If you are struggling to pay your taxes, you may be considering an Offer in Compromise (OIC) as a way to settle your debt with the IRS. This can be a complicated process, and there are many things to consider before making an offer. In this blog post, we will provide you with a guide to negotiating with the taxman. We will discuss the factors that the IRS considers when evaluating offers, and we will give you some tips on how to make your offer more appealing. Let’s get started!
What is an Offer in Compromise?
An Offer in Compromise is an agreement between a taxpayer and the IRS that allows the taxpayer to settle their tax debt for less than the full amount owed. The Offer in Compromise program is designed to help taxpayers who are unable to pay their taxes in full and provides them with a fresh start.
In order to qualify for an Offer in Compromise, you must meet certain criteria. First, you must be current on all filing and payment requirements. This means that you must have filed all required tax returns and made all required estimated tax payments for the current year. If you are not current on these requirements, you will not be eligible to submit an Offer in Compromise.
Second, you must demonstrate that you are unable to pay your tax debt in full. The IRS will consider your income, expenses, and asset equity when evaluating your Offer in Compromise. If you have a large amount of disposable income or significant assets, you may not be eligible for an Offer in Compromise.
Third, you must agree to comply with all tax laws in the future. This means that you must agree to file all required tax returns and make all required estimated tax payments going forward. If you do not agree to these terms, your Offer in Compromise will be rejected.
What factors does the IRS consider when evaluating offers?
The IRS considers several factors when evaluating offers, including:
– Your ability to pay: The IRS will consider your income, expenses, and asset equity when evaluating your Offer in Compromise. If you have a large amount of disposable income or significant assets, you may not be eligible for an Offer in Compromise.
– The time value of money: The IRS will take into account the time value of money when evaluating your Offer in Compromise. This means that they will consider the interest and penalties that accrue on your tax debt over time.
– Your compliance history: The IRS will review your compliance history to determine whether you have a history of complying with tax laws. If you have a history of non-compliance, your Offer in Compromise may be less likely to be accepted.
– Your reason for non-payment: The IRS will consider your reason for non-payment when evaluating your Offer in Compromise. If you can demonstrate that you are unable to pay your tax debt due to circumstances beyond your control, you may be more likely to have your Offer in Compromise accepted.
What are some tips for making my Offer in Compromise more appealing?
There are several things that you can do to make your Offer in Compromise more appealing to the IRS. First, you should try to negotiate a lump sum payment. This means that you would agree to pay the entire amount of your Offer in Compromise up front. The IRS is typically more likely to accept offers with lump sum payments because they receive the money more quickly.
Second, you should try to negotiate a lower Offer amount. The IRS will consider your ability to pay when evaluating your Offer in Compromise, so it is important to offer an amount that you can realistically afford to pay.
Third, you should try to include supporting documentation with your Offer in Compromise. This documentation can include financial statements, tax returns, and other documents that support your Offer amount.
Fourth, you should make sure that your Offer is submitted on time. The IRS has strict deadlines for submitting Offers in Compromise, and if your Offer is late, it will likely be rejected.
Making an Offer in Compromise can be a complicated process, but by following these tips, you can increase your chances of having your Offer accepted.