A tax resolution is a special program that the IRS has developed for people to manage their delinquent taxes through offer in compromise. It is, in essence, a program that allows a person to renegotiate their delinquent tax amount with the IRS for a more manageable amount, similar to a delinquent tax reduction or forgiveness program. It is designed to help people get up-to-date quicker, if they meet a certain few requirements. But what are these requirements?
To qualify for delinquent tax reduction under the provisions of the offer in compromise, a person must meet one or more of these three conditions:
1. Doubt as to Liability
2.Doubt as to Collectibility
3.Effective Tax Administration
Each of these three conditions come with their own set of paperwork, financial analysis, and much more. The process for filing an offer in compromise can be daunting to do it alone, making it very helpful to hire a tax professional. (The help of a tax professional is not required by law, but is suggested due to the complexity of the process).
This condition provides that the whole delinquent taxes would never be collectible. In essence, if the person can prove that, without a doubt, there is no possible way to pay off the full delinquent taxes, then they may be able to settle for a smaller amount. It should be known however, that this condition involves a lot of number crunching. A person would have to not only gather all their financial information, but they would also need to be able to prove their inability to pay according to the IRS’s eligibility equation. However, if you can prove through their equation, that you could never pay the amount due, then you are in luck and will be able to negotiate for a smaller amount.
This form of offer in compromise is a good option for those that don’t qualify for the previous two conditions, but still think they won’t be able to pay off the delinquent taxes. In this way it is similar to the doubt as to collectibility. The difference is that, in the effective tax administration they don’t say it would be impossible, but rather that it would put the person and their family under a significant amount of financial stress if they were required to pay the full amount.
In addition to reviewing this list, you may also use the IRS’s free tool to check your qualification- Offer In Compromise Pre-Qualifer.
Offer in Compromise (OIC) is a program that the IRS provides for taxpayers that owe taxes they can’t pay. Offer in Compromise enables the taxpayer to settle their liability to the IRS for a reasonable amount, less than they already owe. Offer in Compromise also offers taxpayers that believe they don’t owe those taxes in the first place, a chance to file an OIC and have those tax liabilities reconsidered via the IRS.
With the OIC Program, all back tax liabilities are settled with the amount of the offer. This also allows for all Federal Tax Liens to be released upon IRS acceptance of the Offer in Compromise with payment of the amount offered. When an OIC is is filed, its acceptance is based on the taxpayers inability to pay their taxes to the IRS. From there, the IRS looks at the taxpayers current financial position, equity in assets and their ability to pay their liabilities. In essence, the Offer in Compromise program enables taxpayers to get the fresh start they are hoping for.
Taxpayers can compromise all types of IRS taxes, penalties and interest. If you qualify for this program you can save thousands of dollars in taxes, penalties and interest.
A program offered by the IRS to taxpayers who are unable to pay their tax liability. Those who qualify are allowed to make an offer in compromise, which is an offer to pay a lesser amount than that which is owed. This program is intended to allow taxpayers with substantial back taxes to settle their tax liability and start over with a clean slate, so that they can remain current on their taxes in the future.
Taxpayers can find out whether they are eligible for an offer in compromise by consulting the checklist on Form 656 of the offer in compromise IRS package. In order to qualify, taxpayers must fall into at least one of the following three categories:
1) Uncertain Liability – Is tax really owed?
2) Uncertain Collectability – Taxpayer has no way to pay this liability.
3) Economic Hardship – Taxpayer must prove that paying the liability would be unfair or create further hardship.
In order to submit the actual OIC application, the following forms may be required (depending on your situation):
If the OIC is rejected, taxpayers can submit an appeal within 30 days of the date on the rejection notice. The appeal will be submitted on Form 13711, “Request for Appeal of Offer in Compromise.”
This appeal letter needs to address the issues raised in the OIC rejection and the taxpayer will likely have to provide additional documentation. If accepted, the appeal will allow the taxpayer the opportunity to renegotiate their rejected offer under more acceptable terms for the IRS.
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