Negotiating an Offer in Compromise
When you can’t pay your IRS tax bill in full, but still want to pay it off, an Offer in Compromise (OIC) may be the solution. With an OIC, the IRS reviews your finances and decides there’s no possible way you could pay off your tax debt. It’s hard to get the IRS to agree to an OIC, so it’s important to work with a local tax attorney at Bryson Law Firm, L.L.C. based out of one of our Louisiana or Texas office locations to make sure the offer in compromise is prepared correctly.
It Takes Meticulous Preparation for an OIC
An Offer in Compromise is perhaps one of the most complicated options for settling a tax debt with the IRS. There are a myriad of forms to complete and records to file to apply. An OIC can be a long and time-consuming process, taking anywhere from 9 to 12 months to get an answer from the IRS. If they reject your offer, an appeal can take another six months to reach a conclusion.
Because an OIC can erase a large portion of your tax bill, the IRS requires that each form be filled out correctly and you provide all the financial records they request to determine whether you qualify. Your request may be rejected if you leave out one form or failed to submit all your financial information. That means even more waiting. That’s why it’s so important to see a tax attorney at Bryson Law Firm, L.L.C. so we can ensure all your paperwork is in order before we submit it.
The Process to Apply for an Offer in Compromise
The IRS has a number of formulas and guidelines in place for an OIC offer to be accepted. However, IRS agents do have some latitude in determining whether to accept an offer from a person. Keep in mind, though, only 40 percent of offer in compromise applications are approved by the IRS. That’s why we review your case thoroughly before deciding whether an OIC is your best option.
To determine your eligibility for an offer in compromise, the IRS reviews your financial situation and decides whether they’ll be able to collect your tax debt in the foreseeable future, and whether you could make payments through a regular Installment Agreement.
They also take into consideration whether a payment in full would cause severe hardship to you. In those instances, another option may make more sense, such as applying for Currently Not Collectible status. If you think the IRS has made a mistake, we can also file a “Doubt as to Liability” with the IRS as the reason for the OIC. This option can be somewhat hard to prove, but it does happen.
Special Considerations for an Offer in Compromise
It’s our experience that the IRS is not the heartless organization portrayed on TV and in the movies. They take into account your personal situation when determining whether to accept an OIC. For instance, they will look at your family environment to see if there are extenuating circumstances leading to your tax debt. They can give special consideration for taxpayers over 60 who have fallen behind on their taxes. The IRS also looks at whether any medical conditions, physical or mental, contributed to your tax debt. In these types of instances, our tax attorney would draft a detailed letter explaining your situation and why you should be given special dispensation for your application.
What if the IRS Rejects the Offer in Compromise?
So, we’ve filled out all the forms, handed in all your relevant financial information, we’ve waited nine months to a year, and we finally get the IRS’s decision. And they reject our Offer in Compromise. The news can be devastating, but it’s not the end of the road. First, we have to find out why the offer was rejected. Oftentimes, it’s because the IRS determined the offer was too low.
In their rejection letter, the IRS will state an acceptable minimum offer they will agree to. If we disagree with the decision, we can discuss your application directly with the IRS agent who handled your case. If we don’t make any headway there, we can go through the formal appeal process with the IRS Regional Appeals Office.
Is an Offer in Compromise Right for You?
An OIC is just one option we look at when determining the best course of action for your tax dilemma. The best place to start is with a free initial consultation with Bryson Law Firm, L.L.C., where we can review your case together, look at your situation from every angle, and discuss the best course forward.