Offer in Compromise (OIC)
Tax Offer in Compromise Specialists
Alana Tax Group helps you navigate difficulties with the IRS. If you find yourself drowning in tax debt, we’ll help you file correctly to resolve the situation. An offer in compromise is an agreement between the taxpayer and the IRS that settles the taxpayer’s tax bill for less than the full amount owed. This program can be life changing for taxpayers whose financial situation makes it nearly impossible to pay their entire tax debt.
How does the Offer in Compromise application work?
To qualify for an Offer in Compromise application, you must show the IRS that there is no possible way that you can pay your entire tax debt, because you don’t have enough income or assets to cover the full amount. Instead, you will offer to pay the IRS the maximum amount you can afford (even though it may be much less than the amount you actually owe).
Once your offer is submitted, the IRS will review it, and will accept it, if they agree that the amount you offered is the most that they can reasonably expect to collect from you. In this case, the IRS will agree to the offer, and will decrease your tax debt to match the amount you can pay.
At this point your entire tax bill will be settled for the years covered by the offer in compromise, including all penalties and interest.
Who qualifies for an Offer in Compromise?
Not surprisingly, the actual acceptance rate for an offer is fairly low because not everyone with tax debt qualifies for this program and because of errors or omissions made on offer submissions. In order to have the greatest chance of approval a taxpayer should seek professional help during this very complex process.
What are the criteria for an Offer in Compromise?
The IRS will consider compromising your tax debt for one of the following three reasons:
Offer Type 1: Doubt as to Liability:
The Basics- You do not believe that the amount of back taxes owed are correct. There was an error made. The IRS, your accountant, or you may have made the error. If the error is corrected, your tax bill will be lower. Offer in Compromise Doubt as to Liability is filed to correct the error and reduce the taxes owed.
Offer Type 2: Doubt as to Collectability:
The Basics: You owe back taxes to the IRS, but you can’t afford to pay your tax debt. The IRS may agree to settle your tax debt for less than you owe. This process is called Offer in Compromise Doubt as to Collectability.
In this case, doubt exists that you could ever pay the full amount of tax liability owed within the remainder of the statutory period for collection, because your assets and income are less than the full amount of your tax liability.
Offer Type 3: Effective Tax Administration:
The Basics: There is no doubt that the tax is correct and there is potential to collect the full amount of the tax owed, but an exceptional circumstance exists that would allow the IRS to consider an OIC.
Two Types of Effective Tax Administration Offer in Compromises.
Type 1 is based on hardship. – To be eligible for compromise on this basis, a taxpayer must demonstrate that the collection of the tax would create an economic hardship
Type 2 is based on equity or public policy- To be eligible for compromise on this basis, a taxpayer must demonstrate that the collection of the tax would be unfair and inequitable.
Every tax case is different, but EVERY case has a solution. We can help you figure out the best program to settle your tax debt, call us today for a free consultation.