Offer in Compromise (OIC)
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An IRS Offer in Compromise (hereafter referred to as OIC or Offer) allows taxpayers that cannot afford to fully pay back their tax liability the opportunity to settle for less than what they owe. An OIC can reduce IRS debt. IRS tax settlements are subject to certain terms and conditions. Working with a qualified tax attorney can provide the representation you need for an optimal outcome.
The IRS sets guidelines for accepting an Offer in Compromise. The IRS looks at a taxpayer’s past, current, and future financial situation when evaluating whether an OIC should be accepted. It is important to know what aspects of a taxpayer’s situation the IRS is looking at when filing an OIC. Not everyone qualifies, as each person’s financial situation is different. Thus, pre-qualifying for an Offer is an important first step in attempting an OIC with the IRS. This process generally takes between 8 and 12 months, but the process can result in tax debt relief or reduction. Your Maryland tax attorney can help you through the process and evaluate if it will be worth filing.
The IRS Offer in Compromise process involves completing the appropriate forms, having the necessary records on hand, being compliant with IRS tax regulations, and filing the Offer for review with the IRS. Once filed, the IRS begins their investigation of the taxpayer’s reasonable collection potential based upon his or her financial situation. They also evaluate the taxpayer’s history of filing tax returns. Unfortunately, many taxpayers who file an IRS Offer in Compromise, get it returned due to procedural deficiencies and never make it to a point of final review. Thus, satisfying the many procedural requirements is necessary if an OIC, and it is helpful to have a certified tax attorney help before it is to be reviewed by the IRS. We encourage clients dealing with IRS tax settlements to consult the experienced tax professionals at JDKatz: Attorneys at Law before applying for an OIC.
After the IRS completes its review, it makes a determination either to reject or accept the Offer in Compromise. If the OIC is rejected, another form of IRS back tax resolution may be needed, such as an Installment Agreement, Currently Not Collectible status, or Full Pay Service. However, if the Offer is accepted, the offer amount is paid and the unpaid or back taxes are resolved. In addition, the taxpayer must file all future IRS tax returns and make all necessary payments on time and in full. An IRS Offer in Compromise is an excellent way to resolve back taxes and to get a fresh start with the IRS. Tax debt settlement help can be obtained by calling our Bethesda or Washington, D.C. office, or by filling out our contact form to get you connected with one of our experienced tax attorneys.
Living Standard Guidelines
When an individual taxpayer files an Offer in Compromise with the Internal Revenue Service (IRS), they are required to complete a Collection Information Statement for Wage Earners and Self-Employed Individuals, Form 433-A. Section 9 of this form is the “Monthly Income and Expense Analysis.” Taxpayers are required to complete this section in order for the IRS to determine their reasonable collection potential (RCP). Taxpayers are expected to state their income and their “claimed” expenses
Processable or Unprocessable?
When an Offer in Compromise is filed with the IRS, it must be deemed “processable” before the IRS will review it. If the OIC is unprocessable, the IRS will return or reject it. The offer needs to be completed and submitted on the appropriate forms along with the appropriate filing fee. Moreover, it is important that the taxpayer file the OIC at the appropriate Offer in Compromise Service Center. If an OIC is deemed unprocessable and returned to the taxpayer this will not prevent the taxpayer from re-filing the Offer, but may cause significant delay. Finding an experienced law firm with reliable tax advice and skills can help to mitigate the wait time for your OIC.
The IRS offers several programs to taxpayers with past-due federal income tax liabilities. The purpose of these various programs is to offer different ways for taxpayers to resolve their tax liabilities based on their unique financial situation. Perhaps the best known of these programs is the Offer in Compromise. The Offer is one of the most popular tax resolution programs offered by the IRS. Because of the large number of the Offer received annually, the IRS has taken actions to streamline the OIC process as much as possible.
Non-Liable Party Contact
When a taxpayer files an IRS Offer in Compromise, the IRS will evaluate the taxpayer’s ability to pay the taxes owed. As part of this evaluation, the IRS will look at the taxpayer’s income and expenses. The taxpayer must disclose to the IRS the taxpayer’s income and how much the taxpayer is paying for certain allowable living expenses.
It is also common practice for the IRS to require the income information from all members of the household regardless of whether they are liable for the taxes owed. Household individuals, who do not owe the tax, are considered “non-liable parties.” A non-liable party may be a husband, wife, significant other, parent, roommate, friend or anyone else living with the taxpayer.
When a taxpayer files an Offer in Compromise with the Internal Revenue Service (IRS), they will evaluate the taxpayer’s ability to pay the taxes owed. As part of this evaluation, the IRS will closely inspect the taxpayer’s income and expenses. For purposes of the Offer in Compromise, it is common practice for the IRS to determine if all claimed expenses are “allowable” and if the expense will be “retiring” in the near future. A debt is retired when it has been paid in full or satisfied by some other means.
Can I Really Settle my Tax Debt for Less Than I Owe?
Many people ask if there really a program available with the Internal Revenue Service (IRS) for taxpayers to settle their back taxes for “pennies on the dollar.” Yes, there is a program available. By filing for an IRS Offer in Compromise, it can offer tax debt relief, but not every taxpayer will qualify for it. Settlement amounts are not always for “pennies on the dollar,” and they depend directly on the personal situation of each taxpayer. Every situation is different, and working with a tax law professional can help to minimize the stress and struggle of completing all forms in a precise fashion.
Effective Tax Administration
The majority of Offer in Compromises filed by taxpayers are filed on the basis of “Doubt as to Collectibility” claiming that, based on financial information provided by the taxpayer, they do not have the ability to pay. Generally, when a taxpayer files an Offer on this basis, the IRS does not look into the taxpayer’s specific facts such as their age, health or exceptional circumstances as part of their review process.
Dissipated assets are those that “(liquid or non-liquid) have been sold, gifted, transferred, or spent on non-priority items and/or debts and are no longer available to pay the tax liability.”
Compliance After Acceptance
An IRS Offer in Compromise is a great opportunity for a taxpayer to settle his or her back tax liabilities. The government offers tax settlement programs with the purpose of providing a taxpayer with a fresh start, and the expectation that the taxpayer will pay his or her taxes on time from here on out. Taxpayers are given a second chance, and the IRS now has a citizen that files their taxes on time, every time.
Many taxpayers are searching for IRS tax relief in the form of a tax resolution. The IRS‘s Offer in Compromise program is a form of tax debt relief or reduction for taxpayers who qualify. An Offer allows taxpayers to settle their outstanding tax debts for an amount that is less than the taxpayer’s tax debts. In other words, when the IRS accepts an Offer, they agree to take a certain dollar amount in exchange for wiping out the back taxes owed. An OIC is a good program for many taxpayers with tax problems. Hiring a qualified tax consultant for this endeavor can help to establish a more favorable amount for the involved taxpayers.
Types of Offers and Payment Plans
The IRS offers three (3) different payment options when it comes to the Offer in Compromise.
Proration of Expenses?
Before the Internal Revenue Service (IRS) accepts a taxpayer’s Offer in Compromise, or places his or her balances in Currently Not Collectible status, or agrees to an Installment Agreement, they will first request a Collection Information Statement (CIS). The CIS is the taxpayer’s financial information statement attesting to his income, expenses, and assets.
Get Help Now
To get help settling outstanding IRS tax debt, or to see if an Offer in Compromise is right for you, schedule a free consultation with the trusted attorneys at JDKatz. Contact us by either filling out the consultation request form or calling one of our offices to receive the help and representation you need!