4 Things You Should Know About Offers in Compromise
You’re starting to feel like your financial problems will never be solved, but something tells you that a solution is out there.
You may be hearing about “offers in compromise,” but all you can find online is either talk about the military, disaster relief, or piles of legal jargon about revenue code sections that you don’t understand.
It seems like you’re going in circles and will keep getting nowhere. So what’s an average person supposed to do?
Keep reading, and we’ll discuss the four key points you need to understand when it comes to making an offer in compromise, particularly for your back taxes.
Table of Contents
1. Defining Offer in Compromise
An offer in compromise is an agreement between a taxpayer and the Internal Revenue Service (IRS) that settles the taxpayer’s tax liability for less than the full amount owed.
The IRS may accept an offer in compromise when it is in the best interest of the taxpayer and the government, and when there is doubt about the taxpayer’s ability to pay the total amount of taxes owed.
2. Qualifying for an Offer in Compromise
After you submit your offer in compromise, an IRS agent will review it. There are many things they will look into before accepting or rejecting your request.
One is whether they can get more from you through forced collections than by taking your offer. Another is whether your financial status is realistically going to improve after a while.
Third, the agent will decide whether other people would think of your offer as reasonable or too low. Combining all these factors, the IRS will determine whether or not they should accept or decline your offer in compromise.
3. Options To Offer in Compromise
If your Offer in Compromise is rejected by the IRS, you will receive a written notice explaining why. You will have the opportunity to appeal the decision or submit a new offer.
If you appeal, you will need to provide additional information or documentation to support your case. If you submit a new offer, you must provide an updated financial statement and supporting documentation.
Even if your offer is rejected with finality, the IRS will often be willing to arrange a payment arrangement or installment plan with you if they see that you are, indeed, undergoing financial hardship.
4. Hiring a Tax Professional
If you are considering hiring a tax professional to help you with an offer in compromise, you should know a few things. First, only licensed attorneys, CPAs, and enrolled agents can represent taxpayers before the IRS.
Second, the taxpayer is responsible for paying the tax professional’s fees, regardless of whether or not the offer is accepted. If you don’t have the resources to pay a tax professional, know that the IRS does not require you to as you can submit an offer on your own.
However, given the complexity of tax issues, especially in terms of tack taxes, you will do well to hire an expert to help you. Click here for more information.
Solving Back Taxes With Offers in Compromise
The IRS deals with many offers in compromise every day, so the earlier you submit yours, the sooner tax authorities can get to it, and the fewer worries you’ll have about your back taxes.
Remember that any taxes you haven’t paid increase daily, thanks to surcharges and penalties. So the faster you act, the better your results will be.
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