Getting behind in taxes is an epidemic that has plagued millions of Americans from every walk of life. No matter the circumstances that led to your tax debt, every taxpayer deserves a chance to resolve their tax liabilities and clear their accounts with the IRS. An IRS Offer in Compromise may be exactly the best tax resolution for your situation.
What is Tax Resolution?
All attempts to pay-off or settle your tax debts constitutes tax resolution. Taxes and the obligations that result from taxes can be resolved in different avenues. Below is a brief description of the various tax resolution avenues.
- IRS Installment agreements: Whenever you are unable to pay your debt through a single payment, there are circumstances under which the IRS will break up your tax liability into small chunks payable as monthly installments. The IRS Installment Agreements are a set of payment plans offered and supervised by the Internal Revenue Service.
- The IRS Offer in Compromise: After assessing your tax debt, there are circumstances when the IRS will let you settle your debt with a fraction of your total debt
- Penalty Abatement: Abatement is the reduction or removal of penalties from your tax debt
- Innocent Spouse relief: The United States tax system allows couples to pay taxes together. If an error, caused by your spouse, led to more tax, the IRS may relieve you from the responsibility of paying the penalties.
In this article, I shall concentrate on the Offer in Compromise as a means of tax resolution.
The IRS Offer in Compromise
You have probably heard about it on the internet or broadcast media. The IRS Offer in Compromise is arguably the most advertised tax resolution solution today. Besides the advertisement, the Offer in Compromise is a legit deal. The firms that advertise it may be out to make a quick sale, but the program behind the advert is real.
There are quite a few people that owe the IRS large sums of money; tens of thousands of dollars, hundreds of thousands of dollars, or even millions of dollars. So much money they owe the Internal Revenue Service that it is more unlikely that the IRS will be able to collect in the time allowed by law. The IRS has ten years from the filling of a return to obtain full payment on a specific debt. This ten-year period constitutes the statute of limitations. The IRS came up with the offer in compromise to help them collect the maximum amount of money within the statute of limitations. When it is apparent that you cannot realistically pay-up your debt, the IRS can consider you for the Offer in compromise. You can make the IRS an offer based on an agreed-upon amount based on your ability to pay and net worth.
To Qualify for The Offer in Compromise
Not all taxpayers qualify for the IRS Offer in Compromise. There is no right or guarantee that you will get your offer accepted. There are certain factors that the IRS considers before accepting your offer.
Factors considered by the IRS before accepting your offer
The Statute of Limitations on your Debt
As discussed earlier, the IRS only has ten years to collect a particular debt once a return is filled. Old liability is less likely to be received as compared to new liability. When you have a short period left on the statute of limitations, your chances of completing your debt grows thinner with the passing time. The IRS is more likely to consider you for the Offer in Compromise.
What assets could the government potentially seize or require you to sell to satisfy your balance? Cars, boats, cash, inheritance, and real estate are all assessed. Unlike other tax resolution services, True Resolve Tax ensures that all your assets are protected before you apply for the Offer in Compromise. The IRS will only accept your offer if it is at least equal to the value of your assets.
Disposable Monthly Income
Disposable monthly income is the amount that you retain after monthly expenses. It is the difference between your monthly income and your monthly expenses. Your disposable income determines the value of your monthly installments. If you are left with two years on your statute of limitations, and you owe the IRS $10,000. After a financial assessment, the Internal Revenue Service calculates your monthly disposable income as $200; they will expect at least $4,800 ($200 each month for two years) to settle the $10,000 debt; that is if you do not have assets that can be liquidated to satisfy the obligation. Not a bad deal.
Is the liability dischargeable according to Chapter 7 or the Chapter 13 bankruptcy case? If it is dischargeable and the IRS is aware of that, your offer is more likely to be accepted.
Other factors that may affect your eligibility
These factors include divorce, age, illness or tax evasion.
Items required for the approval of your offer
- You must be current on all tax returns, for at least five years following the acceptance of your Offer in Compromise.
- You must stay current on all your quarterly payments so that you do not owe when you file for the following five years.
Types of Offers in Compromise
Doubt as to collectability offer
The Doubt as to Collectability Offer is the most popular offer. When your ability to pay is in question, and the IRS agrees that within the time left in your statute of limitations, you are incapable of completing your debt, they will allow you to make an offer. To determine your proposal, the IRS considers the total value of your assets and your annual disposable income.
|Offer = Annual disposable income over two years + Asset value|
The doubt as to liability offer requires full financial transparency and lying or withholding information only threatens your chances.
Doubt as to liability offer
Sometimes we accumulate tax debts that are not entirely our fault. If this is the case with you, you qualify to apply for the Doubt as to Liability Offer. This offer has strict guidelines, conditions, and rules. If you think that you qualify, you should get in touch with True Resolve Tax to discuss your options.
Effective Tax Administration
The Effective Tax Administration is reserved for taxpayers who are financially capable of paying their debts, but it would be financially unfair to force them to do so. If a retiree suffering from a terminal illness owes the IRS a substantial amount, the IRS will let him/her make an offer despite the total value of his assets. The argument is that the retiree needs his money for medical expenses.
How long does it take to get an offer accepted
Generally, the government works slowly. To get your offer accepted might take between six months and two years. Sometimes there are appeals, and this prolongs the process.
At True Resolve Tax, we assess and calculate the eligibility of our clients before we advise them to apply for the offer in compromise. We make sure that your assets are protected before we give you the green light to fill out the IRS forms. Unlike other tax resolution firms, we inform you whether your offer stands a chance of being approved. We work in truth and ethical harmony. Should your offer get rejected, you have a money back guarantee. We are passionate about tax resolution. Contact us today to discuss your options.