Picture yourself with debt relief. Not reaching for bankruptcy is a much better goal than most are able to achieve. It isn’t easy to navigate the complicated world of taxes as a debtor, though it comes out not qualifying, having to wait, and even missing a qualifying opportunity.
There is a lot of onerous paperwork debtors have to fill out to qualify for getting an Offer in Compromise approved. It’s a process, and you need to follow the rules. Keep reading to learn more about how to get an offer in compromise approved.
Table of Contents
What Exactly Is an Offer in Compromise?
An Offer in Compromise (OIC) is an agreement between the IRS and a taxpayer that resolves the taxpayer’s liability for less than the full amount they owe.
It is an alternative to full payment of taxes owed. It is most often used as a last resort when a taxpayer is unable to pay the full amount. The IRS evaluates the taxpayer’s financial situation to determine if a reduced payment is possible relative to their net equity and income.
The IRS offer in compromise will be considered if they determine that it is the most cost-productive and reasonable collection alternative. An OIC should only be considered if the taxpayer is unable to pay the taxes owed in full through installment agreements or other payment options.
How to Get an Offer in Compromise Approved?
The IRS offers tax relief in the form of an Offer in Compromise (OIC). In order to be approved, an OIC must be able to demonstrate that accepting the offer is in the best interest of both the taxpayer and the IRS. To increase the chances of an OIC being approved, the taxpayer should:
- submit accurate financial documents
- provide proof of an inability to pay the debt
- create a payment plan the IRS will accept
It is also important for the taxpayer to be thorough when describing his/her financial situation. Any special circumstances that may have led to an inability to pay.
Additionally, the taxpayer should ensure that all documentation is up-to-date and that tax filings are complete. It should adequately demonstrate a need for an Offer in Compromise.
An OIC application should then be submitted to the IRS in an effort to prove that the taxpayer is unable to pay the total tax liability and should be granted a compromise. To learn more about negotiating with the IRS for OIC, hire reliable tax professionals.
How the IRS Decides to Accept an Offer in Compromise?
The IRS will consider the Offer in Compromise in relation to the taxpayer’s income, resources, and ability to pay. The taxpayer is required to submit ample financial information. This includes assets (like savings) and liabilities (debt), in the form of a Collection Information Statement (Form 433-A or 433-B).
The IRS will also consider other factors, such as expenses (housing, food, and living costs). Depending on the nature of the situation, the IRS may also consider the discharge of debt due to hardship or catastrophe.
The IRS considers both practical and legal aspects of the Offer in Compromise from the taxpayer’s side. In terms of practicality, the IRS will assess whether the taxpayer can actually pay the amount offered.
If the amount is too small, or too large for the taxpayer’s ability to pay, the offer might be rejected. In terms of legal aspects, the IRS will consider whether the taxpayer is liable for the tax debt.
Requirements of the Offer of Compromise Program
If you’ve come to this point of overwhelming debts, you might be considering filing for bankruptcy. However, individuals with over $100,000 in debt or more can’t file bankruptcy.
Luckily, there’s an alternative method to help you deal with your crippling money problems. Below are the three requirements of the Offer of Compromise Program:
Doubt as to Liability
To enroll, the taxpayer must submit a reasonable doubt statement to the IRS demonstrating that the amount of required unpaid tax is in dispute. The statement should explain why they believe they may not be liable for the debt in question.
The taxpayer must also submit information regarding their financial resource availability to pay the debt. The IRS will review both the statement and financial information to determine whether they are eligible for the program.
Additionally, any taxpayer applying for the program must provide:
- a valid Social Security number
- individual Taxpayer Identification Number
They should also pass the Internal Revenue Service Equivalent of an Identity Check. Additionally, the taxpayer must agree to pay a minimum percentage of the disputed tax liability in order to be eligible.
Doubt as to Collectability
The Offer in Compromise (OIC) Doubt as to Collectability Program gives taxpayers a way to make a settlement with the IRS. When a taxpayer faces a federal tax obligation that cannot be paid in full, the IRS may accept an Offer in Compromise if there is Doubt as to Collectability.
In order for an individual or business to qualify for this program they must meet certain requirements. First, the taxpayer must complete required IRS forms and provide documentation proving their financial situation.
Second, the taxpayer must make an initial payment of 20% of the offer amount. Third, the taxpayer must agree to make installment payments for the remaining balance according to an approved plan.
Paying the Full Amount Would Present a Significant Hardship
If you owe a debt to the IRS that you are unable to pay in full, you may be able to take advantage of the Offer in Compromise Program.
This program allows you to negotiate with the IRS to reduce the amount you must pay in exchange for completing certain conditions.
One of the requirements of this program is that you must prove that paying the full amount of the debt you owe would present a significant hardship.
So, How to Get an Offer in Compromise Approved?
The Offer in Compromise is an effective way to reduce the amount you owe the IRS. By submitting accurate paperwork, understanding the process, and being proactive, you can increase your chances of a successful outcome.
However, it requires patience. Don’t hesitate to reach out to a tax professional if you need assistance. Work towards getting your tax debt resolved, with an Offer in Compromise.
Did you find this article about how to get an offer in compromise approved helpful? You can check out our website for more awesome content like this.