If you have a tax debt and want to file an offer in compromise, then we can help. We have a broad set of experience helping taxpayers that are in IRS collections. We have helped taxpayers file offers in compromise to resolve their tax debt.
The offer in compromise allows a taxpayer with debt to settle the tax debt for less than the total amount. The IRS and many states, including the State of Maryland, have offer in compromise programs.
Generally, in exchange for the settlement, the taxpayer must pay the “offer amount.” The offer terms also require that the stay in compliance for five years. Once accepted, the taxpayer must file all federal income tax returns and not create any new tax debts. If not, the IRS can pursue collection on the original debt.
The offer in compromise is one of the main IRS collection alternatives. Other collection alternatives include the installment agreement and currently not collectible status. In each case, the taxpayer’s ability to pay determines whether a taxpayer qualifies.
The taxpayer’s ability to pay is determined under IRS financial analysis guidance. This guidance is found in the Internal Revenue Manual. The guidance is very long and very detailed. Yet, there are still ambiguities in the rules, which leaves room for interpretation.
Before submitting an offer it is important to insure that you are both in current compliance and that you are offer eligible. If you are not in current compliance, the IRS will return your offer as non-processable. If you are not offer eligible (i.e., that the math works), then the IRS will reject your offer. In both case, the IRS will keep your initial payment submitted with application. So, it is important to know whether an offer is a good solution for you.
A complete offer packet increases your chances of acceptance. A good packet starts with accurately completed Form 656 and Form 433A-OIC or 433B-OIC. A complete packet also includes the basic forms payment, and supporting documentation.
Once your offer reaches the IRS Offer Unit, an offer specialist will review your offer. The offer specialist uses the information that you provided to analyze your offer. The IRS offer specialist may question your calculations and the supporting documents. The IRS offer specialists may make adjustments to your calculations. These adjustments may increase your offer amount. In this situation, it is important to understand why the IRS is adjusting your offer amount. You need to understand whether the IRS is correct and whether you can push back.
If you are considering an offer in compromise, then speak with a professional first. Please contact us for a free confidential consultation. We can discuss your tax issues and the potential use of an offer in compromise to resolve your tax debt.
