An Offer in compromise (OIC) is a type of tax relief provided under IRS’s ‘Fresh Start Initiative’ that enables qualified taxpayers to pay off their debts for an amount less than the outstanding amount. OIC gives taxpayers, going through financial hardships, an opportunity to start afresh. However, before requesting one, it is important to learn a thing or two about OIC eligibility and documents requirement as it will help you take your first step in the right direction. To help, in the post we have answered some of the commonly asked questions about OIC. Read on.
1. How do I know if I qualify for OIC?
In order to identify whether you qualify for OIC, you can either use OIC pre-qualifier tool on irs.gov or consult an experienced IRS attorney, such as Nick Nemeth. If you fall into a low-income taxpayers category, your gross monthly income should be less than or equal to the income mentioned in section 1 of Form 656. Also, whether or not you qualify for the relief will depend on the size of your family and your current address.
2. How do I know whether I have made the right offer?
If you think you have not calculated your offer right or you think your offer is not high enough, the IRS is there to help you. The IRS will give you the correct offer amount. In case the amount calculated is more than the amount offered you, the IRS gives you a chance to increase the amount, or the offer gets rejected. That said, when submitting an OIC make sure there you are not providing any false information. Any false information or statement made in front of the IRS is considered a fraud and is subjected to severe penalties.
3. Can I add my current year balance in the offer at hand?
Well, once your offer is accepted, you cannot add additional tax balance to the offer. In fact, the current balance must be paid in full otherwise your offer will default. Also, installment agreements cannot be made on new balances.
4. What happens if I fail to pay?
In case of failure to pay, the IRS will either file a suit or levy to compensate for the amount mentioned in the offer or for the entire amount you owed to the government while deducting the amount already received under OIC. In case of joint OIC with your spouse, the IRS will not default the agreement unless one of the spouses is meeting all terms of the agreement.
5. How much interest do I pay if my OIC is accepted?
The IRS charges an interest on the tax amount until the OIC is accepted. The day OIC is accepted, there is no additional interest added to the owed amount or accepted amount for OIC.
Requesting an OIC is a complex process and can be a hassle if you do not possess some basic understanding of its terms and conditions. Also, to avoid any errors in the application, it is important to seek assistance of an experienced IRS lawyer who can guide you in the right direction. If you think you qualify for the tax relief, speak with Nick Nemeth. Nick Nemeth is an experienced tax attorney who has helped many individuals and business with diverse IRS tax issues. To schedule a free, no-obligation consultation simply call (972) 426-2553.