Offer in Compromise: How to Settle Your Tax Debt - San Diego - USA
Updated: Jul 5, 2019
Offer in Compromise - Settle Tax Debt - San Diego - USA
Almost two-thirds of Americans—about 65 percent—either save none of their incomes or save just a small amount, according to a 2018 survey by Bank-rate. This can be almost catastrophic if they complete their tax returns only to realize that they owe a significant tax debt to the Internal Revenue Service.
The key word here is "almost." The IRS is willing to work with taxpayers if you know what your are doing. Making an Offer in Compromise (#IRSsettlementagreements) is one of a few available options taxpayers have to work things out with the IRS. This Fresh Start program lets you settle your tax debt for less than what you owe.
Unfortunately, many consumers misunderstood the Offer in Compromise program, and some unscrupulous tax relief firms abused it as well. The IRS made some changes effective July 16, 2006, to address these issues.
How did the Offer in Compromise program change?
Some adjustments were made to the Offer in Compromise process under the terms of the Tax Increase Prevention and Reconciliation Act.
There are three payment options for an Offer in Compromise: a lump sum payment, monthly payments spread out over up to 24 months, or monthly payments over the remaining statute of limitations of the tax debt.
Applicants must submit a 20-percent down payment if they choose a lump sum payment plan, or they must immediately begin making monthly payments if they choose one of the two monthly payment options. If the tax settlement applicant qualifies, the 20-percent down payment can be waved.
You can prepare an Offer in Compromise yourself. Our tax relief team doesn't recommend doing a tax settlement yourself.
PER 2016 STATISTICS, YOU HAVE A THIRTY (30) PERCENT CHANCE OF APPROVAL IF YOU DO YOUR OWN OFFER IN COMPROMISE.
PER 2016 IRS STATISTICE, THE IRS APPROVED APPROXIMATELY 42% OF THE 80,000 OFFER IN COMPROMISE SUBMISSIONS.
FLAT FEE TAX SERVICE, INC. CLIENTS HAVE HAD A 96% IRS SETTLEMENT SUCCESS RATE.
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If you insist on "going it alone" here you go: Get the Instructions and Forms
You can obtain the all the offer in compromise forms and instructions in a booklet on the IRS website. It's called "Form 656-B." You can also call the IRS at 1-800-829-3676 and ask them to mail you the booklet, or you can pick it up from your local IRS taxpayer assistance center.
IF YOU QUALIFY FOR AN OFFER IN COMPROMISE, DO IT.
Other Tax Debt Strategies
The IRS offers at least four other options for digging your way out from under tax debt. You can enter into an IRS installment agreement, a monthly payment plan for paying off the IRS.
A short-term installment plan gives you an additional 120 days to come up with the money if you think you can erase your tax debt in that period of time. Otherwise, if it will take you longer, you can ask to enter into a long-term plan. Certain restrictions apply.
Not Currently Collectible (#CurrentlynotCollectible) is a program where the IRS voluntarily agrees not to collect on the tax debt for a year or so, giving you some time to get back on your financial feet. Being declared Currently not Collectible will last 12 to 18 months before it needs to be re-done. The IRS will file a Federal tax lien while you are in the program. It may be possible to run out the Statute of Limitations while Currently not Collectible.
The partial payment installment agreement is a fairly new debt management program where you receive a long-term payment plan to pay off the IRS at a reduced dollar amount. proceeding.
ARE YOU CURIOUS TO KNOW WHAT AN OFFER IN COMPROMISE WILL COST YOU?
Helpful Tips on an
Offer in Compromise
There's no guarantee that the IRS will accept your Offer in Compromise. The IRS bases its decision on several factors.
Remember, the IRS might approve your offer if there's some issue as to whether you legitimately owe the tax. This falls under the umbrella of "doubt as to liability."
The IRS might also approve your application if, based on your submitted paperwork that documents your current financial situation, it appears highly unlikely that you'll ever be able to pay off the tax debt in its entirety. When you tally up your income and the value of your assets, it comes out to less than what you owe. This is referred to as "doubt as to collectability."
Finally, you might be approved if payment in full would either create an economic hardship or would be unfair and inequitable because of exceptional circumstances, according to the IRS. This would apply even if there's no doubt or dispute that you owe the tax and if your income and assets exceed your debt.
You will not be approved, however, if you qualify for one of the installment agreements. If so, the IRS figures that you have ample resources to pay off your tax debt in full over time.
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