Everyone wants to avoid debts, no matter what type of debt is. It is so because debts are a headache, and if they are not paid timely, they can increase over time and create financial hardship for tax debtors.
When it comes to tax debts, the same thing applies. No taxpayer wants to be bound with tax debts. And if it is the IRS tax debts, they try their best to get out of this as soon as possible without caring about their current financial situations. It is so because the IRS tax debts can create financial hardship for them if they are not paid timely.
Well, there is some relaxation provision by the Internal Revenue Service for all the IRS tax debtors that is Offer In Compromise (OIC). Let’s see what Offer In Compromise is?
Offer in Compromise (commonly known as the tax debt settlement) is a relaxation provision on tax debts for the IRS tax debtors. It allows tax debtors to settle their tax debts with the IRS for less than the full amount they owe. It is a lawful option for the tax debtors if they are unable to pay their tax debts due to having insufficient funds, or doing so creates a financial hardship for them. However, they need to prove their claims or given reasons for not paying their returns on time.
The IRS considers a unique set of facts and circumstances for determining whether or not you are eligible for an Offer in Compromise. Those facts and circumstances are as follows:
- Ability to Pay
- Income and Expenses
- Asset Equity.
Are You Eligible For OIC?
The IRS tax debtors who meet the eligibility criteria of OIC can only apply for the OIC. So, as an IRS tax debtor, before applying for the Offer in Compromise, make sure you meet all the eligibility requirements of this tax debts relaxation scheme.
To find out whether or not you are eligible for the OIC, you will have to use the Offer in Compromise Pre Qualifier Tools. You can also prepare the preliminary proposal for the IRS using this tool. To access this tool, you will have to visit the official website of the IRS.
Here are a couple of eligibility requirements for the OIC. Let’s take a look below.
- All required returns must be filed as well as all estimated payments must be paid to the IRS.
- There should not be any open bankruptcy proceedings.
- If you own a business, you must already have made all the necessary tax deposits.
If you fail to meet any of the above-mentioned eligibility requirements, you cannot apply for the OIC.
The Chances of Acceptance and Rejection of Your OIC Application
If you meet all the eligibility requirements of the OIC, it doesn’t mean that you will get approval from OIC. If you think so, it is your misconception.
The IRS officers look for a number of factors before approving an OIC application. They check your ability to pay. If you are unable to pay the entire amount of your tax debts due to not having sufficient bank savings and cash, the IRS may accept your Offer in Compromise request. However, they will also check other factors such as your income, expenses, charities, investments, asset equity, etc. If they find any incorrect information, data, and some form of manipulation, they will immediately reject your application.
If we consider the data provided by Forbes in one of their articles, the IRS accepts only 40% of OIC applications while rejects around 60%.
Therefore, it is very important to be extra careful when you apply for the Offer in Compromise New York. For better results, you must consider hiring a professional tax attorney. They are experts and experienced in this field and know how to smartly work for your benefit.
Complete Application Form and Submit Your Offer
To fill your OIC application form, head over to the official website of the IRS. You will find an Offer in Compromise Booklet, Form 656-B. You will have to read that form carefully as the IRS has mentioned all the instructions about the application form and submitting an OIC offer to the IRS in that form. Make sure you rightly follow the instructions as mentioned in the form 656-B.
The forms and fees required are:
- Form 433 A (for individuals) (with all required documents)
- Form 433 B (for businesses) (with all required documents)
- Form 656(s) (for both individuals and Corporation/ LLC/ Partnership and must be submitted separately)
- A non-refundable application fee of $205
- A non-refundable initial payment for each Form 656
For paying the application fee and initial payment for each form 656, you will get certain payment options that are Lump Sum Cash and Periodic Payment plans. You can choose any of these two payment methods as per your convenience.
For knowing more information about Offer in Compromise, you can search on the internet and surf reliable websites. You can also approach different trusted law firms and tax attorneys. They can also help you with your legal IRS tax-related matters. So, in the end, if you are searching for a solution to reduce the burden of your tax debts, consider Offer in Compromise. You will certainly get relaxation on your IRS tax debts to some extent.