Getting behind on your tax filing requirements happens to many taxpayers many times. You may be facing it right now; owing to the IRS vast amounts in tax liabilities. Did you know that you could enter into a settlement with the IRS that allows you only to pay a small portion of your total tax debt? This settlement is known as the “IRS Offer in Compromise.”
What is the IRS Offer in Compromise
An offer in compromise is a settlement agreement provided by the Internal Revenue Service that allows qualified taxpayers to settle their tax liabilities for a small portion of the total taxes owed. You are probably asking yourself; Why would the IRS be willing to accept only a part of the total debt? The Internal Revenue Service provides the offer in compromise because it is the most realistic way to collect a tax debt in the shortest time. The IRS Offer in Compromise is not guaranteed to all taxpayers and only offered to individuals that qualify for the settlement.
Three Types of IRS Offer in Compromise
1. Doubt as to collectibility offer: This is the deal you make when everyone agrees that you are unable to pay your tax liability. To determine the offered amount in the debtor’s collectability offer, the IRS uses this equation:
(Monthly Disposable Income x 12 or 24) + Assets = The Amount of your Offer
2. Doubt as to Liability offer: It is the type of deal you make when there is a bonified argument that you may not be responsible for your tax debt. If a notice of deficiency was sent to your last known filling address, the chances that you qualify for the Doubters to Liability offer reduce significantly. The reason is that the government assumes that you failed to challenge the notice in the tax court within the time frame.
3. Effective Tax Administration: Applicable under the circumstances that, theoretically, you can pay your tax bill, but it would be unfair for the IRS to force you to pay. For example, a retiree of age 78 who has equity in a home but lacks the financial means to clear a tax liability. The retiree qualifies for the Effective Tax Administration where he/she can make an offer, and the government will take pity and accept the offer
How to Qualify for the IRS Offer in Compromise
Only some taxpayers qualify for the Offer in compromise. There is no guarantee to have your offer accepted by the Internal Revenue Service. As a tax resolution firm that has worked with hundreds of individuals and businesses towards tax resolution, True Resolve Tax has guided many clients towards successful offer in compromise settlements. We review our clients’ tax debts to determine their eligibility. If we feel that you are eligible to qualify for the offer in compromise, we initiate the process with you. We have a high success rate, and that’s why we offer a 100% money back guarantee to our clients who do not get accepted for the IRS Offer in Compromise. In the event that we feel you will not qualify for the IRS Offer in Compromise, we will let you know.
There are ways to know whether a particular taxpayer qualifies for the offer in compromise or not. A taxpayer is not eligible for the IRS Offer in Compromise unless the individual files all the required tax returns. Failure to file all the required tax returns is a limiting factor that will disqualify you from eligibility.
The IRS will then consider your ability to pay through your necessary expenses and asset equity. It is worth noting that not all expenses are allowed, however, when computing a taxpayer’s ability to pay.
The expenses that are allowed are limited to the IRS collection financial standards which are available on the IRS official website. The IRS will only grant the Offer in Compromise if the amount offered is the most a taxpayer can pay over a reasonable period. By law, the IRS has ten years to collect a tax liability.
A taxpayer with significant equity or net income after allowing for permitted expenses is not eligible. The IRS Offer in compromise is for taxpayers with financial strain, and the burden of proof lies with the taxpayer.
Myths Associated with the IRS Offer in Compromise
Myth 1. An offer in compromise is a random amount of money offered to the IRS
Contrary to popular belief, the IRS offer in compromise is not just a random amount or percentage extracted from nowhere. There is a very strict mathematical equation used to determine whether you qualify for the Offer in Compromise. The IRS considers the dollar value of your assets and disposable income including allowable expenses. The IRS determines your net worth. Your net worth will evaluate the IRS offered amount. This amount can be paid as a lump sum or in installments, depending on your ability to pay.
Myth 2. It takes 30-45 days to get an offer accepted
The Internal Revenue Service has up to 24 months (after your application is completed and submitted) to accept an individual for the Offer in Compromise. If the IRS does not make any progress in response to your request within 24 months, your application will be automatically accepted for the offer in compromise. With our experience in the tax resolution industry, the IRS usually responds between 14-16 months from application submission. It may take longer as they are allowed by law to take 24 months
Myth 3. Everyone can qualify for the IRS Offer in Compromise
Eligibility is calculated based on net income, necessary expenses, and asset equity. An individual with significant asset equity or income after allowable expenses is not eligible for an Offer in Compromise. Failure to submit all required tax returns can also disqualify a taxpayer from eligibility.
At True Resolve Tax, our goal is to negotiate for tax resolution solutions that will have our clients settle their tax liabilities with the least amount of money allowed by the law. We have qualified tax agents and negotiators that have experience working with the IRS. We will review your chances of attaining or being rejected from the IRS offer in compromise based on your circumstances. Determining whether you can qualify for an offer in compromise can save you a lot of money and stress.
Take advantage of our pre-qualifier tool and find out if you are eligible for an offer in compromise. At the event that we determine that you do not qualify for an offer in compromise, we assist our clients in obtaining a payment plan with the IRS. Life should be easy; taxes are complicated. Call us today or visit our Denver, Colorado offices so that we can discuss your options.
True Resolve Tax, Your Number One Tax Resolution Partner.