You have certainly heard horror stories about people dealing with the Internal Revenue Service. The IRS has long carried a reputation for coming down hard on citizens who fail to pay their taxes. While it is true that the government can exact stiff penalties on those who intentionally evade paying what they owe, you may be relieved to know that the IRS also offers numerous options for people who intend to pay their taxes but simply have no way of affording to.
One of those programs is the offer in compromise. Through this program, you may be able to settle your tax debt for less than you owe. However, because so many have taken advantage of the option, the IRS has made it more difficult to qualify.
How does it work?
Applicants to the OIC program must continue paying on what they owe while their application is under consideration. To apply, you must use Form 656-B, which you can access online, request by calling the IRS or obtain at the nearest IRS offices in Connecticut. If the IRS accepts your request, you will have three options for making your reduced payment:
- A lump sum, for which you will immediately remit a 20 percent down payment
- A monthly installment to pay the debt over the next 24 months
- A monthly installment to spread over the remaining months of the statute of limitations on your debt
Just because you have submitted your application does not necessarily mean the IRS will approve you for an OIC. For example, if you already qualify for one of the other programs the IRS offers to taxpayers, the agency may conclude you do not need to have your tax bill reduced. However, certain factors may prove favorable for you, such as:
- Uncertainty about whether you actually owe the money
- Doubt as to whether your finances are adequate to repay the full amount
- Concerns that requiring the full amount would cause you a financial hardship
The documentation you provide with your application will be essential in helping the IRS agents reach a fair decision about whether to approve you for the OIC program. You will provide details about your income, available credit, investments and assets as well as your debts and liabilities. You will also submit a calculated total of what you think you can afford, and the IRS will take this under consideration.
For the best outcome, you may want to reach out for experienced assistance when preparing your application for an OIC. A skilled attorney can offer guidance and advice.