What You Need to Learn About Offer in Compromise
A settlement or an elimination of your tax debt is the ultimate purpose of an Offer in Compromise or OIC. In this process, both parties, the taxpayer and the IRS, attempt to reach a mutually beneficial agreement. Generally, the IRS entertains applications for OIC so that unpaid debts can be settled at a lower amount. On the other hand, this offer will only be considered if there is solid proof that the full amount cannot be collected from you anymore. In the OIC, you will declare the amount that you feel you can afford to pay and this should be a reasonable one. This should be directly proportional to the possibility that the full amount owed can be collected in the future. If you would like to apply for an Offer in Compromise, it is a requisite that you have filed all of your tax returns for the pertaining years you wish to compromise on for the debt. The government may have kept records of your dues but an OIC application will not be received if you can’t show your official tax returns. You also have to provide the figures that you believe to have earned during those years. Again, it is essential to keep that we should diligently file our tax returns to avoid IRS problems, including imprisonment. However, the probability of being imprisoned as a result of tax issues is still a present in some instances. People who are convinced that an Offer in Compromise has a great deal to do with how much is actually owed from the IRS are mistaken. The fact is, how much the IRS believes you can afford to pay them is a better contributor of this process. It is this belief and understanding that is the heart of the issue and one of the focuses of your Offer in Compromise. Applicants must prove to the IRS that they cannot afford to pay more than the recommended figures reflected in their forms. When done correctly, the likelihood that the OIC will be accepted is greatly increased. While you are waiting for the decision on your OIC, the IRS will be attempting to collect the money from you. To collect your tax dues, they will enforce wage garnishments, tax liens or levies. Fortunately, there is a process called Collection Due Process Appeal, which provides you the chance of appealing to any of the collection methods enforced by the IRS. At the time of the actual appeal hearing, you will be able to offer an installment agreement and payment plan, or your Offer in Compromise. These two are considered alternatives to the ones enforced upon you by the IRS. Believe that tax debts, no matter how large, can eventually be settled. Although there is a good reason why the IRS believes that you can pay the full amount, if you can prove that your circumstances keeps you from doing so, then you can effectively put an end to your IRS issues. Basically, there is a lot of proving to be accomplished here, but as long as the IRS can feel that getting a settlement would entail lesser overhead cost, it will accept such offer as that is necessary for “effective tax administration.”
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