Offer in Compromise
Applying for an Offer In Compromise (OIC) is a time consuming, tedious, process. It is the only option available for IRS resolution that looks forward rather than backward. In other words, the qualification is based on future earning potential. Almost every day at Confidential Tax Resolution we consult with people who have zero chance of receiving a successful Offer In Compromise settlement. Unfortunately, these people had been sold a bill of goods by someone and oftentimes had already paid for tax help, only to find out from the IRS that they never were qualified for an OIC. They’d spoken with a salesman who’d promised them miracles. They’d wasted their time and money. It’s a shame.
An Offer In Compromise is an agreement between a taxpayer and the IRS (or State) that settles the taxpayer’s debt for less than the full amount owed. Sounds great! In fact, it was established for that specific purpose - to assist taxpayers who cannot pay their IRS back tax debt in full. It is the best possible resolution for settling a tax debt and is sometimes referred to as the “pennies on the dollar” settlement. Is it possible to receive an Offer In Compromise settlement? Absolutely. Can a tax debt really be resolved for a fraction of the total due? Again, absolutely. However, keep this in mind: If everybody could settle their tax debt for pennies on the dollar, nobody would pay their taxes! There are also specific and strict qualification requirements. Confidential Tax Resolution professionals know the drill when it comes to tax debt. We’ve submitted hundreds of Offers and gotten them approved. We can evaluate your case based on IRS guidelines and quickly determine if your situation is an OIC winner.
Beware of the “offer mills” – those on-line companies that are popping up everywhere promising inside knowledge or trickery or guaranteed acceptance of the OIC. It just doesn’t happen like that. But don’t despair, there are other settlement options that are potentially more effective anyway (think about it, sometimes the pennies on the dollar Offer might be 95 pennies on the dollar!). The more realistic settlement opportunities are frequently simpler, less costly and faster – but don’t expect the guys at the on-line “offer mills” to offer to explain this. A successfully negotiated settlement with the IRS requires skill and expertise; the type professional you’ll meet at Confidential Tax Resolution. Call us. We’ll lay out your options; and you do have options.
IRS Offer in Compromise – Providing Tax Payers A Chance to Justify Their Point
If any qualified individuals have a tax-debt due, he can try to negotiate for an amount less than the actual amount of the debt. The IRS offer in compromise program in U.S. provides people with this scope and it falls under the purview of 26 U.S.C. § 7122. Form 656 is used for checking whether the taxpayer would be eligible for the OIC program. The form consists of a checklist for determination of the eligibility. The purpose of the IRS offer in compromise program is to arrive at a mutually beneficial agreement between the U.S. government and the taxpayer. In this way voluntary compliance is also received regarding all payments made in future and the tax-filing requirements.
In order to be considered for the IRS offer in compromise settlement the taxpayer would need to fulfill any one of the 3 criteria. These 3 conditions are - Doubt regarding Liability, Doubt regarding Collectability, and Effective Administration of Tax. As per the first criterion, the individual can get considered for the OIC settlement if he manages to show that there is room for suspicion as to whether the tax liability assessed is correct. According to the second condition the debtor proves that the debt cannot be collected in totality by the Internal Revenue Service (IRS) under any situation.
Under the 3rd condition, there is no challenge from the debtor’s end regarding the aspects of collectability or liability. However, the debtor shows special or extenuating circumstances where debt collection would result in financial hardships or it would be inequitable and unjust. This condition is mostly used by disabled or aged individuals. People who are faced with any other circumstance which deserves extenuation can also opt for the 3rd option. It is worth mentioning that the IRS offer in compromise has no effect on tax lien. Only after the amount is entirely cleared and acknowledged by the IRS, the request for removal of lien can be made to the IRS. If a taxpayer is unable to pay the entire amount due in full he can also arrange with the IRS an installment agreement under which he has to pay equal installments every month.
IRS section 6694 penalizes tax-return preparers for preparing returns assuming positions not entirely supported by existing law. There have been new tax legislation which have come as a shock for the tax practitioners. One such instance is the Small Business and Work Opportunities Tax Act of 2007. This law has amended IRS section 6694.