Employment and Criminal Lawyer

What happens if you combine a few poor financial choices with unemployment, medical costs, and other monthly expenses. The result is a large tax bill you cannot pay.

But you can't afford to pay your taxes. This sounds familiar. You're not the only one.

Internal Revenue Service (IRS), which collected more than $1.8 Billion from delinquent returns and assessed more than $33.8 million in additional taxes for returns that were not filed in time in 2019, has more than 33.8 billion.

However, you don't want your name to be included in that statistic. You can't avoid taxes in exceptional circumstances. This will only make it worse. Instead of letting your tax bill grow, you can find a way that will reduce your tax liability by using a rarely used tactic.

An offer in compromise (OIC) could be the answer you are looking for. This IRS tax relief program is one of the most underused and misunderstood.

Here's all you need to know about compromise offers, who is eligible, how to apply and how it can help you get a fresh start without tax debt.

What's an IRS Offer in Compromise OIC?

An offer in compromise (or settlement) is an agreement between you or the IRS. It allows you to offer a lower amount than your full tax liability. You can be accepted into a partnership agreement. The agreed payments are made, and your tax balance is erased.

The IRS accepted 17,890 of 54,225 offers in compromise requests in 2019 totaling $289.4 million.

This means that you could get a 33% acceptance rate, or 67% rejection rate, depending on whether you are glass-half-full or half empty.

How do I apply for a compromise offer?

The IRS follows a strict process when considering and appraising compromise offers. Here's how it works:

• First, complete and include Form 656, Offer In Compromise ( download).
• If applicable, complete and sign Form 433A (OIC), Collection Information Statement for Self-Employed Individuals and Wage Earners.
• If you are the owner of a business, fill out and sign Form 433B (OIC), Download, Collection Information Statement for Business.
• If you do not meet the Low-Income Guidelines, pay the $205 application fee.
• The payment option that you choose will determine how much of the initial offer payment you deposit. This requirement may be waived if you meet the Low-Income Guidelines.

The IRS won't consider your offer of compromise if the completed and signed forms are not provided.

How to simplify the Offer in Compromise

Like any other creditor, the IRS wants their money fast. Getting some is better than none, especially if your income forecast is uncertain.

Taxpayers who are struggling to pay their taxes may abandon filing their annual returns and give up. A reasonable payment plan can give otherwise productive taxpayers a fresh start and improve the user experience.

They also have only 10 years to collect taxes after a return has been filed. Research shows that the likelihood of a tax debt being paid is lower the longer it remains on the books.

The IRS can garnish your wages, levy bank accounts, or place a lien on your property. Some assets are not allowed. To discuss an installment plan that is based on your ability and to make sure it is accepted, consults a tax professional.

An offer in compromise is a good way to get some revenue from a taxpayer who doesn't have a lot of assets or a large income.

They will not seize your property even if you make an offer in compromise. The lens is not subject to the same restrictions.

Is there an application fee for an OIC payment plan by the IRS?

The IRS charges $205 for application fees (as of February 2021). The fee can be waived if the applicant meets the criteria for Low-Income Certification.

Two types of compromise offers

Based on your payment method, there are two types of compromise offers.

Lump-sum offer

Taxpayers must pay the agreed amount within five-month of approval for the "lump sum" compromise offer. The IRS will consider the offer if taxpayers make a 20% downpayment when they submit it.

Warning! The 20% deposit is non-refundable. You might want to consider whether they will accept the offer. Consult with a tax professional.

Periodic Payment Offer

The "periodic payments" offered in the compromise must not be made after six to 24 months. Include the first installment payment with your application.

What forms are you required to complete?

To determine eligibility, the IRS requires that applicants complete Form 656 as well as Form 433 A (Form 433 B for Businesses)

You will need to give detailed information about your income sources, bank accounts, investments, living expenses, and bank accounts. These forms can be costly if you make mistakes.

Before providing financial information, hire the services of an experienced tax relief company.

How a Back Tax Assistance Company Can Help You with the IRS Fresh Start Program?

Three reasons could make you eligible for an OIC.

You cannot afford the entire amount. The IRS acknowledges that you do not have enough income or assets to pay all of your tax debt by the end of the statute of limits (10 years).

Economic hardship. It is possible to prove that you are in financial hardship by paying the entire amount.

Doubt about what you owe.

It is possible to wonder why someone would pay part of their tax debt if they are unsure if they owe it at all or if the amount is correct.

It would be better to appeal the decision to court if you feel it is unfair or inequitable. Sometimes, it is the best thing to go to court. The IRS can win 80% of its cases. An offer in compromise is not an option if your debt has been determined by a final court ruling.

In other words, paying a portion of your tax bill, even if you disagree with it, can be less expensive and more time-consuming than appearing before a judge. Talk to an experienced tax attorney enrolled agent, or CPA before making a decision. All of the tax relief companies listed below have tax attorneys or enrolled agents.

Compare All Tax Relief Companies

Eligible taxpayers should also:

• All required tax returns must be filed
• Keep up-to-date on estimated tax payments for self-employed as well as business owners
• Keep up-to-date on federal tax deposits for businesses with employees
• Not at the moment in an open bankruptcy proceeding.

How does one determine eligibility for an OIC Application?

The IRS first determines if taxpayers have the financial means to pay off their total tax debt. The IRS has an online tool that calculates its reasonable collection potential (RCP) to do this.

The IRS will accept an offer if the RCP is lower than the total tax debt, and the taxpayer meets any other requirements for an OIC.

The IRS also determines if the offer in compromise is the maximum amount a taxpayer can afford. Compensation is the basis of this calculation. It is important to understand policies, procedures, as well as certification guidelines.

The IRS requires that applicants not participate in open bankruptcy proceedings.

A tax relief expert can help you determine the lowest amount that the government will accept, and then negotiate an installment agreement to avoid your offer being rejected.

What amount should I offer as a compromise to the IRS?

The IRS will not settle for less than what you can afford. It is difficult to know how much you can afford. It all depends on your income, your family size, your location, your health, and how healthy you are. The big question is: How does the IRS determine how much you can afford? And what payment plan is best?

How does IRS determine how much you can afford?

The IRS uses a formula to calculate your reasonable collection potential (RCP). It is also called "net realizable value." It can vary depending on the assets you have, whether you own business assets, the type or offer in compromise that you apply for and payment options.

This calculation should be left to an expert in tax relief, but here is a simplified version to give you an idea.

IRS reasonable collection formula

RCP = Reasonable collection opportunity.

QSV = Quick Sale Value or 80% of the Asset's Fair Market Value.

MDI = Monthly Disposable Income (after you have paid for your living expenses).

Lump-sum

The RCP, if you pay the bills within the due date, is the quick sale price of your assets (property and jewelry, etc.). Add your monthly disposable income to 12.

RCP = QSV+ (MDI x 12).

Periodic payments

The formula for periodic payment offers is where the OIC can be repaid within 6 to 24 months.
ta
RCP = QSV+ (MDI x24)

What happens if you combine a few poor financial choices with unemployment, medical costs, and other monthly expenses. The result is a large tax bill you cannot pay.

But you can't afford to pay your taxes. This sounds familiar. You're not the only one.

Internal Revenue Service (IRS), which collected more than $1.8 Billion from delinquent returns and assessed more than $33.8 million in additional taxes for returns that were not filed in time in 2019, has more than 33.8 billion.

However, you don't want your name to be included in that statistic. You can't avoid taxes in exceptional circumstances. This will only make it worse. Instead of letting your tax bill grow, you can find a way that will reduce your tax liability by using a rarely used tactic.

An offer in compromise (OIC) could be the answer you are looking for. This IRS tax relief program is one of the most underused and misunderstood.

Here's all you need to know about compromise offers, who is eligible, how to apply and how it can help you get a fresh start without tax debt.

What's an IRS Offer in Compromise OIC?

An offer in compromise (or settlement) is an agreement between you or the IRS. It allows you to offer a lower amount than your full tax liability. You can be accepted into a partnership agreement. The agreed payments are made, and your tax balance is erased.

The IRS accepted 17,890 of 54,225 offers in compromise requests in 2019 totaling $289.4 million.

This means that you could get a 33% acceptance rate, or 67% rejection rate, depending on whether you are glass-half-full or half empty.

How do I apply for a compromise offer?

The IRS follows a strict process when considering and appraising compromise offers. Here's how it works:

• First, complete and include Form 656, Offer In Compromise ( download).
• If applicable, complete and sign Form 433A (OIC), Collection Information Statement for Self-Employed Individuals and Wage Earners.
• If you are the owner of a business, fill out and sign Form 433B (OIC), Download, Collection Information Statement for Business.
• If you do not meet the Low-Income Guidelines, pay the $205 application fee.
• The payment option that you choose will determine how much of the initial offer payment you deposit. This requirement may be waived if you meet the Low-Income Guidelines.

The IRS won't consider your offer of compromise if the completed and signed forms are not provided.

How to simplify the Offer in Compromise

Like any other creditor, the IRS wants their money fast. Getting some is better than none, especially if your income forecast is uncertain.

Taxpayers who are struggling to pay their taxes may abandon filing their annual returns and give up. A reasonable payment plan can give otherwise productive taxpayers a fresh start and improve the user experience.

They also have only 10 years to collect taxes after a return has been filed. Research shows that the likelihood of a tax debt being paid is lower the longer it remains on the books.

The IRS can garnish your wages, levy bank accounts, or place a lien on your property. Some assets are not allowed. To discuss an installment plan that is based on your ability and to make sure it is accepted, consults a tax professional.

An offer in compromise is a good way to get some revenue from a taxpayer who doesn't have a lot of assets or a large income.

They will not seize your property even if you make an offer in compromise. The lens is not subject to the same restrictions.

Is there an application fee for an OIC payment plan by the IRS?

The IRS charges $205 for application fees (as of February 2021). The fee can be waived if the applicant meets the criteria for Low-Income Certification.

Two types of compromise offers

Based on your payment method, there are two types of compromise offers.

Lump-sum offer

Taxpayers must pay the agreed amount within five-month of approval for the "lump sum" compromise offer. The IRS will consider the offer if taxpayers make a 20% downpayment when they submit it.

Warning! The 20% deposit is non-refundable. You might want to consider whether they will accept the offer. Consult with a tax professional.

Periodic Payment Offer

The "periodic payments" offered in the compromise must not be made after six to 24 months. Include the first installment payment with your application.

What forms are you required to complete?

To determine eligibility, the IRS requires that applicants complete Form 656 as well as Form 433 A (Form 433 B for Businesses)

You will need to give detailed information about your income sources, bank accounts, investments, living expenses, and bank accounts. These forms can be costly if you make mistakes.

Before providing financial information, hire the services of an experienced tax relief company.

How a Back Tax Assistance Company Can Help You with the IRS Fresh Start Program?

Three reasons could make you eligible for an OIC.

You cannot afford the entire amount. The IRS acknowledges that you do not have enough income or assets to pay all of your tax debt by the end of the statute of limits (10 years).

Economic hardship. It is possible to prove that you are in financial hardship by paying the entire amount.

Doubt about what you owe.

It is possible to wonder why someone would pay part of their tax debt if they are unsure if they owe it at all or if the amount is correct.

It would be better to appeal the decision to court if you feel it is unfair or inequitable. Sometimes, it is the best thing to go to court. The IRS can win 80% of its cases. An offer in compromise is not an option if your debt has been determined by a final court ruling.

In other words, paying a portion of your tax bill, even if you disagree with it, can be less expensive and more time-consuming than appearing before a judge. Talk to an experienced tax attorney enrolled agent, or CPA before making a decision. All of the tax relief companies listed below have tax attorneys or enrolled agents.

Compare All Tax Relief Companies

Eligible taxpayers should also:

• All required tax returns must be filed
• Keep up-to-date on estimated tax payments for self-employed as well as business owners
• Keep up-to-date on federal tax deposits for businesses with employees
• Not at the moment in an open bankruptcy proceeding.

How does one determine eligibility for an OIC Application?

The IRS first determines if taxpayers have the financial means to pay off their total tax debt. The IRS has an online tool that calculates its reasonable collection potential (RCP) to do this.

The IRS will accept an offer if the RCP is lower than the total tax debt, and the taxpayer meets any other requirements for an OIC.

The IRS also determines if the offer in compromise is the maximum amount a taxpayer can afford. Compensation is the basis of this calculation. It is important to understand policies, procedures, as well as certification guidelines.

The IRS requires that applicants not participate in open bankruptcy proceedings.

A tax relief expert can help you determine the lowest amount that the government will accept, and then negotiate an installment agreement to avoid your offer being rejected.

What amount should I offer as a compromise to the IRS?

The IRS will not settle for less than what you can afford. It is difficult to know how much you can afford. It all depends on your income, your family size, your location, your health, and how healthy you are. The big question is: How does the IRS determine how much you can afford? And what payment plan is best?

How does IRS determine how much you can afford?

The IRS uses a formula to calculate your reasonable collection potential (RCP). It is also called "net realizable value." It can vary depending on the assets you have, whether you own business assets, the type or offer in compromise that you apply for and payment options.

This calculation should be left to an expert in tax relief, but here is a simplified version to give you an idea.

IRS reasonable collection formula

RCP = Reasonable collection opportunity.

QSV = Quick Sale Value or 80% of the Asset's Fair Market Value.

MDI = Monthly Disposable Income (after you have paid for your living expenses).

Lump-sum

The RCP, if you pay the bills within the due date, is the quick sale price of your assets (property and jewelry, etc.). Add your monthly disposable income to 12.

RCP = QSV+ (MDI x 12).

Periodic payments

The formula for periodic payment offers is where the OIC can be repaid within 6 to 24 months.
ta
RCP = QSV+ (MDI x24)