Tips For Completing An Offer In Compromise To Settle Your Tax Debt
Posted on: 21 December 2015
Paying off old tax debt is important if you want to get the IRS off your back, and you may be able to do this with an offer in compromise (OIC). An OIC is a plan created by the IRS to help people settle tax debts for an amount that is less than what is actually owed. In order for you to do this, you must make sure you meet the qualifications, and you must follow the right steps. Here are some tips to help you with this.
Make Sure You Qualify
To use an OIC, there are several conditions you must meet. If you are not sure if you meet these, you could hire a tax attorney to help you determine the answer to this. Here are some of the conditions:
- You must be current on your tax returns – This means that you cannot use an OIC if you have failed to file a return within the past few years. If you did not file a return one year, but filed the appropriate extension, you may still qualify.
- You must be able to prove you cannot pay the full amount within a reasonable time – In addition, you must prove that you will not be able to repay the entire balance of what you owe. This is typically something you can prove by comparing your income and expenses to the amount of your tax bill.
If you meet these two conditions, you might qualify for an OIC. To begin the process, you will need to fill out the right IRS forms and determine how much to offer for your settlement amount.
Fill Out The Documents
If you believe that using an OIC would be a good option for you, your lawyer can help you begin the process. This will involve printing off Form 656, which is actually a booklet you must complete.
As you complete the forms within this booklet, you will be asked a lot of questions. Some of these will pertain to your current financial situation, while others will involve reasons behind your request. If you recently suffered from a major injury that is preventing you from earning the money you once earned, make sure you include this information on the forms. You should include any reasons that explain why you are having trouble paying this debt. Other examples of hardships include divorces and loss of job.
You will also need to decide how you plan on repaying the money. Will you pay it off in a lump-sum payment, or would a payment plan be better for you? You will also need to decide how much to offer. The IRS may accept offers of as little as 1% of what is owed, but they might be more likely to accept an offer that is closer to the original amount of the debt.
When the IRS receives the documents, they will make a decision. In prior years, they have accepted around 25% of the offers they receive. If they deny your offer, you have the right to appeal their decision.
Appeal The Decision If Necessary
Just because the IRS denies your offer does not mean you should give up. You have the right to appeal their decision; however, you should try to find out why they denied it. This will help you determine how to modify your offer when you appeal it.
Appealing a denial takes time, but it can be worthwhile. The IRS may decide to accept your offer if you modify it slightly, and this could help you get rid of the debt for a lower amount.
If you would like to learn more about ways to deal with tax debt, contact a lawyer that specializes in taxes and bankruptcies or a firm such as Wiesner & Frackowiak, LC.Share