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IRS Offer In Compromise
The attorneys at Segal, Cohen & Landis have an extremely high success rate in settling our clients’ tax debt via the IRS Offer in Compromise. Given that the IRS only accepts 24% of all submitted offers, it is advisable to consult a tax attorney with expertise in this area.
An Offer in Compromise allows a taxpayer to settle their past-due back tax liabilities for less than the full amount owed. It is a great option for taxpayers suffering from financial hardship. The factors considered by the IRS include the following:
- The taxpayer’s ability to pay;
- The taxpayer’s income;
- The taxpayer’s expenses; and
- The taxpayer’s asset equity.
Generally, the IRS will approve an Offer in Compromise when the amount offered represents the most the government can expect to collect within a reasonable period of time (usually 5 years). The Offer in Compromise program is not for everyone and is greatly over-promoted by non-attorney tax firms. If a taxpayer seeks an Offer in Compromise, they should be sure to check that attorney’s qualifications.
How does the IRS determine if a taxpayer is eligible to make an offer?
Before the IRS can consider a taxpayer’s offer, the taxpayer must be “current” or “in compliance” with respect to all filing and payment requirements. Compliance requires that tax returns are filed when due and tax payments are made when due. Please note that a taxpayer will not be eligible to pursue an offer in compromise if there is an open bankruptcy proceeding. In addition to the necessary tax forms, the IRS will require that taxpayer submit documentation regarding financial circumstances so that it may evaluate whether taxpayer’s offer should be accepted. The taxpayer is not eligible if there is an open bankruptcy proceeding. The IRS will ask a taxpayer seeking to make an Offer in Compromise to provide current financial information to determine the taxpayer’s eligibility to make such an offer.
What are the payment options for an accepted Offer in Compromise?
Option 1: The taxpayer may submit the initial payment of 20% of the total offer amount with the Offer in Compromise application and then pay the remaining balance in five or fewer payments.
Option 2: The taxpayer may submit an initial payment of 20% with their application and pay the remaining balance over 2 years.
Option 3: While option 1 and option 2 are the most common, more options are available depending on the taxpayers personal circumstances. As such, a tax attorney should be consulted.
If the taxpayer meets Low Income Certification guidelines, the taxpayer does not need to send the application fee or the initial payment. The taxpayer will not need to make monthly installments during the evaluation of their offer.
What happens after the taxpayer submits an offer?
While a taxpayer’s offer is being evaluated:
- The taxpayer’s non-refundable payments and fees will be applied to the tax liability;
- A Notice of Federal Tax Lien may be filed;
- Other collection activities should be suspended;
- The legal assessment and collection period will be extended;
- Existing installment agreements for the back taxes are suspended; and
- The Offer is automatically accepted if the IRS does not make a determination within two years of the IRS receipt date.
What happens if the offer is accepted?
- The taxpayer must meet all the Offer Terms listed in Section 8 of Form 656, including filing all required tax returns and making all payments;
- Any refunds due within the calendar year in which the taxpayer’s offer is accepted will be applied to the tax debt;
- Tax liens are not released until the offer terms have been fully paid and completed.
What happens if the offer is rejected?
A rejected Offer in Compromise may be appealed within 30 days of the date on the rejection notice.
Filing an OIC: Why You Need an SCL Tax Attorney
- We have a 95% acceptance rate for all submitted offers on behalf of our clients.
- We know how the IRS determines which offers will be successful and what substantiation is required to get your offer through.
- We are well-versed in the forms, filings and documentation required to submit an offer.
- The OIC process is akin to a mini-audit and our attorneys have extensive experience working with IRS Offer Specialists.
- We understand the drawbacks to submitting an offer that will not succeed, including the extension of the statute of limitations (extending the time the IRS has to collect on the tax debt).
- If you don’t qualify for an offer in compromise, we explain every other possible way to resolve your tax liability, which may include penalty abatement and partial pay installment arrangement or hardship status until the statute expires, which also have the effect of reducing the amount you would otherwise be required to pay over the life the debt.
Need Help with Offer in Compromise?
Please feel free to contact us regarding your Offer in Compromise. Every tax matter is unique because every person’s situation is unique. We can quickly and efficiently analyze your circumstances and propose various options of resolution.
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