What You Have To Know About Filing an Offer in Compromise

If you are experiencing IRS problems, a resolution might be an Offer in Compromise or OIC. Taxpayers can negotiate with the IRS. An OIC is an agreement reached between the IRS and you that resolves your tax debt. In certain circumstances, the IRS can accept less than what you owe.

Read the IRS Form 656 literature before filing an OIC. It'll help you figure out if you qualify for an OIC.

Certain conditions to satisfy to qualify for an OIC:

• Doubt as to liability – There's doubt that you even owe the tax bill or that the estimated tax is right.
• Doubt as to collectibility – There is doubt on the IRS's part that it will be able to collect your bill from you at present or in the future.
• Effective tax administration by proving that paying the tax debt is unjust as it'll cause you financial hardship.

How Much Must You Offer?

The IRS states that the amount of an OIC has to be equal to your assets' realization value plus the amount of money the IRS could take from your future income.

Your assets' realization value is what the IRS could take if it seized your assets and sold them at present. Debts associated with the property will not be included. To calculate this sum, the IRS uses a "quick sale value", meaning 20% less than the fair market value.

In determining with this sum, you don't have to include personal or household effects. However, luxury items need to be included.

You also should include the sum of your retirement plans. Any penalties and taxes you should pay after cashing them in can be deducted from their values. A written explanation of how you came up with this figure needs to be included.

The IRS Collection Process (IRS Publication 594) has a host of items that you may exclude from your asset calculation.

The number connected to the type of payment plan you want to use is then multiplied by your disposable income, a figure that may be determined by subtracting your living expenses from your monthly income.

Payment Plans

• Deferred offer – your future income multiplied by the months remaining on the statute of limitations for your taxes.
• Short-term deferred offer – settlement after 91 days but within two years after the IRS acceptance notification (future income x 60).
• Cash offer – payment in full within five months of IRS acceptance notification (future income x 48).

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Originally posted 2008-02-05 05:25:16. Republished by Blog Post Promoter

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