Apply Offer in compromise for due taxes
  • January 12, 2016
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What is an Offer in Compromise? THe basic idea is that if you owe taxes, penalties and interest that you really can’t pay because you simply don’t have the assets or income to cover what you owe, then you may be able to settle with the IRS for less. Unfortunately, many struggling taxpayers are unable to leverage this option, as their request gets turned down by the IRS, for a variety of reasons. So, when it comes to filing an offer in compromise, applicants must take every possible precautionary step that may minimize the risk of rejection. To help, here are seven facts about OIC you should know before you file.

1. Don’t Accumulate Debts while an OIC is Pending

Taxpayers applying for OIC typically wait from six to twelve months for the IRS to process the request. It’s never a good idea to inflate your tax bills each year, a practice known as ‘pyramiding.’ In order to get your OIC application approved you need to stay current in filing and pay your taxes while the offer is pending with the IRS.

2. Don’t Make Junk Offers

Many taxpayers mistakenly believe they can make a lowball offer with baseless claims and still succeed. An OIC is simple in concept but requires taxpayers to submit valid documentation for all figures. An Offer in Compromise factors in the amount of your total disposable income for a year. You can’t just write any number with no substantial backing and expect to get a reprieve on your taxes. Such applications usually get rejected outright, and the applicant loses the mandatory 20 percent payment that accompanies the application. Any subsequent application will require another 20 percent down payment.

3. Appeal a Rejection Only After Expert Consultation

If your OIC application is rejected, you can still appeal the decision. Getting a professional to look at the original offer you filed is essential In cases of rejection. The tax professional will likely find oversights. On average, one third of OIC offers are accepted by the IRS, and rejections are mainly due to lack of sufficient information from the applicant. Taxpayers who seek the services of a tax lawyer have a higher success rate than those who go it alone. If you lack a proper understanding of this provision, seek a tax attorney’s help. Bear in mind that the appeal is due within 30 days after it was denied.

4. Confirm Your Eligibility Before Applying

Though an Offer in Compromise gives many defaulting taxpayers a ray of hope to do away with their accumulated debts, it is important to know your eligibility before applying. Before you apply for an OIC, you must be aware of all current filing and payment requirements. You are not eligible if you are in an open bankruptcy proceeding or have too much equity in your house or other disposable assets. Use an Offer in Compromise pre-qualifier to know your eligibility, and subsequently prepare a preliminary proposal.

5. Know the Alternatives

A program called the Partial Pay Installment Agreement (PPIA) may be an option if an OIC has failed to deliver. Though often overlooked by the IRS, it presents a viable settlement alternative to the OIC program. The PPIA program is very simple—you pay what you can afford, and the rest goes to the IRS as soon as the IRS collection timeframe expires. Partial agreements, which mean taxpayers do not have to pay the IRS in full, are permitted not only by the IRS internal guidelines but also by law (Internal Revenue Code Section 6519). The time limitation also known as ‘the statute of limitations on collection under PPIA is ten years, which starts the moment IRS determines that you owe them money. The IRS determines how much you owe when:

  • You file a tax return
  • They have completed an audit of your tax return and find that you owe them additional money
  • When the IRS files a Substitute for Return (SFR ), which a tax return they file for you because you neglected to do it

Your 10 year clock to collect starts ticking when the IRS indicates there is balance you owe on its books. In the end, you may pay the IRS less than what you owed.

6. Don’t Go the DIY Way

The DIY approach may be good for some things, but not for navigating the OIC process. IRS examiners are trained to ensure that you pay off your debts. If they feel you can pay your tax debt with available property and finances, they will want you to sell the property and get a payment plan to pay off the tax debt. The IRS always tries its best to get tax debts paid. Seeking professional help may provide you the best possible outcome.

7. Pay Your Taxes On-Time after Acceptance

You must pay your taxes on time for at least five years after OIC acceptance. Failure to do that means you give up the forgiven tax debt, and will have to pay the original debt along with penalties and interest. You must adhere to the IRS guidelines or blow the opportunity you’ve been given.

The Bottom Line

Whether you are contemplating applying for an offer in compromise, have already done so, or faced a rejection in the past, having a knowledgeable and experienced tax attorney by your may strengthen your chances of getting an approval. Call Nick today for your complimentary consultation. Let the Law Offices of Nick Nemeth find the best option for you.

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Brent VahleBrent Vahle
19:13 02 May 24
I called to see if they could help reduce some penalties and fees. The person I spoke with told me it might be counterproductive for them to take my case since their feels would likely equal the amount of penalty/interest abatement. I decided to pass on moving forward but was so happy to hear a legal team, or any business for that matter, who has that much integrity. I feel most others would likely try to take my money anyway. I hope I never have to go through this again, but if I do, I will definitely use the Law Offices of Nick Nemeth!
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Carla AtwalCarla Atwal
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Nick was wonderful in guiding me with direction on some tax questions I had. He was concise, and to the point, and was happy to provide general info to me at no charge. I truly appreciate him and would highly recommend him.
Miguel AlvaradoMiguel Alvarado
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Lucy FoyLucy Foy
06:55 19 Jan 24
My first appointment I had with, Tax Attorney Nick Nemeth, gave me such a sense of relief. He listened and gave me his professional advice, Mr Nemeth took my case. I was well kept updated, by phone calls and letters. That really impressed me and gave me so much confidence in them. The case went on for a couple of months. The day I received the call from one of his team members Kyle, informing me that the case was resolved and that I owed absolutely nothing to the IRS, I was overwhelmed with joy. I would recommend this law firm to anyone that needs help, with any tax issue. Thank you, to the Law Firm of Attorney Nick Nemeth and his team.
Bradley RunyonBradley Runyon
20:17 13 Jan 24
I received a tax bill in the mail from the IRS last year in 2023. The fees and penalties I owed were something I myself could not afford. I reached out to Nick Nemeth's firm and received the best experience you could imagine. The team was professional, educational, and fast. If you have a tax issue with the IRS using another firm other than Nick Nemeth's would be an error in judgment. I would recommend their services above others.
Sue HulsemanSue Hulseman
19:55 11 Jan 24
Working with Nick Nemeth and his team to resolve my debt with the IRS was the best decision I could have made. I felt such relief knowing I didn’t have to deal with the IRS myself. They did a wonderful job and were responsive to my questions and kept me abreast of my case. My outcome was exactly what I was hoping for. I strongly recommend using them if you have an issue to resolve with the IRS.
20:53 21 Dec 23
I had an incompetent tax preparer, who also ignored several notices from the IRS, which in the end resulted in a lien on my property. I did not know what to do and an attorney friend recommended that I contact the Nick Nemeth Law Offices. I met with Jamie Flores and Ivan Nalbantov in December 2021 for a free consultation, and right away was impressed by their thorough examination of my paperwork and extensive knowledge of IRS tax laws. I felt not pressured and appreciated their advice and in the end decided that I would pursue resolving the issue by myself. I paid the IRS Civil Penalty and, as recommended also submitted a letter to the IRS requesting a refund and explaining what happened. I am glad to report that my persistence finally paid off. My case took two years to resolve and I finally received a full abatement/refund check from the IRS in December 2023. I could not have done this without the straightforward recommendation of Jamie and Ivan; and I highly recommend the Nick Nemeth Law Offices to anyone needing help with the IRS.
Susan WilsonSusan Wilson
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Sarah HowardSarah Howard
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I would like to thank Mr. Nick and his staff for the superb help that I received from them. My IRS problem was resolved quickly and efficiently. It took 2 visits to convince me that I was over my head. I thought that I could call the IRS, appeal my tax notices and settle on a payment plan on my own. After many phone calls to the IRS, waiting sometimes more than 4 hours with no resolution to speak of, it proved to be extremely difficult and stressful. Revisiting Mr. Nick was a huge wake up call. My account was reviewed, and a payment plan was established with the IRS within a week. I will be forever grateful to the staff who worked on my case and especially to Lorna who listened to me vent while going through this painful process.
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