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IRS Offer in Compromise
The Offer in Compromise (OIC) is frequently described in the popular press, in radio and television advertisements as a simple means of resolving complicated tax problems while reducing overall tax debts to a minimum. Reality, in the context of OIC’s, is far from the claims made by advertisers. In fact, the majority of all OIC claims are denied. Not necessarily because there are no other means of resolving an individual taxpayers problems but, instead, because there are a number of solutions that solve taxpayer problems before the IRS will even consider this specific tax settlement instrument.
The rest of this page is dedicated to explaining why these claims are frequently denied, what the various qualification guidelines are for this specific workout and the other solutions available to taxpayers that want to settle their overall tax debt for the lowest amount possible that they can afford.
Why are most OIC claims denied?
The vast majority of these claims are denied by the IRS because taxpayers do not qualify. Many so-called tax professionals use this strategy but do not clearly understand the guidelines. This wastes the time of the IRS and, more importantly, the taxpayer in need of tax relief.
What are the qualification guidelines for an OIC?
From the perspective of the IRS, the Offer in Compromise is a strategy to be employed when all other forms of remediation fail, generally speaking. There are three principal bases of qualification. They are: (1) doubt as to liability; (2) doubt as to collectability; and (3) effective tax administration. Each of these grounds for acceptance shall be discussed in turn.
Doubt as to liability is what it sounds like. You need to prove to the IRS that you are not liable for the amount owed. If you feel you have a simple, straightforward answer as to why you do not owe the debt that anyone would believe, you may be eligible to reduce or eliminate your tax debt. You must have substantial evidence however. If you would like a professional to review your case and help you understand if they believe you qualify on this basis, call IRS Tax Relief Now, Inc. at (888) 332-8959 for free assistance.
Doubt as to collectability is pretty clear-cut. You must show the IRS that you do not have the assets, income or other means to repay the debt in full and that by being required to do so by the IRS, you would suffer a severe economic hardship.
Effective tax administration is a bit more nebulous, as far as a criterion of judgment is concerned, than the former criteria described previously. Assume you cannot pay the debt in full, also assume paying said tax debt would cause you a hardship, further assume you have specific life circumstances that make it exceedingly difficult to pay the debt, e.g. terminal illness, incarceration, mental instability. If you meet these requirements you may be eligible.
Do you need a tax professional to file for you?
The short answer is no. The qualitatively superior answer is that you should consult with a tax professional before filing the required form (IRS Form 656). There are substantial benefits when it comes to consulting with a tax professional regarding the Offer in Compromise. First, they will let you know if you have a high probability of being approved or a low probability of success. Second, if they feel you cannot be approved, they can discuss other forms of working out your tax problem. Lastly, and perhaps more importantly, you will not waste your time or the time of Revenue Officers at the IRS that process requests.
If you would like to file for an OIC on your own, you’ll need to complete IRS Form 656 (http://www.irs.gov/pub/irs-pdf/f656.pdf) and gather substantiating documentation. If you would like a free consultation first, call IRS Tax Relief Now, Inc. at (888) 332.8959 to set a convenient telephonic appointment to review your tax problem in detail.
What other solutions are available?
In fact, there are many solutions available to the taxpayer considering the IRS views the OIC as a non-preferred method of satisfying past due taxes. Consider that the IRS would prefer that you set up an installment agreement first. If you are eligible for an installment agreement you are, by definition, ineligible for an OIC. If you are not eligible for an installment agreement and if the IRS still deems you ineligible for an OIC you still have options.
Common options when the offer is denied.
The most common form of settlement with the IRS is to analyze multiple years of returns, define if any further exemptions and/or deductions exist and re-file past years of returns. This may very well reduce your overall tax debts, help you pay the tax debt in full or help you qualify for an installment agreement that you may not have previously been qualified for.
The OIC has significant benefits. By filing and qualifying for it, you can reduce your overall tax debt owed. However, the IRS does not typically approve claims of this nature due to the restrictive criteria associated with the approval process. If you do not want to waste your time or the time of an agent of the IRS, it is advised that you seek the counsel of an Enrolled Agent or tax attorney specializing in tax resolution. If you would like a free consultation from an Enrolled Agent, call IRS Tax Relief Now, Inc. at (888) 332-8959.