If you are unable to pay your tax obligation in full, no matter how long you may have to pay off the outstanding tax debt, then an Offer in Compromise may be the most attractive tax negotiation option available to resolve your tax issues.
Although an Offer in Compromise is a highly sought-after tax resolution option, since it can substantially eliminate the amount you owe to the IRS, it is also an extremely complicated process. For this reason, it is best to rely on a tax resolution expert to handle the negotiation of an Offer in Compromise for you.
What Is An Offer In Compromise?
An Offer in Compromise (OIC) is a means of tax resolution that has been approved by Congress allowing the IRS to accept an amount that is significantly less than what is owed in outstanding taxes when a taxpayer’s financial situation makes it nearly impossible to pay off his or her tax debt, no matter what form of tax resolution is negotiated. On average, people who are able to negotiate an Offer in Compromise with the IRS end up paying only 20% or even less of what they actually owe, resulting in significant savings.
How Does An Offer In Compromise Work?
In order for an Offer in Compromise to be a viable option, the IRS must agree that you have no possible way to pay off all of the tax debt you owe, no matter what type of other negotiation option is considered. This means that your income is not enough to pay your debt in full and you do not own assets with enough value that could be seized by the IRS to meet the tax debt completely.
If this stipulation exists, here’s what happens next:
- You offer to pay what you determine is the maximum amount you can afford to the IRS to cover your tax debt, even though that amount is less than what you owe and may fall far short of the outstanding debt amount.
- The IRS will review your offer and if it believes that what you are offering is the most it can reasonably expect to collect from you, it will accept your offer and will lower the amount of your tax debt to meet this offer. This is a compromise the IRS is willing to make in order to recoup what you can pay, knowing that it will not likely be able to collect anything additional.
- Once you have paid the full amount as set in the compromise, your tax debt is considered to be paid in full and you will not be required to pay anything additional.
Determining If You Are Eligible For An Offer In Compromise
As you can imagine, it is difficult to get the IRS to agree to an Offer in Compromise since it potentially reduces the amount that a taxpayer owes by a substantial amount. The process of obtaining an OIC is very complex and the acceptance rate by the IRS is relatively low. That’s why your best chance of being successful in negotiating an Offer in Compromise is by using a tax relief company like People’s Tax Relief that is experienced in negotiating with the IRS on behalf of taxpayers.
To be eligible for an Offer in Compromise, it must be demonstrated to the IRS that collection of an outstanding tax debt in full would create an economic hardship on the taxpayer or would somehow be considered to be unfair. Below are the three reasons that the IRS may be willing to enter into an OIC:
- Doubt as to liability – Doubt exists about the correctness of the amount of tax assessed.
- Doubt as to collectability – It is doubtful that a taxpayer will ever be able to pay the full amount of tax debt owed.
- Effective Tax Administration – Even if the tax amount assessed is correct and it is determined that the amount can be collected, there are exceptional circumstances that make the IRS willing to consider an Offer in Compromise.
How Does An Offer In Compromise Differ From Currently Not Collectible Status?
An Offer in Compromise permanently alters the amount you are required to pay to settle outstanding tax debt owed to the IRS, allowing you to pay a fraction of what you owe to settle your tax obligations. In contrast, “currently not collectible” status halts the collection process by the IRS because they accept that your current financial situation makes it impossible for you to meet your tax obligations temporarily. However, once your financial situation improves, you will be required to resume repayment of your tax debt including any interest that has accrued during the temporary stay. The total amount you owe is not altered by “currently not collectible” status, although if your status is unchanged when the 10 year statute of limitations runs out, your tax debt will be wiped clean and you will no longer be required to repay your debt.
Do You Think You Might Be Eligible For An Offer In Compromise? Contact Us Today!
Call People’s Tax Relief for a free, no-obligation tax consultation at 866-788-8069 or fill out the form on the side of this page and one of our experienced tax negotiation specialists will contact you. During this consultation, we will help you determine if you may be eligible for an Offer in Compromise, and if so, can guide you through this complex and difficult process, making it more likely that your offer will be accepted by the IRS.