A compromise offer with the Internal Revenue Service: what is it?
An offer in compromise is part of the IRS fresh start program, initially created to limit the burden of tax debt for first-time tax offenders. The IRS can negotiate a reduction in the amount of taxes you owe through the IRS’s Offer in Compromise program, but the qualifications are somewhat complicated. Still, there is a way to qualify, and many tax debtors try to negotiate with the IRS directly. How does applying for an OIC work? And what are the implications?
The advantages of an OIC
The IRS Offer in Compromise deserves more recognition as a legitimate and helpful program. After 15 years in the business, we’ve settled on a method that consistently produces positive results. Read on to find out how an Offer in Compromise might help you determine a tax obligation once and for all.
What happens when my offer is not correctly calculated?
The Internal Revenue Service will determine the offer amount. The IRS will allow you to increase your offer if it is higher than the one you initially made. We have the right to rescind this offer if you fail to comply. It is possible to ask the IRS for an installment payment plan if they determine that you cannot pay the bill in full.
Faris Khatib, the CEO of Ideal Tax states the IRS looks at OICs for signs of fraud. Making a false statement on an OIC or to an IRS agent is fraud and might result in legal repercussions.
Now that my offer has been declined, what other options do I have?
An appeal must be submitted within 30 days of the date of the rejection letter if the recipient wishes to challenge the decision. If you decide to proceed despite the denial, you can make a lump-sum payment or work out an installment plan to settle your tax liability.
What if the IRS agrees to the terms of my proposed settlement?
To assume your fair offer is accepted:
As stated in the acceptance agreement, you must pay the offer price.
The Internal Revenue Service (IRS) will keep any refund due to you because of an overpayment of any tax or other obligation for the calendar year in which your offer in compromise is accepted, along with any interest that has accumulated. A tax refund or overpayment is impossible to apply to next year’s anticipated tax liability. If the offer to settle relies solely on reasonable doubt regarding responsibility, then the court need not accept the compromise.
Acceptance of the offer in compromise triggers a five-year period during which all tax returns (including extensions) must be filed and paid in full. After accepting an offer in compromise, you have five years to pay the agreed-upon amount and comply with the settlement terms, or your request will default.
After accepting an OIC
- Lump sum payment
1. Lump sum
You will have to include 20% of your total tax debt (after OIC) with your application (in addition to the application fee). This money is nonrefundable, even if the IRS rejects your offer (the IRS will apply it to your tax bill).
Source: nerdwallet.com
- Payment plan
You can pay off your debt within the next twenty-four months
Initial payment must accompany the application (in addition to the application fee). The Internal Revenue Service can turn down your offer, but that won’t change this charge (the IRS will apply it to your tax bill).
While the IRS considers whether or not to accept your offer in compromise, you can keep making payments.
More things to know about getting an offer in compromise
Most people who want to run for office must pay a non-refundable fee of $205. (low-income taxpayers can get a waiver).
You must pay a non-refundable deposit. If you make less than five payments, your first payment must be 20% of the total amount owed. If you make more than five payments, your first payment must be 20% of the monthly payment amount (if paying in six or more monthly installments).
You can get an offset bypass refund while waiting for IRS OIC approval to cut down on delays (OBR). To get your entire tax refund, you must show the IRS that you are having trouble paying your bills.
Getting an offset bypass refund from the IRS may speed up your return while you wait for an OIC agreement (OBR). To get your entire tax refund, you must work with the IRS to show that you are in a challenging financial situation. The IRS has further information.
Your plan for a compromise, including specifics, could be shared with the public. The stolen IRS public inspection files have the name, city, state, ZIP code, the amount owed, and offer terms for each taxpayer.
Get help from a professional
Although it might be challenging, federally required tax debt reduction initiatives provide real relief. Using the law to your advantage, a tax professional can help you resolve any issues with the IRS, perhaps saving you thousands of dollars. You can reach out to them for a free first consultation.
