Offering in Compromise is a way of settling debts with a creditor without filing bankruptcy or receiving court-ordered judgments. Many factors come into play when considering this option, so be sure you know the following four things before you make your decision!
What is an Offer in Compromise?
If you owe the IRS back taxes, you may be able to settle your debt for less than the full amount you owe. This is called an Offer in Compromise (OIC). An OIC can help taxpayers who cannot pay their full tax liability, or who do not have the assets to pay their liability.
The IRS considers many factors when evaluating an OIC, including:
* Your ability to pay
* Your income
* Your Expenses
* The value of your assets
* Your compliance history
To qualify for an OIC, you must submit a completed Form 656 and application fee. You will also need to provide financial information to support your offer. The IRS will review your offer and determine if it is acceptable based on the information you provide.
If your OIC is accepted, you will need to agree to pay the amount offered and comply with all tax laws in the future. If you default on the terms of your agreement, the IRS can revoke the agreement and require that you pay the full amount of your tax liability.
What are the Requirements for an Offer in Compromise?
The requirements for an offer in compromise are as follows:
1) You must be current on all filing and payment requirements. This means that you must have filed all required tax returns and made all required tax payments for the current year and the previous two years. If you are self-employed, you must also be up to date on your estimated tax payments.
2) You must have paid any amounts due under any previous offers in compromise.
3) You cannot currently be in bankruptcy proceedings.
4) You must agree to enter into a direct debit agreement with the IRS for any future taxes owed. This means that the IRS will automatically deduct any amounts owed from your bank account or other financial institution every month.
5) You must agree to waive your rights to collection due process or appeal if your offer is accepted.
Conclusion
If you’re struggling to pay your taxes, you might be considering offering in compromise. This option can help you settle your tax debt for less than what you owe, but there are a few things you should know first.
First, the IRS will only consider your offer if they believe that it’s the most they can expect to collect from you. This means that if you can pay your full tax bill, they probably won’t accept an offer in compromise.
Second, even if your offer is accepted, it will still stay on your credit report for seven years. This could make it difficult to get loans or lines of credit during that time.
Third, an offer in qualifying for an offer in compromise could end up costing more than just paying your tax bill outright. You’ll have to pay a non-refundable application fee and may also have to put down a deposit when submitting your offer. Be sure to weigh all of these factors before deciding whether or not offering a compromise is right for you.
