If you are very behind in your personal taxes, then a tax settlement may be an option. In some cases though, it may be that an offer in compromise can give you a much faster resolution. It can also reduce the amount that you may need to pay. Before you go ahead and submit an IRS offer in compromise, you and the attorney who you work with will need to have an honest conversation about what you can pay and whether or not the IRS will say yes.
Filing for an Offer in Compromise
An offer in compromise can be a very useful tool if you want to try and resolve any outstanding liabilities you might have. You can submit an offer in compromise any time after you receive your first notice of any delinquent taxes, until you are able to appear at a CDP hearing.
Preparing the Offer
As a taxpayer, you will begin the process. You will do this by preparing your offer and then by completing the required forms. You will need to have all of your tax returns filled out before you begin, so keep that in mind. Of course, depending on your personal and your financial circumstances, your tax attorney may decide to file for an OIC based on your doubt as to whether or not you’re liable. Your tax attorney will be able to help you to decide which basis you are going to qualify for, so you won’t have to worry about a thing.
Paying the Down Payment
Every single offer in compromise has to include a user fee. This is usually $186. This fee can however, be waived if you have a low income. If you are filing based on economic hardship, then you will need to make a payment based on the terms in the OIC. Here you will have two options:
Lump Sum Cash Offer
Here, you will propose to pay the entire balance of your offer. This will be done in 5 installments or less. Under this payment option, you will have to submit 20% of the lump sum as well as the user fee.
You also have a periodic payment offer. You will propose to pay the balance of your offer in either 6 months or 24 months. Under this payment option, your first proposed payment will be taken along with the OIC and user fee.
Reviewing your OIC
As soon as the OIC and the related fees are served with the IRS, the department will then suspend all collection efforts. This can be done as long as the outstanding OIC is pending. This is often done for over several months.
Substantiating the Offer
When this has happened, the offer then needs to be substantiated. Proof is provided and this means that the financial claims can be made for the offer. This can be done in two ways.
Streamlining the Offer Process
An investigator will review the non-complex OICs and they will request additional documents that may be required. This is done before a recommendation is made, but this option may only be available to certain taxpayers. That being said, it is a much faster way of doing things.
Will the IRS Stop Trying to Collect Payments?
As soon as your OIC and fees are served, the department will then need to stop any collection payment efforts. Once the officer has received the OIC, they will then submit it to the COIC Unit, or the Centralized Offer in Compromise Unit. This unit will then review all of the documentation and they will determine if it is entirely processable or not.
An offer in compromise is not the 100% cure to everything, but by seeking professional help, you can then explore other options that you might not know existed.
Of course, being in debt is never a good thing and it can really impact your future as well. If you want to stop this from being the case, then you need to do everything you can to seek the right help and at the right time. If you genuinely believe that you are not going to be able to pay your debts, then you need to try and hire a tax advisor. When you do, you can then count on them to work with you to make sure that your offer in compromise goes through smoothly.
If you need help filing for your offer in compromise or if you are in need of some support when it comes to your payments in general, then the only thing that you need to do is contact us today at Karim & Associates.