Nobody can escape taxes, but what if you are broke and can’t pay the whole amount? To deal with such situations, the IRS provides you with the option of requesting an Offer in Compromise (OIC) that allows taxpayers to dissolve their tax liability for an amount lower than the actual amount owed to the IRS. To request an OIC, applicants need to fill either Form 433-A (for individuals), 433-B (for businesses), or Form 656(s) (for corporation, LLC, and partnership). However, there are certain things you need to know when filing an IRS Offers in Compromise, which we will present in this blog post. Read on.
Note Down the Filing Date
It is important to remember the date on which you file the application. That is because the IRS is under obligation to get back to you within 2 years with an outcome on your OIC application, either rejecting, returning or withdrawing it; else, it is considered as accepted. Make sure you note down the date as the procedure can be quite lengthy.
Choose a Payment Option
There are two options to choose from and your initial payment will vary based on the payment option you choose:
- Lump Sum Cash – Under this arrangement, you will have to pay 20 percent of the total offer amount with your application, and if the offer get accepted, then you need to pay the remaining balance in five or fewer monthly payments.
- Periodic Payment – Under this arrangement, you will have to choose your monthly installment, keeping in mind your finances. The monthly installment you choose excludes the expenses of your basic needs such as food and house rent. Calculate the amount after considering all your necessary expenses.
Don’t Pledge More Than You Can Afford
You are the best judge of your financial situation. Whichever option you choose, either lump sum cash or periodic payment, make sure you do not pledge more than you can afford. You have to pay a lump sum to the IRS within 5 months of the date the IRS approves it, so find an amount you can afford and don’t pledge for more than you afford. Remember the lump sum you pay to the IRS is non-refundable in case your application got denied or you fall behind in your payments. In case of periodic payment, find an amount you can pay easily excluding all your necessary expenses as your monthly installment.
Need Professional Help? Consult an IRS Tax Lawyer
When requesting an OIC, it is always advisable to have an IRS tax lawyer to guide the way. IRS tax lawyers provide you the best advice based on the dynamics of your case. An IRS tax lawyer understands the complex process and will make sure that all your information that is needed to file an OIC is done properly. If you are looking for professional help, look no further than the Law Offices of Nick Nemeth. For a no obligation consultation, fill our contact form or simply call (972) 426-2553.