If you are finding it extremely difficult to pay your tax debt and are looking for a way to lower your burden, then an IRS Offer in Compromise (OIC) may be a solution. However, you need to fulfill the minimum criteria for being eligible for an offer in compromise. Read further to know whether an Offer in Compromise can be an option to settle a tax debt with the IRS.
What is an Offer in Compromise?
An OIC is an IRS program that allows taxpayers to settle their federal tax debts by allowing them to pay less than the total accrued tax they owe. If a taxpayer fulfills the eligibility criteria then he/she can request OIC. IRS allows both lump sum and installment agreements for payments of the lowered tax debts for OIC. The IRS has strict criteria to judge the ability to pay taxes and disqualifies those who can fully pay the tax liabilities.
Who is eligible for IRS Offer In Compromise?
Everyone wants to have their taxes reduced, simply wishing to work out a deal with the IRS is pointless. You must demonstrate to the IRS that one of the following circumstances exists to be considered for OIC.
There is considerable uncertainty as to whether the IRS will be able to collect the tax debt from you shortly or right away.
Due to extraordinary circumstances, paying your entire tax debt would result in "economic hardship," or would be "unfair" or "inequitable".
Another less common justification is the "question as to responsibility." If a taxpayer wants to pursue this, they must submit Form 656-L. This offer is predicated on the assertion that there is uncertainty over the accuracy of the tax liability determined. IRS recommends using their pre-qualifier tool to check if you are eligible for an IRS offer in compromise.
How to Apply for an Offer In Compromise
There are three components to an IRS offer in compromise application:
Fill out IRS forms 656 and 433-A. You may also submit Form 656-L if you think the tax debt is not yours or doesn't genuinely exist.
A nonrefundable $205 application fee, which could be waived if you fall within the IRS low-income requirements.
A contribution to your anticipated new balance payable.
When you file for an IRS offer in compromise, you'll be required to give out complete financial information regarding your monthly income, assets, cash, and other debts, as well as your rent, utilities, groceries, and other costs to show economic hardship.
Consult an IRS tax attorney
Offer in Compromise can make a huge difference in a person’s life both financially and emotionally, but getting approval is not easy. For Dallas, Texas residents interested in OIC, there are law firms that have a dedicated team of skilled financial analysts, IRS tax attorneys, case managers, enrolled agents, and CPAs that can help you form a strong case. They look into every option available to qualify for an OIC when establishing a strategy to address a taxpayer's IRS issues. Consult these tax debt attorneys in Dallas, TX to increase your chances of approval and settle your tax debt with an offer in compromise.
