The Fundamentals of the IRS OIC Program
The IRS Tax debt settlement mechanism has been designed in a way that it provides financial benefits in genuine cases. When assessing your circumstances for tax settlement with the IRS, the agency evaluates your ability to pay, your asset equity, income, and expenses. An offer in Compromise is accepted if the IRS tax debt settlement personnel are confident that you cannot pay the full amount under your existing financial circumstances. Hence, they negotiate a discounted amount, which they think is the maximum that you can pay to them.
Even though OIC is the best IRS tax settlement program in most cases, the program is not for everybody. Make sure to check if you are eligible for the program. For example, ongoing bankruptcy proceedings are not eligible. The IRS recommends hiring a qualified tax professional/consultant to better understand your eligibility for the program.
Remember that before you make an OIC offer for a tax settlement with the IRS, you must file all the tax returns for the period. This is true for both individual and business tax returns. It goes without saying that submitting misleading information or fraudulent documents for any of the IRS tax settlement programs could potentially lead you behind bars and heavy fines. Hence, make sure that all the information and documents you provide with your OIC are genuine and legit.
When you are making an offer for a tax settlement with the IRS, you may either choose to pay the lump sum amount, or you may request for an installment plan. If your offer is accepted by the IRS, you will be expected to hold your end of the deal. Similarly, you will be liable to fulfill all the terms of your offer within the appropriate time period in order to get your federal lien released. Failure to do so could result in further penalties.
If you wish to study the detailed guide for Offer in Compromise, information regarding all the steps involved during the process and all the forms/ documents you are expected to submit can be found in the official OIC Booklet (i.e., Form 565-B). It is recommended that you read the whole document in order to fully understand your rights, responsibilities, and other crucial information related to the IRS OIC Program.
If your offer in compromise is rejected, you have the option to file for an appeal within 30 days of receiving the initial decision by the IRS. Before rejecting your offer, however, the IRS usually provides you an opportunity to modify your offer according to the amount that the IRS considers to be the best estimate of your ability to pay currently.
Last but not the least, you must not haste yourself into applying for the OIC program. The best course of action would be to consult with a tax settlement professional in order to know about the best IRS tax settlement program that suits your individual circumstances. You must also be clear about your eligibility for the program and be prepared with all the required documents before you actually apply for it. These measures will help you minimize financial costs and efforts during the whole process of the OIC program with the IRS.
If your application is rejected, you can appeal within thirty days using Form 13711
(Request for Appeal of Offer in Compromise).
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