by Victory Tax Solutions on March 8, 2012 in Blog
If you’re in trouble with the IRS, it’s possible you’ve heard someone mention that you should try to get an “Offer In Compromise.”
But, what is it?
An Offer In Compromise is a settlement offered by the IRS, when they believe it is unreasonable that the taxpayer will be able to pay off all of the debt they owe. The IRS and the taxpayer agree upon an amount, which allows the taxpayer to pay off their debt in a manageable way, and giving them an opportunity for a fresh, debt-free start!
I could use one of those, how do I get one?
You must be eligible. Before you will be given an Offer In Compromise, the IRS has to believe that you are unable to pay the total amount you owe. This means that before you make an offer you have to first submit all of your missing paperwork including: missing tax returns, this year’s tax returns (or estimated tax returns), and, if you’re a small business owner, file your federal deposits. After you’ve completed these first steps, you are eligible to apply. *Note: If you are in the process of filing for bankruptcy, you are NOT eligible to settle an Offer In Compromise.
Then, you can fill out an application. As an individual, you submit IRS forms 433A and 656. (If you’re a small business, you use forms 433B and 656.) Along with your forms, you will have to provide extensive documentation about your assets, which the IRS will use to determine what they believe you are capable of paying within a 24-month time period. You will also need to submit a $150 application fee and a first payment. (Note: if you are below the poverty threshold, you can complete an application fee waiver.) Based on all of the personal data you compile, you make an offer—kind of like making an offer to buy a home—the IRS will decide whether to accept your offer.
Do I need a tax resolution professional to help me with this? Technically, no. But, the process of filing for an Offer In Compromise can be overwhelming and a tax specialist who has extensive experience knows their way through the system and can help you resolve your issue with fewer kinks. A tax resolution specialist also knows how to make an offer acceptable to the IRS and can help speed up the process.
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