The Basics of the IRS Offer in Compromise

Though the majority of taxpayers settle their annual tax debt without any issues, some encounter financial hardships that make meeting their tax obligations challenging. In such instances, the IRS is not completely heartless – they provide a solution known as the IRS Offer in Compromise (OIC). This arrangement allows taxpayers in a financial crunch to settle their tax debt for less than the full amount they owe.

At Brightside Tax Relief, we understand how the IRS Offer in Compromise works and make the process more manageable for those who qualify. This detailed guide aims to bring you insights and value, enabling you to navigate this often complicated process successfully.

Qualifying for an Offer in Compromise

To qualify for an OIC, you need to meet some stringent requirements set by the IRS. Here are some critical considerations the IRS uses to determine eligibility:

– Ability to pay: This is usually the first consideration. You must demonstrate that you cannot pay your debt either as a lump sum or through a payment arrangement.

– Income: Your income, both present, and future, will play a significant role in the decision-making process. This includes your wage earnings, rental income, dividends, etc.

– Asset equity: If the IRS determines you could sell your assets (like real estate or vehicles) and still meet your basic living needs, you might not qualify.

– Expenses: Your necessary living expenses are taken into account.

The Offer in Compromise Pre-Qualifier Tool

Before embarking on the OIC application process, it is wise to use the IRS’s online Offer in Compromise Pre-Qualifier tool. This tool will give you a preliminary assessment of whether you might qualify for OIC.

Remember, this is a preliminary tool, and its results do not guarantee acceptance or denial. It’s always a good idea to consult with tax professionals like us at Brightside Tax Relief for comprehensive help.

The Application Process

There is a detailed application process when you’re seeking IRS’s OIC, it involves the following steps:

– Completing the necessary IRS forms: The main form involved is form 656, the Offer in Compromise, and form 433A (OIC), which is a Collection Information Statement for Wage Earners and Self-Employed Individuals.

– Compiling related documentation: This includes bank statements, pay stubs, documentation of living expenses, asset valuations, and more.

– Paying an application fee and initial payment: As of this writing, the application fee is $205, and the basic initial payment varies depending on your chosen payment option and financial situation.

Keep in mind that incomplete applications are frequently returned, delaying the process, and you’ll accrue penalties and interest in the meantime.

What Happens After Submission?

After your application has been submitted, the IRS thoroughly reviews it. They may even request additional information. During this time, they’ll also pause any collection activities.

If your offer is accepted, you need to meet all the terms of the offer, including staying current with filing and payment of all your future taxes for five years. If not, the IRS has the right to revoke your OIC and demand the full amount of your original tax debt.

The Role of Brightside Tax Relief

At Brightside Tax Relief, we help navigate customers through the IRS Offer in Compromise process. Our tax professionals provide guidance on eligibility requirements, help compile comprehensive and accurate applications, and stand by your side throughout the process. We understand how challenging and overwhelming IRS tax debt can be and aim to make the process as smooth and stress-free as possible.

Remember, obtaining an Offer in Compromise is not a guarantee. It’s a rigorous and nuanced procedure that requires financial transparency and accuracy. But with a professional tax company like Brightside Tax Relief by your side, navigating this complex process efficiently and effectively becomes significantly more achievable.

Ultimately, the goal is to find the best possible solution that is fair and beneficial to both the taxpayer and the IRS. The IRS Offer in Compromise is one such amicable solution- a pragmatic approach that, when feasible, brings relief to taxpayers and enables them to start on a fresh page with the IRS.