Unlike death, tax bills are inevitable in life. Whether you are an individual or a business entity, you would want to avoid tax liens. Unfortunately, many people are unable to pay taxes on time and end up in tax debt. But what if we tell you that there is a way to get your tax debt all cleared out?
Through a process call the Offer In Compromise or OIC, you can appeal to the IRS to settle for less money than you owe them. This tax forgiveness plan is devised for people going through financial hardships and can’t afford to pay the taxes. However, whether the IRS will consider your appeal or not depends solely on the government. It is best to consult Tax Law Firm Virginia Beach.
In recent times, there are accounts where the IRS has accepted the IOCs submitted for tax forgiveness.
If you are also considering opting for the OIC, here is what you need to do.
Check if you qualify for the OIC consideration.
Everyone under tax liability would want the IRS to settle their debts for less. However, one must also qualify for the Offer in Compromise.
If you want your case to be considered as OIC by the IRS, you must be qualified for one of the situations.
#1 When there is a “doubt as to collectability.” In this situation, the IRS has doubts whether the individual can pay the tax bill nor in the near future.
#2 The individual will suffer significant financial hardship if they pay their tax bill in full.
#3 When there is a “doubt as to liability.” In this condition, the taxpayer may claim that the IRS’s tax liability is not accurate. One must fill the Form 656-L to pursue the doubt of liability.
Understand the OIC Process
To pursue the OIC, one has to go through a formal process of submitting an offer to the IRS. The process starts with filling the IRS From 656. IRS charges $186 as an application fee that must be attached to the Offer in Compromise form. Individuals with income less than the poverty guidelines are exempt from paying this fee.
The OIC requires one to provide complete financial details to the IRS by filing Form 433-A or Form 433-B. Married individuals living on community property are also required to give their spouse data.
IRS may reject your application if your Forms are not filled correctly. If you are unsure how to go about the OIC process, you can take assistance from an IRS Lawyer Virginia Beach.
How to determine the offer amount?
Form 433 elaborates on how to determine the offer amount. The IRS checks how much tax liability you can pay reasonably. They go through the financial details disclosed by you in Form 433. As a general rule, use this method.
Add up the net realizable value you have with the excess monthly income. Now, multiply this amount by the payment period you have chosen. If the amount payable to the IRS is way beyond what you can afford, you should still consider making an offer. There are many instances where the IRS has settled the tax liability for less money than people owe.