An offer in compromise is one of the most useful instruments for taxpayers who cannot pay their tax debt. Though an offer in compromise (OIC) is not a viable option for everyone, taxpayers who have suffered from financial hardship or personal crises may benefit from filing an OIC. An OIC allows taxpayers to settle their tax debt for less than they owe. Taxpayers can qualify for an OIC in a number of ways, and the OIC can be structured in different ways as well. In general, it must be clear to the IRS that the taxpayer cannot and will never be able to completely pay their tax debt. The OIC instrument is available to allow taxpayers to get out from under tax debt while allowing the IRS to recoup a portion of the tax debt owed.
There are several situations in which you may qualify for an offer in compromise. Since this instrument allows you to pay off your tax debt for a fraction of the actual sum, it is not an easy option to pursue. For an OIC to be an option, the IRS requires proof of your financial position showing that you cannot pay your tax debt. This requires filing a long list of documentation on your assets, credit, expenses, accounts, debts, payments, previous tax returns, and other documents. If you operate a business or you are self-employed, additional documents about your business accounts, assets, credit history, and payments are required. Arranging and filing these documents without the help of a professional is extraordinarily difficult, and can take years. We can help you organize and file the right documents with ease, and speed up the OIC process.
Doubt as to Tax Liability
If you believe your tax liability has been incorrectly calculated, you can use an offer in compromise to resolve the situation. Separate documentation must be filed and an error in tax calculation must be shown to qualify for an offer in compromise in this way. If your tax debt has been miscalculated, we will crunch the numbers and file the documentation required to resolve the situation with the IRS. We will make sure that you will not pay more tax debt than you owe.
Doubt as to Ability to Pay
The ultimate goal of the IRS is to obtain any tax dollars it can, even if this means settling for a smaller amount. If a taxpayer cannot pay their full tax debt and will never be able to, the IRS will negotiate an offer in compromise to obtain some tax dollars. To use this avenue, the taxpayer must conclusively prove that they cannot pay their tax debt.
Effective Tax Administration
Effective tax administration is a third option for negotiating an offer in compromise. This provision is for taxpayers that could possibly pay their tax liability, but doing so would cause substantial economic hardship. This may be the case if, for example, the sale of your home would cover your tax debt, but you are on a fixed income and would not be able to buy a new home or pay rent.
If you feel that you have few options for paying your tax debt, or if you cannot see any avenue for resolving your full tax debt, an offer in compromise may be a path you can take. To pursue this option and get the help you need to file correctly, contact us today.