Important Information About an Offer in Compromise
The ultimate goal of an Offer in Compromise or an OIC, is the settlement and eradication your tax debt. In this process, both parties, the taxpayer and the IRS, attempt to reach a mutually beneficial agreement.
Applications for OIC are entertained so that taxpayers are given the chance to pay their debts at a lesser amount. A requisite of this payment scheme is your ability to demonstrate the fact that the full amount can’t be collected from you anymore. In this process, you are to notify the IRS of the amount that you feel you can afford to pay and this should be a reasonable estimation. A higher approximation is needed if your likelihood of paying the full amount is greater.
Filing for an Offer in Compromise requires that you have filed all your tax returns in the years applicable to the said request. The government will only accept OIC requests if you can provide them your official tax returns and an estimate of your earnings, even if they have records of these details. Filing for tax returns should be diligently done to avoid IRS problems, including imprisonment.
The belief that the OIC is primarily about how much taxes you owe is a misconception. In fact, an Offer in Compromise is essentially about how much the IRS believes they will be able to collect from you. Applicants must have a strong case of their claim that they can’t afford to pay more than what they offered in the compromise. The possibility of getting an approval for this request increases when the requisites are conscientiously followed.
On the contrary, the IRS will still attempt to collect money from you while your OIC is still being processed. Procedures such as wage garnishments, tax liens or levies will be enforced all in an effort to collect your tax dues as soon as possible. Fortunately, you have the option to appeal to any of these collection methods by going through a process called the Collection Due Process Appeal. During the actual appeal hearing, you will be able to suggest an installment agreement and payment plan, or your Offer in Compromise. These two are considered alternatives to the ones enforced upon you by the IRS.
Believe that tax debts, no matter how large, can eventually be settled. Although there is a good reason why the IRS believes that you can pay the entire amount, if you can prove that your circumstances keeps you from doing so, then you can effectively put an end to your IRS issues. Basically, you would prove your case and as long as the IRS feels that settling would avoid greater overhead cost, it would accept a settlement because such is essential for ‘effective tax administration.’