Offer in Compromise

What are Offers in Compromise?

An offer in compromise (OIC) is a contract in between you, the taxpayer, and the Internal Revenue Service that settles your tax liabilities for less than what you owe. In essence, if you are accepted for this program, your tax slate can be wiped totally clean.
An OIC allows the taxpayer to pay a lower quantity in complete satisfaction of unpaid tax liability, including interest, charges, and additions to the tax. The OIC program is a method for taxpayers to fix their tax liability and for the IRS to collect funds that may not be gathered through other methods.

Liabilities to Be Compromised

An OIC works for the whole assessed liability for tax, penalties, and interest for the years or durations covered by the deal. All questions of tax liability for the years or periods covered by the agreement are conclusively settled. Neither the taxpayer nor the IRS can resume a jeopardized tax year or duration unless there was (a) falsification of information or documents, (b) concealment of ability to pay and/or assets, or (c) a shared error of a product fact adequate to reserve or reform a contract.

Grounds for Acceptance or Rejection

The IRS will consider an OIC on the following grounds:

• Doubt as to Liability. For this ground to use, there should be an authentic doubt about the credibility of the liability. Because an OIC is a "compromise," a customer making an OIC on doubt regarding liability is required to offer some payment, even if she or he thinks that no tax liability exists. In choosing what total up to accept, the IRS will weigh the dangers of lawsuits. The greater the threat, the higher possibility that the IRS will accept smaller sized payments.
• Doubt regarding Collectability. An OIC submitted on this ground needs to demonstrate that (a) it is not likely that the tax can be collected completely within the collection statute of restrictions and (b) the OIC reasonably reflects the quantity the IRS might collect through other ways, consisting of administrative collection solutions. This determination requires a detailed analysis of the taxpayer's net worth and future income capacity.
• Promotion of Effective Tax Administration. This alternative is the most subjective ground for submitting an OIC. The IRS may compromise a tax liability on this ground if (a) full collection is possible however would trigger the customer a financial hardship, or (b) there are no other grounds of compromise, however public policy or equity factors to consider supply an enough basis for compromising the liability.

Who Qualifies for an Offer in Compromise?

This program is primarily for those who are incapable of paying their tax costs completely because they lack a stable earnings stream and have little to no equity in their assets. Those who can pay their tax expense in installment payments normally will not get approved for an offer in compromise.

• A taxpayer should have submitted all of their taxes to certify. After all, how will the federal government know you can't pay if they don't know the amount you owe?
• Some payment may be required upfront for you even to use. This can include paying the present quarter's tax liability.
• Reasonable collection capacity (RCP), or your ability to pay your tax liabilities, need to be calculated. This can consist of all of your possessions, consisting of money on hand, home owned, and even cars and trucks. Moreover, future income is typically considered, minus the expense of living in your location.

Things to Consider Before Submitting for an Offer of Compromise

- An offer in compromise must be one of your last hopes to settle your tax bill. This is not a simple program to get approved for. Proof of your earnings can take months to authorize, with some cases, such as with a company, requiring you to submit boxes of paperwork.
- The choice is subjective. The federal government has no legal responsibility to compromise or settle with you at all.
- Submitting to this program will bring IRS examination, a lot more so than if you make an application for an installment payment plan.
- Because the IRS now knows your entire monetary scenario, the IRS now has all the info it requires to accelerate collection efforts versus you.

The Tax Relief Clinic Inc recommends you only send an offer in compromise when you are relatively certain your application will be authorized. The IRS offers an online pre-qualifier assessment tool for just this purpose. Another drawback to the offer in compromise program is that interest is still accruing on the quantity you owe during the application procedure, which, as formerly specified, can take a while. As almost always with the federal government and IRS procedures, you have the right to appeal to a declined deal.

Contact us today to discuss the very best choices for fixing your tax problems!