If you watch TV, it’s likely that you’ve seen the commercials where Taxpayers who owe the IRS large sums of money, state that they were able to settle their tax debt for pennies on the dollar. When clients with tax debt,come into my office in Richardson, Texas, probably the most common question I get is how can qualify for those same savings.
Is it possible? The answer is maybe, depending on your financial circumstances. The IRS Offer-In-Compromise Program, or OIC, allows taxpayers who qualify, to settle for the less than the full amount of their tax debt. In the upcoming weeks, I will drill into detail regarding the program, but for now, I’ll give you an overview.
There are three types of OICs –
- Doubt as to Collectability – This is the most common Offer-In-Compromise. The Taxpayer owes the government the debt but is financial unable to pay in full.
- Doubt as to Liability – With this type of OIC, the question is not a financial one but whether the taxpayer actually owes the debt to the government.
- Effective Tax Administration – This is rare type of OIC and while the Taxpayer owes the debt and has the means to pay, it would not be in the best interest of the government to require the Taxpayer to pay in full.
How Do You Know If You're a Candidate?
There are a number of items that will drive whether you qualify. Two of the most critical are below.
- You must be in tax compliance which means you must have filed your last 6 years of tax returns and be properly withheld for the current year.
- Whether you qualify and/or how much the IRS will accept, is driven by your RCP, or Reasonable Collection Potential. This is the formula that the IRS uses to evaluate your Offer and it is critical to understand the formula to get your offer accepted. We will discuss this in more depth in the upcoming weeks.
Stay tuned in the upcoming weeks as I go into greater detail on how the Offer-In-Compromise program works and how to maximize your chance of getting your offer accepted.
If You Need Help
If you need assistance in filing your Offer-In-Compromise or have other tax issues that you need help with, call us at (972) 821-1991 or email me at email@example.com.
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