Representation for Offer In Compromise
Through the Offer In Compromise program, Tax Relief Strategy supports taxpayers in resolving tax debts. An offer in compromise, or OIC, is a method of settling a federal tax liability with the Internal Revenue Service (“IRS”) for a lower sum than you owe.
An offer in compromise may be a viable alternative if you are unable to pay your tax debt in full and the amount proposed represents the maximum the IRS may anticipate to collect in a reasonable amount of time.
An offer in compromise permits you to pay less than the full amount of your tax debt. You have the option of paying a large sum over five months or making monthly payments over a 24-month period. In exchange for a lower payment, you commit to file and pay your taxes on time for the next five years. If you are unable to pay your full tax debt or if doing so would put you in financial hardship, it may be a viable choice. The IRS takes into account your specific combination of facts and circumstances, including your
- Ability to pay.
- and Asset Equity.
The RCP — reasonable collection potential — of the taxpayer determines the lowest allowable amount of an OIC. The RCP is calculated by multiplying the taxpayer’s assets’ quick sale value by 60. The net monthly income is calculated over a five-year period, which is the basic method used by the IRS.
When the sum given is the most that can be expected to be collected within a reasonable period of time, the IRS will normally approve an offer in compromise. Before submitting a compromise offer, look into all alternative payment choices. Not everyone is a good fit for the Offer in Compromise program.
Need a Tax Professional to Assist You with Filing an Offer In Compromise?
Grounds for a Tax Liability Offer In Compromise
An agreement between a taxpayer and the IRS that settles a tax liability in exchange for payment of less than the full amount owed is known as an offer in compromise. The IRS can compromise a tax liability for one of three reasons: I question about collectability; (ii) doubt about responsibility; or (iii) to promote efficient tax administration. You must also be current on all IRS tax filing and payment obligations, and you cannot be in the midst of a bankruptcy procedure.
The IRS’s declared purpose with the offer in compromise program is to collect what is possibly collectible as soon as feasible and for the least amount of money possible.
Ability to Pay Analysis
The IRS will evaluate your financial circumstances in detail, including your ability to pay, while assessing an offer in compromise. This examination includes a thorough examination of your monthly income and expenses, as well as the value of your assets. It’s critical to evaluate and understand how your current financial status affects your eligibility for the IRS’s offer in compromise program before filing an offer in compromise application. In reality, determining your ability to pay is the most crucial pre-filing procedure for determining your eligibility for an OIC is the ability to pay study.
How To Prepare for an Offer In Compromise
As a taxpayer, you must make sure that all expenses you claim are substantiated, because the IRS will invalidate them if they aren’t satisfied that you paid them. We recommend keeping accurate records and documenting expenses to our clients. We must do everything we can to prove your expenses to the IRS.
OIC is all about numbers, just like everything else. You must submit as many valid costs as possible while reporting as little income as feasible. Keep in mind that the IRS will forecast your future earnings for the next five years. Your OIC will be denied if it appears that you will be able to pay off your whole tax debt in five years or less.
If you have a large tax burden and wish to submit an offer in compromise, you’ll need the help of an experienced enrolled agent. Gary Canonico, president of Tax Relief Strategy, has experience obtaining IRS acceptance for his clients’ OICs. You don’t have to do it alone.