To the Internal Revenue Service, you shouldn’t send an Offer in Compromise (OIC) request because you think it’s a good idea. Offers in compromise have a very low chance of being accepted, despite the fact that many companies dishonestly advertise that they can settle for a fraction of the original amount. But don’t take that to mean that this is the best way to handle your tax obligations. Read more on the same below.
There are three scenarios in which you might be granted an OIC:
1) You have solid evidence indicating that the IRS’s estimated amount of back taxes is incorrect.
2) You can prove to the IRS that your financial situation is so precarious that they should not expect to be able to collect from you.
3) You can prove to the IRS that you will be in a precarious financial position if they attempt to collect back taxes from you.
You’ll need the following three items to submit a request for an OIC:
- That you are currently a part of any bankruptcy proceedings. Submitting a settlement offer at this point would be a waste of time. If you want to know more about this, talk to the person who prepares your taxes.
- Send in Form 656 (Offer in Compromise) along with the application fee of $150. Many people are surprised to learn that there is a cost associated with making an application. An unreasonable number of people who do not satisfy the requirements would submit a compromise agreement if this were not the case.
- Include the proper payment with your offer. A lump sum payment is also available, but you can opt for regular installments if you prefer. Considering both options thoroughly is required before deciding on a path of action.
Do you need a tax professional’s help to file an offer in compromise? Many people’s response to this enquiry would be yes, but nobody is compelled to. If you’re confident that you can devote the time and energy to figuring out the forms and communicating directly with the IRS, you can do it on your own.