Offer in Compromise is a tax debt settlement provision for the IRS tax debtors. It allows tax debtors to settle their tax debts for less than the full amount they owe. In simple terms, it is a tax relaxation scheme for the IRS tax debtors that allows them to get certain tax exemptions for their tax debts. It is a very useful as well as a legitimate provision especially for those IRS tax debtors who are unable to pay the full amount of their tax liability due to some genuine reason such as long-term illness, insufficient funds, family crisis, insolvency, or paying their tax liability creates a financial hardship for them.
If you are an IRS tax debtor and if you can justify why you didn’t file your returns on time or why you owe to the IRS by providing some genuine reasons, Offer in Compromise is for you. Otherwise, there are many other options for tax debt settlement (such as installment agreement), you can opt out any of those as per your requirements and eligibility.
What to Do to Apply For an Offer In Compromise?
Generally, you have two options.
First, you can apply for it by yourself by visiting the official online OIC portal of the IRS and completing all the required formalities such as completing and submitting the Form 433-A (OIC) (individuals) or 433-B (OIC) (businesses) and Form 656(s) – individual and business tax debt (Corporation/ LLC/ Partnership).
Second, you can hire a professional tax attorney or a tax law firm to apply for it. Both options are open for you and legitimate as well.
Which Option You Should Choose?
To determine which is a better option, you will have to understand the whole scenario of the NYC Offer In Compromise. Let’s take a look at the below-mentioned points.
The IRS highly considers a few things to determine whether or not you are eligible for OIC and whether or not your offer should be accepted. Those are:
- Ability to Pay
- Asset Equity
To examine all these points, the IRS checks and analyzes your returns, records, and current financial statements so that they can determine whether or not you are the right candidate for OIC.
According to a journal published in Forbes, the Internal Revenue Source accepts an average of 40% of Offer in Compromise application, which means they reject 60% of OIC applications every year. Considering this fact, you shouldn’t take the risk of handling an OIC application process if you don’t have enough knowledge and understanding about the process as you can miss the chance.
In the event of rejection of your OIC application by the IRS, you can’t reapply for the same year. But yes, if you disagree with the rejection of your OIC application, you can use Request For Appeal of Offer In Compromise, Form 13711. However, this can be a very complicated and lengthy process. You may get frustrated while completing the formalities of this procedure.
The reason behind making you understand the whole scenario of the Offer in Compromise is to guide you through the right decision. Now you have enough understanding about the OIC application process and the IRS tendencies toward it, so based on this, you should make the right decision.
We will strongly recommend you to hire either a trusted tax attorney or a tax law firm because they will certainly provide you with the best result. Let’s discuss in detail why you should hire a tax attorney and why you should not apply for it by yourself.
Why Should You Choose a Tax Attorney and Why Should You Not Do It By Yourself?
Basically, a tax attorney is a certified, legally approved, and experienced tax lawyer who mainly deals with all types of IRS tax matters whether it is tax debts settlement, returns filing, or FBAR reporting. He/she is a law graduate, has the expertise and immense experience in practicing tax law. Tax attorneys very well know how to smartly handle the different types of IRS tax matters. They also have great negotiation skills which they use to maximize your benefits and minimize your risks. Overall, they can interpret the tax law in your favor to benefit you.
These all are the major reasons why should you trust a tax attorney for handling your Offer In Compromise. They will certainly help you to the best of their potential and ensure you get the best result.
Now, answering your query – why you should not apply for it by yourself, the simple and straightforward answer is you are not a tax attorney. That means you don’t have enough knowledge, understanding, and experience of the IRS’ Offer in Compromise application process. If you apply for it by yourself without having much knowledge about it, there are high chances of making mistakes. And if you make even a single mistake in your OIC application, the IRS officer will reject your application for sure. And as we mentioned above, if your OIC application gets rejected once, you cannot reapply for it for the same year. You will have to follow a complicated process further if you disagree with the rejection of your OIC application.
So, now it is your turn to make the right decision and win the Offer in Compromise.