Are You Eligible For An Offer In Compromise?

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You just heard or saw a commercial that promises, “If you owe the IRS $10,000 or more we can settle your tax debt!” Don’t fall for it. Even when you hear the announcer say “Yes, no problem! We can settle your tax debt no questions asked.” If you called and you’re on the phone with a sales person, listen to your instincts and hang up right away!

An Offer In Compromise (OIC) is what is being hinted at in these commercials. An Offer In Compromise allows you to settle your tax debt for less than the full amount you owe. It may be a legitimate option if you can’t pay your full tax liability, or when doing so creates financial hardship. However, there are many things that must be considered and questions that any respectable professional will ask prior to saying they can settle your IRS Tax debt for less than the full amount of the debt.

For instance, the following must be determined in your unique situation.

• Ability to pay an agreed-upon amount in a specific timeframe
• Income
• Monthly Expenses
• Asset equity

The Offer in Compromise program is not for everyone.  If your cash in the bank or money in your retirement accounts exceeds your debt to the IRS, this will rule you out of the OIC.  Also, if you have equity in assets that can be accessed to satisfy the IRS debt, you will not be a candidate for an OIC.

Make sure you are eligible

We explore every option that reduces assets to their lowest value so they will not be considered available to satisfy your tax debt. We generally submit an OIC when the amount offered represents the most the IRS can expect to collect within a reasonable period of time. We will explore all other payment options before submitting an Offer In Compromise because that is what the IRS will do.

Before the IRS can consider your offer, you must be current with all filing and payment requirements. You are not eligible if you are in an open bankruptcy proceeding. We use our Offer in Compromise Pre-Qualifier to confirm your eligibility and prepare a preliminary proposal.

Select a payment option

Your initial payment will vary based on your offer and the payment option you choose:

• Lowest Lump Sum Cash: Submit an initial payment of 20 percent of the total offer amount with your application. Wait for written acceptance, and then pay the remaining balance of the offer in five or fewer payments.
• Low Periodic Payment for less than the full amount due: Submit your initial payment with your application. Continue to pay the remaining balance in monthly installments while the IRS considers your offer. If accepted, continue to pay monthly until low offer amount is paid in full.

Also, if you meet the Low Income Certification guidelines, you do not have to send the application fee or the initial payment and you will not need to make monthly installments during the evaluation of your offer. See your application package for details.

Understand the process

While your offer is being evaluated:

• Your non-refundable payments and fees will be applied to the tax liability (you may designate payments to a specific tax year and tax debt);
• A Notice of Federal Tax Lien may be filed;
• Other collection activities are suspended;
• The legal assessment and collection period is extended;
• Make all required payments associated with your offer;
• You are not required to make payments on an existing installment agreement; and
• Your offer is automatically accepted if the IRS does not make a determination within two years of the IRS receipt date.

As you can see, it is impossible for anyone to promise that your tax debt can be cleared with and Offer In Compromise before they know the details of your specific circumstance. For real help and real advice connect with me on TaxConnections. If you are not eligible for an Offer In Compromise we will help you find a solution for your unique situation.

Original Post By:  Barry Fowler

Barry Fowler is licensed to represent taxpayers before the Internal Revenue Service (IRS) and is a longstanding member of several tax industry professional organizations including the National Association of Enrolled Agents (NAEA), National Association of Tax Preparers (NATP), Texas Society of Enrolled Agents (TSEA), and the American Society of Tax Problem Solvers (ASTPS). With experience in the tax and finance industry spanning over twenty years, Fowler’s expertise includes tax resolution, personal financial planning, tax return preparation, financial statements, and general ledger bookkeeping. He has been instrumental in helping hundreds of people resolve complex tax issues with the IRS.

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