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.
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.
The IRS will consider an OIC on the following grounds:
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.
- 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.
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