How to Make an Offer in Compromise to Settle a Tax Debt

IRS Offers in Compromise with The Law Offices of Nick Nemeth

As every citizen of the U.S. knows, it’s always wise to be well prepared when dealing with the Internal Revenue Service (IRS). Whether your issue is simply filling your taxes on time or something more involved, like setting up a payment plan for taxes owed, you should always educate yourself as much as possible about the system and how it works. With the tax code  so massive and complex it can be impossible for the average person to resolve more serious problems with the federal agency on their own. Individuals who are unable to pay their IRS tax debt may be able to qualify for an IRS Offer in Compromise (OIC)  which is a program established to help taxpayers settle outstanding IRS debt for an amount lower than what they owe.  it is important to have an IRS lawyer by your side for a positive outcome. To help get you started, we give you an overview of how to make an IRS offer in compromise to settle a tax debt. Read on.

Specific Steps

In addition to finding the right tax professional to help you, and once you have been approved, you will need to take specific steps once the process begins. Plan on making payments on time, every time, and be sure you file future tax returns properly (and on time). But these aren’t the only IRS offers in compromise tips.  Be prepared to work with your specialist to complete a detailed application that will accurately demonstrate financial hardship.

The immediate goal is to show this hardship, so you can be awarded OIC status. An additional, and very important tip: OIC status is temporary, because your income will be under review by the IRS, to make sure you still can’t pay the tax debt.

Of course, there will be several forms involved in the process, another reason for you to seek professional assistance. These documents include Form 656, which is the initial document used to make the offer. You will probably encounter other forms, such as 656-A for the application fee and payment and 433-A, which is described as “collection information statement for wage earners and self-employed individuals. If you are working with a small-business tax issue, you may use Form 433-B, collection information statement for businesses.

Is It for You?

It’s best not to answer this question too quickly – not before you talk with your tax professional. Remember, it will be up to you to prove real financial hardship. You must also have all required tax returns filed before OIC status can be granted.

According to the IRS website:

“Beginning with Offer applications received on or after March 27, 2017: The IRS will return any newly filed Offer in Compromise application if you have not filed all required tax returns. Any application fee included with the OIC will also be returned. Any initial payment required with the returned application will be applied to reduce your balance due. This policy does not apply to current year tax returns if there is a valid extension on file.”

Planning to Request an OIC? Hire an IRS Tax Lawyer!

Although making an offer in compromise to settle taxes may seem simple on the surface, the process can involve a lot of intricacies that call for professional who has many years of experience. If you are unable to meet your IRS tax debt obligation, speak with an IRS tax attorney at the Law Offices of Nick Nemeth.  Our team of IRS tax lawyers, CPA, EA’s, Financial Analysts, and Case Managers are experienced in helping individuals and businesses navigate all sorts of IRS tax problems. For a confidential, free, no-obligation consultation, fill out our contact form or simply call (972) 426-2553.   We truly appreciate and value the opportunity to be of service.