The IRS offers the option of settling tax debts for less than the full amount owed through an offer in compromise (OIC). The IRS evaluates various factors such as a person’s ability to pay, income, expenses, and asset equity when considering whether to approve an OIC.
To be eligible for an OIC, individuals must meet certain requirements, such as filing all required tax returns, making estimated payments, not being involved in an open bankruptcy proceeding, having a valid extension for the current year return, and meeting tax deposit obligations as an employer.
When submitting an OIC, the IRS returns the application and application fees but does not process the offer until it is deemed valid. Any offer payments included with the application are applied to the outstanding tax balance. There are different payment options available, including lump sum cash payments or periodic payments over time.
For individuals who meet the low-income certification guidelines, they may be exempt from submitting the application fee, initial payment, or making monthly installments while the IRS reviews their offer.
If an offer in compromise is rejected, individuals have the option to appeal the decision within 30 days using the Request for Appeal of Offer in Compromise (Form 13711). The IRS Independent Office of Appeals provides additional assistance in the appeal process.
It’s important to note that seeking the guidance of a qualified tax attorney at Anderson Bradshaw is advisable when pursuing an offer in compromise, as the process can be complex, and professional assistance can help navigate the requirements and increase the chances of a successful resolution.