What is an Offer in Compromise?
Missouri residents who have outstanding tax bills that they cannot pay should learn about an Offer in Compromise and how it may help them.
April is tax season and many residents in Missouri can find themselves facing large tax bills with no way to pay them. When in this situation, what options are available to taxpayers? The Internal Revenue Service does recognize that there are times when people legitimately cannot pay their tax bills. They have set up different ways to help people satisfy their tax debts. One of these is the Offer in Compromise program.
How it works
In essence, the OIC is a way in which people can request that the IRS compromise with them on their bills. Taxpayers propose a certain payment amount for the IRS to consider. The IRS then reviews the case based upon several criteria to determine whether or not the compromise will be accepted or denied.
When reviewing applications, the IRS looks at people’s assets as well as their regular costs of living and earnings from jobs or other sources. There are two common ways of making an Offer in Compromise application. Both involve submitting some portion of the suggested amount due. One has taxpayers making payments every month during the consideration period. In cases where people are deemed to be of a certain low-income status, they are not required to submit money with their applications or to make any payments until a decision has been reached.
Benefits of the OIC process
One of the primary benefits of the Offer in Compromise program is that other collection efforts by the IRS will be stopped. That means taxpayers will not receive letters or phone calls about their outstanding tax bills while the process is in the works. A lien regarding the tax debt can still be filed, however.
If an OIC is accepted, people can satisfy their debts in ways that they are able to manage and get a fresh start on their tax liabilities. If a taxpayer has an OIC accepted and is due a refund in the same year, that refund will be applied to the prior debt. This can help reduce the amount of additional money that the person has to come up with.
Acceptances not common but can happen
People seeking an Offer in Compromise should know that there is no guarantee that an application will be accepted. However, new initiatives by the IRS in 2012 did result in more OIC applications being accepted according to Forbes. Between 2012 and 2014, acceptance rates ranged from 38 percent to 42 percent of all requests made.
Requesting an OIC
Missouri residents seeking an Offer in Compromise should consult with an attorney before submitting an application. The process can be very detailed and getting assistance from someone with experience may help prevent making a mistake on the application.