Steps To IRS Offer In Compromise

What an Offer In Compromise?

Sometimes mistaken for an, “Offer And Compromise”, nearly every delinquent taxpayer wants this coveted IRS payment plan; yet very few will qualify.  Our experience with IRS Offer in Compromise denials, reveals the average taxpayer struggles to qualifying because the process is too difficult.  Gathering the relevant information necessary for an OIC application, correctly completing complicated forms, and calculating all the numbers, is a huge undertaking.  IRS requirements demand you, to clearly present a complete and comprehensive Offer in Compromise application.  Sometimes these packages sent via mail, contain as many as 100 or more pages, including the supporting documentation.IRS Offer In Compromise

This IRS payment arrangement allows the taxpayer to negotiate their overall debt for much less than what they owe.  Some real-life examples include taxpayers settling $100,000 in IRS liability for $400; $16,500 for $500; $36,000 for $1000.  Clearly, there is a wide variance in OIC contract outcomes, which is due to many differences with taxpayer’s situations.  Applications require math calculations from numbers gathered from many documents and resources.  Remember the 100 pages?  Depending on a taxpayer’s tax situation there could be reams of paperwork required, and as a result adds much more complexity to the back tax project.

Reason Why the IRS Rejects an Offer In Compromise

OICs account for most IRS repayment program denials.  The IRS’s OIC qualifying process is designed for experts, since so many regular taxpayers find it difficult to navigate the maze of requirements.  You may send every item asked by the IRS, and yet still be rejected.  While reasons for denial vary, many occur because taxpayers fail to file tax returns for past years.  Many taxpayers who miss these small details, end up losing money; because they end up in less appealing payment plans, like the IRS installment agreement.

Professional guidance is important when applying for Offer In Compromise.  Professionals know what the IRS is looking for, allowing them have a higher success rates when compared to individual taxpayers.  Tax professionals are aware of details, such as the amounts the IRS will allow for various living expenses.  Back tax professionals can quickly determine if this IRS reimbursement arrangement is even an option for you.

When To Apply For An Offer In Compromise

While most taxpayers will not qualify for an OIC, it may benefit some to apply anyway.  Changes in the a taxpayer’s foreseeable financial future, is a common way for unqualified taxpayers, becoming good candidates for OIC.  For example, losing your job or planning your retirement, could dramatically alter your financial picture.  Any change in future income is relevant, when applying for an Offer in Compromise or any other IRS subsidy plan .

As with all tax settlement programs, the IRS demands all tax return filed, prior to any tax payment contract negotiations.  So, you should begin with reviewing all of your current and past tax filings.  Without knowing your tax liability, its is unwise to proceed with a solution.  Taxpayers who rely upon IRS notices for tax debt amounts, usually end up paying much more in taxes, than those who check their own returns for accuracy.  People make mistakes, including the IRS, so you must always check for errors and omissions on filed tax returns.

Using Back Tax Professional Help for IRS Payment Arrangements

If you decide to work with a professional to apply for an IRS Offer In Compromise, you must remember your participation is important.  Working with your back tax team is a partnership.  You need them to fix your tax problem, and they need your time and effort .  While the professional carries the heaviest load of work, you must be available to give them various bits information.  Gathering this material is hard work, but worth your time and energy.  Especially if your efforts settle your tax debts for less than you owe, like the great examples given above.

IRS Offer In Compromise