What You Need to Know About Offer in Compromise

You are actually looking for the probability of the elimination of your tax debt when you submit an application for an Offer in Compromise or OIC. This compromise implies that the two parties have decided that the agreement is in their best interest. The parties involved are you, as the taxpayer and the government who is represented by the IRS.

The IRS receives Offer in Compromise for the intention of settling unpaid tax dues at a lesser amount. A key consideration in accepting applications of this kind is the taxpayer’s capacity to pay the entire amount. In this process, the taxpayer provides an amount that he feels he can afford to pay but this should be a practical one. For instance, if the probability of collecting that amount is higher, then a higher amount should be declared in the OIC. If the reverse is true, then he/she should put a lesser amount.

If you would like to apply for an Offer in Compromise, it is a requisite that you have filed all of your tax returns for the applicable years you wish to compromise on for the debt. The government may have its own accrual of your taxable earnings but it will not consider your OIC until you present your official tax returns. You also need to provide the figures that you believe to have earned during those years. Again, it is essential to keep that we should diligently file our tax returns to avoid IRS problems, including imprisonment. However, the possibility of being imprisoned as a result of tax issues is still a present in some instances.

The belief that the OIC is mainly about how much taxes you owe is a fallacy. In fact, an Offer in Compromise is essentially about how much the IRS believes they will be able to collect from you. Applicants of this said option should demonstrate that they will no longer be able to pay more than the figures indicated in the OIC. The possibility of getting an approval for this request increases when the requirements are conscientiously followed.

On the other hand, the IRS will still attempt to collect money from you while your OIC is still being processed. Actions such as wage garnishments, tax liens or levies will be enacted all in an effort to collect your tax dues as soon as possible. The bright side is, you have the option to appeal to any of these collection methods by undergoing a process called the Collection Due Process Appeal. At the time of the actual appeal hearing, you will be able to offer an installment agreement and payment plan, or your Offer in Compromise. These two are considered substitutes to the ones enforced upon you by the IRS.

To conclude, remember that tax debts will be settled eventually. Even if the IRS deems that you are capable of paying the entire amount, if you can adequately demonstrate otherwise, you will still be able to put an end to these tax problems. As long as the IRS believes that tax settlement lowers overhead costs, it would agree to come up with one because such is important in keeping tax administration effective.