Owing taxes to the Internal Revenue Service (IRS) is not easy. Unlike private creditors, the IRS has a lot more power to make sure that they get back what they are owed. But, just like with commercial creditor, there are ways of procuring tax debt help in order to fix your tax debt problems. One of the programs that the IRS created to provide tax debt relief to those having problems paying off their debts is called an Offer in Compromise.
An Offer in Compromise is a lot like a settlement with a commercial creditor. You make an offer to pay as much of your tax debt as you think you can pay. It also helps to clear tax debts that you owe to IRS. The IRS then looks over the offer you have made and either accepts it, counter-offers, or rejects it according to the terms of your tax debt settlement. Typically the IRS will accept your offer if the amount you owe is in doubt. If you can show that it is unlikely, the IRS will be able to collect the entire amount of the debt, or you can show special circumstances.
In order for the IRS to agree to an Offer in Compromise due inability to clear tax debts that you owe, the IRS has two requirements. First, you must agree that the amount the IRS says you owe is correct. Second, you must show that you would be unable to pay the entire amount owed within the statutory period by submitting Form 433-A, the Collection Information Statement and its accompanying worksheet.
The IRS has also established guidelines to determine what qualifies as a special circumstance. In order to settle tax debt under special circumstance, make sure that you do not contest the amount the IRS says you owe, or that you can pay it back. Rather, you must be able to demonstrate that the collection of the debt would create an economic hardship, or that collection would be unfair. While there are no official rules governing who qualifies under special circumstances for tax debt relief, the IRS usually grants Offers in Compromise because of special circumstances to the elderly and indigent.
Anyone with a tax lien or levy placed on their property should realize that filing an Offer in Compromise will not remove the lien or levy. In order to clear tax debts on Tax liens full payment of the taxpayer’s debt is a must. Levies may be released after an Offer in Compromise has been accepted if the taxpayer petitions to have them released.
Submitting an Offer in Compromise for tax debt settlement will keep the IRS from placing a tax levy on a taxpayer’s property. Once an Offer in Compromise has been submitted by the IRS debt tax attorney, the IRS will not levy a taxpayer’s property once a valid offer has been accepted for processing is pending, and if the offer is rejected for 30 days after rejection, or during an appeal of a rejection.
There are several terms and conditions the IRS requires every taxpayer to comply with when they submit an offer of compromise. If you want to know how to get out of tax debt keep in mind the following:
It is essential, that once the Offer in Compromise has been accepted, to do your best to fulfill these terms. If you can settle tax debt with IRS following their rules and guideline then you can expect certain beneficial tax debt relief options. If you do not, then unlike with a commercial creditor, the IRS is free to revoke the agreement and reinstate the entire amount of your tax liability.
The biggest advantage to filing for an Offer in Compromise is avoiding further collection efforts by the IRS. Unlike commercial creditors and collection agencies, the IRS does not need to get a court order in order to impose a lien on your property or garnish your wages. You can settle tax debt with the IRS directly without any other court approval.
Another advantage of tax debt settlement with an Offer in Compromise is the payment options. Unlike the American tax debt relief programs the payment options provided by the IRS is consumer friendly. The IRS has three different options that a taxpayer making an Offer in Compromise can choose from:
When considering what payment option is best to clear tax debt, every taxpayer should keep in mind that the IRS is under no obligation to accept the Offer in Compromise with the payment plan they choose. The tax debt attorney may chalk out a plan for some tax debt relief options but it all depends on the whims of the IRS to consider your case. Therefore, every taxpayer filing an Offer in Compromise should take a careful look at their ability to pay and choose the option that will get them out of debt with the IRS the fastest.
An Offer in Compromise is not difficult to file once you know the steps. In order to settle tax debts with the IRS you need to follow these steps. There are three forms that must be completed, Form 433-A worksheet, Form 656 (the proposed agreement), and Form 433-A (the collection information statement). All the forms should be submitted by mail to the IRS along with any backup documentation to prove your ability to pay, your first payment, and the $150 filing fee. The filing fee may be waived off for any taxpayer who can prove on Form 656-A that they are living below the poverty line. In fact to get any tax debt relief from the IRS you have to provide for the proper legal documents to back it.
Typically it takes a taxpayer 1-4 months to prepare the Offer in Compromise forms along with their accompanying documentation. You can also get the help of a tax debt attorney to prepare the documentation for the IRS. After the documentation the IRS takes approximately 1-2 years (13-18 months) to process and evaluate the Offer in Compromise. Finally, it takes 1-3 months to finalize the offer and arrange the payment options. If the arrangements are properly done necessary tax debt help will be provided by IRS to clear your tax debts.
Therefore, anyone making an Offer in Compromise for tax debt settlement should be prepared, and continue to pay on their debt in accordance with their Offer in Compromise.
Each year, the IRS approves only a small number of the Offers in Compromise it receives. In 2004, for example, the IRS only approved 16% of the offers submitted to it. In order to increase your chances of getting tax debt help from IRS and getting your Offer in Compromise accepted, you should:
The IRS offers a number of payment plans and installment agreements for tax debt settlement to tax payers. If you owe more than $25,000 in combined taxes, penalties and interest you will need to fill out Form 433-F Collection Information Statement, as well as the Request for Installment Agreement, Form 9465.
If you have not received a bill from the IRS for the current tax year, the IRS allows you to use an online payment agreement to establish an installment plan for the current year. You can also use the online payment agreement form if you have less than $25,000 or less in taxes, penalties, and interest. The terms and legal agreements can be clarified from the IRS tax debt attorney if needed.
For more on payment and installment plans, you can visit the IRS’s website at www.irs.gov.
An experienced debt settlement firm has all the resources to ensure that your Offer in Compromise is complete and accurate, improving your chances of getting proper tax debt help and also your Offer in Compromise accepted by the IRS. When choosing a debt settlement company, you should: