An Offer in Compromise is an IRS settlement that allows a financially struggling taxpayer to settle an income tax debt for less than the full amount owed. An Offer in Compromise may be a legitimate option if the taxpayer cannot pay the full income tax liability, or doing so creates a financial hardship. The IRS must consider a taxpayer’s unique set of facts and circumstances:
- Ability to pay;
- Expenses; and
- Asset equity.
The IRS will generally approve an offer in compromise settlement when the amount offered represents the most that the IRS can expect to collect within a reasonable period of time. The IRS will try and discourage a taxpayer. Explore all other payment options before submitting an offer in compromise. The Offer in Compromise program is not for everyone. If you hire a tax professional to help you file an offer, be sure to check his or her qualifications.
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Make sure you are eligible to settle with the IRS:
Before the IRS will consider a taxpayer’s settlement offer, the taxpayer must be current with all filing and payment requirements. You are not eligible if you are in an open bankruptcy proceeding. Call the IRS tax relief team at Flat Fee Tax Service, Inc. for your free and confidential consultation. A consultation call to our team will be the quickest way for a taxpayer to find out their qualifications for an IRS settlement.
Submit an Offer in Compromise Settlement:
A taxpayer can submit an IRS settlement on their own. It is not recommended. Presently, at the time of this writing, the IRS is accepting 40% of the settlement offers that are submitted. Most of the 40% used a tax professional. The clients who use Flat Fee Tax Service, Inc. have had a 90% success rate.
If you are stubborn and want to do your own settlement, you will find step-by-step instructions and all the forms for submitting an offer in the Offer in Compromise Booklet, Form 656-B. A taxpayer’s completed offer package must include:
- Form 433-A (OIC) (individuals) or 433-B (OIC) (businesses) and all required documentation as specified on the forms;
- Form 656(s) – individual and business tax debt (Corporation/ LLC/ Partnership) must be submitted on separate Form 656;
- $186 application fee (non-refundable); and
- Initial payment (non-refundable) for each Form 656.
Select payment option:
The taxpayer’s initial payment will vary based on the offer and the payment option chosen:
- Lump Sum Cash: Submit an initial payment of 20 percent of the total offer amount with the application. Wait for written acceptance, then pay the remaining balance of the offer in five or fewer payments.
- Periodic Payment: Submit an initial payment with the application. Continue to pay the remaining balance in monthly installments while the IRS considers the settlement offer. If accepted, continue to pay monthly until it is paid in full.
Should a financially distressed taxpayer meet the Low-Income Certification guidelines, the taxpayer does not have to send the application fee or the initial payment and the taxpayer will not need to make monthly installments during the evaluation of the offer. Check the application package for details.
You Need to Understand the Entire Process:
While a settlement offer is being evaluated:
- The taxpayer’s non-refundable payments and fees will be applied to the income tax liability (payments can be designated to a specific tax year and tax debt);
- A Notice of Federal Tax Lien may be filed;
- Other collection activities (levies) are suspended;
- The legal assessment and collection period is extended;
- Make all required payments associated with the settlement offer;
- The taxpayer is not required to make payments on an existing installment agreement; and
- The settlement offer is automatically accepted if the IRS does not make a determination within two years of the IRS receipt date.
If a taxpayer decides to do their own Offer in Compromise, the settlement offer had better be done correctly the VERY 1st TIME. The reason is this: the IRS suspends the Statute of Limitations during the Offer in Compromise submission process. That means if the settlement offer is rejected for any reason, the IRS has extended the time to enforce collection.
DO IT RIGHT THE FIRST TIME AND AVOID A LOT OF TROUBLE
FLAT FEE TAX SERVICE, INC.:
- Guided by our Christian Values which is why we do not have Client Complaints.
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- Experienced IRS Tax Attorneys will work directly with you throughout the process.
- Stop, remove and release an IRS wage levy in one day.
- 90% of our clients who submit an IRS settlement have received a successful Offer in Compromise.
- Low, Affordable Fees. Fees can be stretched out over 10 to 12 months.
- Our clients receive positive results.
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