The IRS or Internal Revenue Service launched the Offer in Compromise program for the best interest of the government and the taxpayer. It supports voluntary agreement with potential tax payments and filing necessities. If you owe taxes that you won’t be able to pay either in a single disbursement or in installments, see if you qualify for an Offer in Compromise that lowers the overall tax amount and makes settlement possible. In case you owe taxes to the IRS, you could consider settling your entire tax debt for less than the sum you owe. The official practice of lessening your tax debt is known as an Offer in Compromise. Your Offer in Compromise will be analyzed by the IRS in accordance with its verification of your “reasonable collection potential.” If you can prove that the government will not collect any cash from you otherwise, your offer might be accepted by the IRS.
An Offer in Compromise is a means to resolve due federal income taxes. With the OIC process, you’ll be able to make an offer of either a short-time or lump sum disbursement plan to solve tax issues. Clearly, the IRS is usually reluctant to allow considerable discounts unless you are really incapable of paying your total debt.
First of all, decide why the IRS must acknowledge your OIC. The very first reason would be a “doubt as to collectibility”; this refers to a state where the IRS won’t be able to collect the unpaid tax under any rational situation. The next reason would a “doubt as to liability”; here you may hold fresh information indicating that you do not owe the tax. The final reason is of “effective tax administration”; here you owe the tax and have the option of paying it but suppose that for some special reason you might not have to.
Now collect every single detail concerning your unpaid tax bill. The simplest and best way to execute this is to request the IRS for a recent statement, which it is required to give.
Arrange a proper means to fund your settlement offer. If you are planning to make a payment offer of $20,000 in taxes, you should arrange a way of paying the $20,000, for example by obtaining a home equity loan, trading off your assets or drawing on your savings.
Settle on the kind of payment offer that you intend to make. The IRS normally acknowledges lump-sum disbursement offers and at times approves installment offers. It is up to you to decide what you can manage, considering the fact that the IRS is more prone to allow a lump sum payment offer. The phrase “lump sum” is somewhat misleading; the reason behind this is that the IRS will acknowledge a lump-sum offer including five installment payments, provided you are able to pay 20 percent of the initial offer.
Collect all the necessary credentials. Also assemble any other important documents that will help draw a clear picture of your economic circumstances, including all liabilities that you owe, assets you possess, any savings that you have, and job and income reports for the last few years, with your service and income position for the next couple of years. Check that you have the latest edition of the IRS forms you require.
Fill out the Offer in Compromise form – IRS Form 656. Just make certain that you fill out all necessary details, even though it seems boring or monotonous. You may directly give a call to the IRS or browse through the IRS website (irs.gov) to get the most recent form. Finally, pay the requisite filing fee and submit your offer in compromise form with the proper IRS office.