Offer in Compromise
Many people understandably become stressed when facing overwhelming federal tax debt, especially when they have no idea how they will be able to pay. You do not have to fear the IRS; they can actually be quite accommodating to your financial situation. One tax relief solution offered by the IRS is an Offer in Compromise. At Fidelity Tax Relief, we analyze your situation to see if you qualify for this program and assist you by working towards the appropriate IRS tax settlement for your outstanding debt.
What is an Offer in Compromise?
An Offer in Compromise (OIC) is a program offered by the IRS where the IRS and the taxpayer agree upon an amount to settle an outstanding tax debt. The goal of an IOC is to create a compromise in the best interest of both the taxpayer and the IRS. Often, the IRS will accept an amount significantly less than the original tax liability. If you qualify for an OIC, then you will completely settle your tax debt for an amount you can afford. It is often used as an alternative to declaring your case as Currently Not Collectible or creating a Protracted Installment Agreement.
Who qualifies for an Offer in Compromise?
The IRS Offer in Compromise was created for people who are unable to pay, or for whom the tax liability will put them into a financial hardship. When deciding upon the qualification of a person, they will look at your ability to pay, income, expenses, asset equity, and other aspects of your circumstances. The IRS will accept this type of tax relief settlement when it seems that the amount offered would be the most that they can expect to receive from the taxpayer within a certain time period.
What are the requirements for eligibility?
First and foremost, to be eligible, you need to be current with all your tax filing and the requirements for your tax obligations. You also cannot be in open bankruptcy proceedings.
There are three main types: doubt as to liability, doubt as to collectivity, and effective tax administration.
The doubt as to liability OIC means that you have doubt about the amount you owe and believe that the assessed tax is incorrect. You have to submit detailed records showing that you do not owe the amount currently on record.
Doubt as to collectability means that you do not believe you will ever be able to pay the full amount of your debt. In order to qualify for this type of IOC, you have to be employed, claim the proper exemptions, not be in business or self-employed, have very few if any assets, and have expenses that are equal to or greater than your income.
Effect Tax Administration is when the tax liability is accurate and you could pay, but there are other circumstances that legitimize the claim for an OIC. In addition to a complete financial statement, you also have to provide a written narrative that explains your circumstance and why paying in full would present financial hardship. Additionally, you have to provide proof of these reasons. This is type of OIC most rarely approved. A typical case involves a person having a degenerate or fatal disease or some other exceptional circumstance.
How can it help resolve my tax problem?
An Offer in Compromise resolves your federal tax problem by reducing your tax liability as much as 90 percent, significantly reducing the amount you have to pay. This will help you to be able to afford to pay your debt without finding yourself in further financial hardship. Once you have completed the payments, you will be free of your tax debt, as long as you have not accrued any new debt in the meantime. You also will have to pay your federal taxes on time for the next five years, meaning no extensions, forgetting to file, or payment plans. If you do not, then you will be liable for the full amount of your debt plus interest and penalties.
How can you assist with my IRS Offer in Compromise?
The Offer in Compromise form can be complicated, and the rate of acceptance if very low. Any errors or problems found in the filing could result in a rejection, and it is common errors and omissions that make the rejection rate so high. You have to prove to the IRS your circumstances, which involves a lot of documentation, including full disclosure of your finances to the IRS.
The tax professionals at Fidelity Tax Relief have years of experience in filing for OIC on the behalf of our clients. Therefore, they will ensure that all the documentation is correct to increase your chances of getting the tax resolution you want. They work on your behalf talking and negotiating with the IRS, including any legitimate appeals, removing any burden that fell upon you. Additionally, they will prescreen you and only proceed with the OIC if they feel it is the right option for you. If they feel you would benefit from another action, they will work with you on that instead.
Select a payment option
Your initial payment is based on the offer and payment you choose:
- Lump Sum Cash: Submit an initial payment of 20 percent of the total offer amount with your application. Once your offer is accepted, you will then receive written confirmation by mail. Any balance remaining is paid in five or fewer payments.
- Periodic Payment: Submit your initial payment with your application. Continue to make monthly payments while the IRS considers your offer. If you are accepted, continue to pay monthly until it is paid in full.
If you meet the Low Income Certification guidelines, you do not have to send the application fee or the initial payment and you will not need to make monthly installments during the evaluation of your offer.
Understand the process
While your offer is being evaluated:
- The non-refundable payments and fees will be applied to the tax liability “you may designate payments to a specific tax year and tax debt”.
- A Notice of Federal Tax Lien may be filed.
- Other collection activities are suspended.
- The legal assessment and collection period is extended.
- Make all required payments associated with your offer.
- You are not required to make payments on an existing installment agreement.
- Your offer is automatically accepted if the IRS does not make a determination within two years of the IRS receipt date.
If your offer is accepted
- You must meet all the terms listed on Form 656, including filing all required tax returns and making all payments.
- Any refunds due within the calendar year in which your offer is accepted will be applied to your tax debt
- Federal tax liens are not released until your offer terms are completely satisfied
If your offer is rejected
- Your Case Manager will appeal the rejection within 30 days using Request for Appeal of Offer in Compromise.
Call Fidelity Tax Relief today at (877) 372-2520 to see if an Offer in Compromise or other tax relief solution is right for you.
Helpful Related Links: