In the current economic difficulties, some people are struggling to pay their tax debt. Although the IRS will continue its collection efforts, programs are available to help manage this debt. One such program, an Offer-In-Compromise (OIC), allows eligible taxpayers to get tax relief for less than the amount they owe.
The Offer-In-Compromise (OIC) is the best solution for taxpayers to settle their tax debt with the IRS; however, it is a complicated process that requires a lot of work and fulfillment of requirements. While you can attempt to handle it yourself, it is easy to get overwhelmed. Mistakes can lead to more questions from the IRS and extend the process.
Here, it would be best to have guidance from tax resolution experts such as V Tax Services. Our tax professionals have successfully helped many clients negotiate Offers-In-Compromise (OICs) with trust and cooperation. We help you throughout the process and make sure to successfully get an OIC plan for your tax debt to the IRS.
What is an Offer in Compromise (OIC)?
An Offer in Compromise (OIC) is a plan you can negotiate with the IRS to lower your tax debt. To apply, you must meet specific qualifications and fulfill the requirements. The IRS will review a detailed financial analysis of your situation to decide whether to accept or reject your offer. Working with a tax professional for this economic analysis is an excellent idea to ensure accuracy.
This is a helpful strategy, but it is not a simple process. When you apply for an OIC, the IRS will closely examine you, your business, and your family, examining your spending habits, lifestyle, and debts. This can make it even more challenging for you to deal with the IRS.
Who qualifies for an IRS offer in compromise?
The Offer-in-Compromise process has two main challenges: qualifying to apply and getting the IRS to accept the offer. The IRS provides an online tool to help you check if you might be eligible.
The IRS will return your application if any of these conditions apply because it shows you are unsuitable for tax relief through an Offer In Compromise.
● Your application will be returned if any of the following are true:
● You forget to provide necessary information about your financial affairs, including your business.
● You have not filed your tax returns in time.
● You have not received a bill for at least one tax debt included in your offer.
● You have not made all required estimated tax payments for the current year.
● You are currently in a bankruptcy proceeding.
● You stop paying your taxes or filing your returns while waiting for a decision.
● The IRS has forwarded your case to the Justice Department.
● You forgot to include the application fee ($205 for most; waived for low-income applicants).
If the IRS sends back your application due to the above disqualification, you can reapply after fixing the issues.
Offer Payment Options
The Offer In Compromise offers two payment options. You must choose one and include the payment with your offer. The amount of your first and subsequent payments will depend on the total offer amount and the payment option you select.
Lump Sum Offer:
When you submit the lump sum offer, you need to pay 20 percent of the total amount. The remaining balance should be paid in five or fewer payments within five months of the IRS accepting your offer.
Periodic Payment Offer:
In the periodic payment offer, you make the first payment when you submit the offer and the rest within 24 months based on the terms of your offer.
Steps to Apply for an Offer in Compromise (OIC)
1. Understand Eligibility and Requirements
Eligibility:
The IRS suggests an Offer In Compromise when criminal proceedings are not a factor and taxpayers' financial situation indicates they cannot pay the total tax liability. Tax professionals at V Tax Services help you to follow techniques to fulfill your eligibility criteria.
Requirements:
To make sure you follow the rules:
● Keep up with filing and payments for five years after accepting your offer.
● No refunds or credits will be given for anything before the offer.
● Submit your offer honestly, and do not use it just to delay things.
Our experts will meet all the requirements of OIC on your behalf.
2. Submit Your Offer
Forms and Payment:
Complete Form 656 (Offer in Compromise) and include the required payment. You may choose between a lump sum or installment payments. We will help you decide which one is suitable for you.
A lump sum requires 20% upfront, while installments need the first payment with the offer. If the OIC is accepted, payments are applied to the liability; your payments are not refunded if rejected. So, do not take risks; hire tax resolution experts at V Tax Services.
Review and Approval:
The IRS will review the offer and can reject it if payment requirements are not met or if the offer is not deemed reasonable. Compliance with payment terms is crucial during review to prevent the offer's automatic withdrawal.
For assistance with this process, consider consulting professionals at V Tax Services to increase your chances of success.
Remember that when you apply for an IRS offer in compromise, you must provide detailed information about your monthly income, assets, cash, other debts, and expenses like rent, utilities, and groceries. You can hire a qualified tax professional or tax relief company to handle the paperwork and meet all your requirements.
How the IRS decides whether to accept an offer in compromise
The IRS uses your financial information to determine your “reasonable collection potential” (RCP), which is the amount they believe they can collect from you now and in the future.
The IRS considers various factors to calculate your RCP, including your assets, cars, bank accounts, property, current and future income, basic living expenses, and even the age of your car. They will only accept your offer in compromise if it meets or exceeds the RCP amount.
Here are three reasons why the IRS might accept an offer in compromise:
There is a genuine disagreement about whether you owe the tax money or how much you owe.
Paying the full amount would cause financial hardship or be unfair due to exceptional circumstances.
The IRS believes it might never be able to collect the total amount from you.
Offer in Compromise Objectives
Here are the objectives the IRS aims to achieve when they accept an offer in compromise:
● Collect as much as possible quickly and with minimal cost to the government.
● Reach a fair settlement that benefits both the government and the taxpayer.
● Give the taxpayer a fresh start to encourage future tax compliance.
● Obtain revenue that might not be collected otherwise.
What If You Have Taxes You Can't Pay OFF?
If you can not pay your taxes or don’t set up a resolution, the IRS can take serious actions that cause severe problems for you. They can reduce your paycheck or issue levies on contractor payments. If you do not act, they will keep these measures in place until the taxes are paid or the collection period ends, typically ten years with the IRS. V Tax services can resolve your tension and help you reduce or remove these issues.
The IRS can seize your property, including homes, cars, and even retirement accounts in more severe cases. They can also freeze your bank accounts, which means your funds could be taken if you do not respond quickly. For serious delinquency, the IRS might revoke your passport or deny its renewal.
How Can We Help You?
To get tax relief by using Offer in Compromise, you need expert guidance from a professional tax firm such as V Tax Services. With an overall approval rate of OIC around 30%, having a tax professional is beneficial. The tax resolution team at V Tax Services uses their expertise to improve your chances of OIC approval.
Our tax experts will recommend you apply for an offer in compromise after determining if you meet the IRS's strict guidelines. Our skilled team accurately completes the necessary financial analysis to ensure you choose the best tax resolution option.
Offer in Compromise is the best solution!