It is true that the IRS has a settlement program that allows taxpayers to settle tax debt for less than the amount they owe. The formal name for this tax debt settlement program is the Offer in Compromise.
That brings us to what’s false.
Despite the late night cable tv ads that imply the an Offer in Compromise (OIC) is a common and reasonable solution for many people, the reality is that few people qualify for this program. In fact, while more than 16 million people and 3 million businesses owe the IRS, approximately 42,000 settled their tax debts using an Offer in Compromise last year.
EVERY YEAR 80,000 TAXPAYERS SUBMIT AN OFFER IN COMPROMISE
The reason is simple: From the IRS perspective, most taxpayers can afford to pay their taxes with their current assets or over time or with a payment plan — so those people wouldn’t qualify for an Offer in Compromise. Every year, millions of taxpayers pay their taxes on monthly payment plans.
This tax settlement program is geared toward a narrow segment of taxpayers — people who will never be able to pay all of the debt with their future income or assets before the IRS runs out of time to collect it (generally, 10 years from the date the tax was assessed). For most people, there are IRS alternatives to the OIC that work out much better for their situation.
Next year, it will be more important than ever for taxpayers to understand their IRS payment options. In 2019, the IRS projects that 3 to 4 million new taxpayers (on top of the 30 million who already file with a balance due) will owe taxes due to tax reform and a growing gig economy. These basics will help taxpayers choose the right option with the IRS.
Most people file for a certain kind of Offer in Compromise (OIC)
There are actually three categories of offer in Compromise (OIC). The most common one is called “Offer in Compromise, Doubt as to Collectibility,” or OIC-DATC. This Offer in Compromise is appropriate for people who can’t pay their taxes after paying their allowable expenses (rent, car payment, utilities, etc.) and want to settle for a payment that is less than the amount they owe.
The IRS will never accept Zero dollars. The will accept as little as $100. Flat Fee Tax Service has many clients who paid the IRS between $100 to $500.
For OIC-DATC, taxpayers will need to:
— File a Form 656, Offer in Compromise.
— Attach financial statements (Form 433A-OIC for individuals and Form 433B-OIC for businesses).
— Submit supporting documentation to prove their asset values, liabilities, and monthly income and living expenses.
The two other types of OICs are:
— “Doubt as to Liability,” when taxpayers don’t think they owe the tax in question.
— “Effective Tax Administration,” which is reserved for taxpayers who can pay the tax they owe, but it would cause undue hardship, or there are other extenuating circumstances.
Taxpayers file few of the last two types of OICs. Most people simply owe and can’t pay — so they need a Doubt as to Collectibility OIC.
I am Dave Rosa. It is my duty, my responsibility and my pleasure to provide you with a comprehensive and thorough consultation regarding an Offer in Compromise. Our tax professionals have a 96% Offer in Compromise success rate.
Our conversation will take approximately 20 to 30 minutes. At the end of our conversation, you will know if an Offer in Compromise is the right option for you.
Call for details. 1-866-747-7435.
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