Settling Tax Debt with an Offer in Compromise
Figuring out how you’re going to get tax help can be tricky. You have day-to-day expenses such as rent, a car payment, groceries, day care and any other debts to worry about. If you’ve never had a problem with the IRS, “Offer in Compromise” may not be a phrase you’re familiar with. This is just one of the options that can make handling your tax debt a lot simpler and affordable to get tax relief.
Often mistakenly called “Offer and Compromise”, an Offer in Compromise is a settlement agreement between you – the taxpayer – and the IRS. This allows you to resolve your tax debt for far less than you owe, sometimes by as much as thousands of dollars. This can be a great solution for you, provided you qualify.
Seeking a Settlement
When you attempt an Offer in Compromise (OIC), IRS scrutiny should be expected. This means that you’ll be required to hand over a detailed financial report, itemizing your revenue streams as well as your monthly expenses. If approved by the IRS, OIC conditions must be met to the letter or your settlement will be invalidated.
Again, not to be confused with the nonexistent IRS “offer and compromise”, an OIC doesn’t work in a typical negotiation fashion. In other words, you don’t barter for a lower total to pay back. After reviewing your application for an OIC, IRS officials may take as long as a year to determine whether or not you’ll be approved. This has a disadvantage for you.
The expiration date for your back taxes owed is ten years from the date of assessment, but an OIC suspends the clock for however long it takes for you to be approved or denied. This time then gets tacked back on once your case has concluded. And there will not be “offers” in compromise; the IRS won’t let you simply choose which settlement sounds the most attractive. You’ll be expected to pay a reduced amount within a limited timeframe; failure to do so can result in termination of your agreement, forcing you to start over.
What to Watch Out For
Beyond meeting the terms of your agreement, you shouldn’t bank on being qualified. Although many requests are made to the IRS, compromise offers account for only a small percentage of formal tax debt resolutions each year. Your best bet if you think you might be a candidate for an OIC is to look for a resolution company with experience in such matters such as the Tax Defense Network.
When you’re considering an Offer in Compromise, help from a professional is definitely going to be your best course of action. But don’t be discouraged if your tax pro concludes that you’re not likely to be approved for an Offer in Compromise; IRS resolutions abound, based on your circumstances. So rather than testing the waters by completing 433a OIC yourself, ask a licensed tax professional if that’s your best move. You may be provided with a solution that is even better for your situation.