If financial hardships are preventing you from settling unpaid taxes, an OIC or ‘Offer in Compromise’ settlement may be the best solution to your troubles. Part of the IRS’s ‘fresh start initiative’, an OIC is an agreement between the IRS and a taxpayer, wherein the latter is allowed to pay less than their total outstanding dues. Before you decide to settle your tax debts through an Offer in Compromise, there are more than a few facts you must know. Here are five such facts related to an OIC.
Must Read: 7 Useful Guidelines To Qualify For An Offer-In-Compromise
1. IRS evaluates your finances before approving OIC
The IRS will thoroughly investigate you after you file an OIC. They will evaluate every finance item, including your assets, income, expenses, and current debt. To declare such items, you will be required to fill in forms 433A or 433B. The IRS will also require your bank statements, salary slips, and proof of any investments or holdings that you have. If you run a business, you will be required to provide your profit and loss sheet.
2. You must file all your taxes before filing an OIC
One of the eligibility requirements for an OIC is that you must file all your tax returns. The reason is that unless the IRS gets a correct picture of your outstanding dues, they cannot initiate the OIC process and decide if they should sign the agreement with you. That said, file all your tax returns before you request for an OIC from the IRS, otherwise they will reject it.
3. You can re-apply for an OIC
If the IRS, for some reason, rejects your Offer in Compromise application the first time, you can re-apply for an OIC. If the IRS accepts your OIC application, but you are not happy with their offer, you can still re-apply. We would, however, recommend you to hire an experienced tax attorney in either of the cases. A tax attorney knows best how to get an offer in compromise approved, and can help you in signing a favorable agreement.
4. You owe tax debts until the IRS approves your OIC request
Many taxpayers stop paying their taxes after filing an Offer in Compromise. What you need to know is that all your debts remain yours until the IRS approves the agreement. The waiting period for an OIC request is usually 6 to 12 months, and by accumulating more tax debts during this time, you will accrue penalties. Moreover, if you stop paying your taxes after filing an OIC, the IRS may start levying your assets.
5. An OIC can be a lengthy process
Although an OIC is one of the best ways to get rid of outstanding taxes, it is not a quick solution. A typical Offer in Compromise settlement will take around 9 to 12 months, whereas every appeal takes around 6 months. After approving your OIC request, the IRS will provide you with a time period of 5-24 months to settle your remaining taxes. To ensure you do not collect any more tax from your credit cards and other loans, the IRS will control your budget during the period.
Must Read: Understanding Offers In Compromise And The Need For A Tax Lawyer’s Help
We Can Help!
These are just a few facts related to an Offer in Compromise as a tax settlement solution. There are however, several other intricacies under the law, which you must know to establish if an Offer in Compromise is the best solution for your financial situation. Attorney Nick Nemeth has a proven track record in dealing with several tax law intricacies, and can guide you on how to get an Offer In Compromise approved. To reach us, and schedule your free consultation with Nick Nemeth, please call (888)-890-0523 or fill out our contact form and we will get back to your shortly.
