How does the IRS decide if I get an “Offer in Compromise”?
Taxpayers can use OIC to negotiate a lower settlement amount for their tax debt. Before issuing an OIC based on doubt as to collectability to taxpayers who cannot pay their bills in full, the IRS will conduct a financial analysis (capacity to pay, income, costs, and asset equity) and determine if the taxpayer has shown the realistic collection prospect. In a challenging financial circumstance, reducing your tax burden permanently is a source of consolation and, for some, a new financial beginning.
If the Internal Revenue Service approves your plan
Your application fee and other payments will not be refunded if the IRS processes but rejects your offer. The IRS will provide you with a tax refund based on the amount of these contributions.
If the Internal Revenue Service accepts your offer, it will retain any refunds you are due and any interest that applies to tax years before the acceptance date. The Internal Revenue Service will hold any refund due you for the whole calendar year your offer was accepted if they receive it before November 1, 2022.
Understand the Methodology
You can do the following while the IRS reviews your proposal:
All non-refundable tax payments and fees will be applied to your total outstanding (you may designate payments to a specific tax year and tax debt)
- The Internal Revenue Service may issue a Notice of Federal Tax Lien in various instances.
- The Internal Revenue Service has temporarily suspended all subsequent collection operations.
- The deadline for evaluating and collecting on your behalf has been extended.
- You make all of the installments outlined in your offer.
- If you already have an Installment Agreement, you are not required to make payments on that Agreement.
Pay your taxes and file after the IRS accepts your OIC.
If you fail to file and pay taxes on time for five years after the IRS accepts your offer, the IRS may inform you that your request is in default and terminate it. After termination, you will be accountable for the entire amount of your debt, not the offer (not the reduced amount).
How Do I Fast-Track My Compromise Offer?
Ensuring your compromise application is error-free might speed up acceptance. A skilled tax attorney can help you file your offer in compromise correctly. However, submitting an OIC might be difficult for certain people. Therefore a tax attorney specializing in such instances is usually best. Ideal Tax, one of our trusted partners, will offer a free first consultation to help you find the best debt solution.
Getting an installment agreement
In general, a taxpayer who has engaged in an installment agreement with the IRS must pay the tax agency monthly until the obligation is paid in full. Before enrolling in a payment plan, those interested should study its terms and criteria. After an OIC request is approved, you have two alternatives for repaying your debt.
A payment plan is considered a “periodic payment offer” by the IRS if it involves six or more monthly payments and must be paid off within 24 months after acceptance. The taxpayer must complete Form 656 and the initial payment under an installment plan. Please keep in mind that this cost is in addition to the application fee. This money, like the 20% lump sum cash offer payment, is non-refundable. The taxpayer must continue making installments under a periodic payment plan until the IRS completes its examination. Non-refundable costs. The taxpayer can specify which tax liabilities are covered by the monthly payments.
One-time payment
Taxpayers can pay in installments or one lump sum. There will be no more than five installments throughout the next five months, all for the same total price. A cash offer in the form of a lump amount must be accompanied by a 20% non-refundable deposit and Form 656. This charge is separate from the application fee. The 20% payment is frequently payable even if the offer is rejected or returned to the taxpayer. Instead, the 20% will assist the individual in paying less in taxes. The taxpayer can designate which tax bill the 20% payment should be allocated to.
How Do I Fast-Track My Compromise Offer?
Ensuring your compromise application is error-free might speed up acceptance. A skilled tax attorney can help you file your offer in compromise correctly. However, submitting an OIC might be difficult for certain people. Therefore a tax attorney who specializes in such instances is usually best. Ideal Tax, one of our trusted partners, will offer a free first consultation to help you find the best debt solution.
HussaiN is a full-time professional blogger from India. He is passionate about content writing, tech enthusiasts, and computer technologies. Apart from content writing on the internet, he likes reading various tech magazines and several other blogs on the internet. Email ID: [email protected]
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