Essential Information about an Offer in Compromise
You are actually looking for the possibility of the elimination of your tax debt when you submit an application for an Offer in Compromise or OIC. This compromise means that both parties have decided that the arrangement is in their best interest. You, as the taxpayer and the IRS, representing the government, are the parties concerned here.
In general, the IRS is open to receiving an Offer in Compromise so that unpaid debts can be settled for a lesser amount. However, they will only consider such an offer if they feel that the full amount cannot be collected. In this process, the taxpayer submits an amount that he feels he can afford to pay but this should be a realistic one. For instance, if the likelihood of collecting that amount is higher, then a higher amount should be declared in the OIC. If the opposite is true, then he/she should put a lower amount.
If you would like to apply for an Offer in Compromise, it is a requisite that you have filed all of your tax returns for the pertaining years you wish to compromise on for the debt. The government may have kept records of your dues but an OIC application will not be received if you cannot present your official tax returns. You will also be required to declare the earnings that you could have earned during those years. Filing all of your tax returns also ascertains that you will not be imprisoned for failing to do so. However, the possibility of being imprisoned as a result of tax issues is still a present in some instances.
People who believe that an Offer in Compromise has a great deal to do with how much is actually owed from the IRS are mistaken. The fact is, how much the IRS believes you can afford to pay them is a better contributor of this process. It is this belief and understanding that is the heart of the issue and one of the focuses of your Offer in Compromise. Applicants must prove to the IRS that they cannot afford to pay more than the recommended figures indicated in their forms. The likelihood of getting this request approved improves when such important considerations are deal with correctly.
On the contrary, the IRS will still attempt to collect money from you while your OIC is still being processed. Actions such as wage garnishments, tax liens or levies will be enacted all in an effort to collect your tax dues as quickly as possible. Fortunately, you have the option to appeal to any of these collection methods by undergoing a process called the Collection Due Process Appeal. At the time of the actual appeal hearing, you will be able to offer an installment agreement and payment plan, or your Offer in Compromise. Both of these are substitutes to the collection methods that the IRS will be implementing.
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 prevents you from doing so, then you can effectively put an end to your IRS issues. Basically, you would prove your claim 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.”
Filed under Blog by on Oct 31st, 2009. 