRS is more likely to approve an offer that presents the highest amount of money that they can expect to collect within a reasonable time frame than they are to accept one that does not. If as a taxpayer, you can convincingly prove the following, you have a higher chance of getting your Offer in Compromise application approved:
- That you are unable to pay the full tax owed.
- That the tax is not actually owed
- That an offer in compromise is in the best interest of the IRS.
Some specific eligibility requirements for an offer in compromise
- As a taxpayer, you must have filed all your tax returns
- You must make all the expected approximated tax payments for the current year.
- You must have received a bill for at least one of the tax debts included in their offer.
The IRS will do a thorough investigation and if your lifestyle contradicts your claim of being unable to resolve your tax liability, it may be a serious impediment to your approval. You may want to consider looking into installment agreements as another viable option.
General Offer in Compromise advice
To get your offer approved, you need to tie as many loose ends as possible. Below are a few things you should pay attention to when applying for an offer in compromise.
- You will need three forms; Form 656, 433-A (OIC), 433-B (OIC)
- Write N/A or Zero instead of leaving blank spaces on the forms.
- Ensure the foundation of your case can be backed up with facts.
If your offer is rejected, you can submit an appeal within 30 days of the rejection notice using Form 13711. If your appeal is accepted, you have another opportunity to renegotiate your offer in compromise to be more favorable for you and the IRS.
If your appeal request is rejected, there are other options you can explore. Each of these options have their own requirements which have to be met and they each work differently depending on your unique situation. They include:
- Payment extension: This is a great option if you only need a little more time to pay. The IRS can grant you a 120 day extension to settle them.
- Installment agreements: If you are unable to pay everything you owe at once, you may want to enter into an installment agreement with the IRS. Taxpayers with $50,000 or less in the debts that they owe have 72 months to pay. While those who owe $500,000 and more have 84 months.
- Currently not collectible: This may be the best option for you if you can prove significant financial hardship. Once a Currently not collectible status is issued, all collection attempts will stop until further notice (which is usually when or if your financial situation improves).
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