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Streamlined Offer in Compromise Program

There are millions of taxpayers who file annual tax returns every year with the IRS.  Some of these individuals receive a refund, while a good many of the others find themselves owing money to the United States government.  Among those that owe, there will always be a percentage that will be unable to pay the tax bill for any number of reasons and will therefore need to make other arrangements for payment.

Some of the most common paths for those unable to pay the taxes that are owed by the deadline include:

  • Payment Extension: A popular option if you need additional time to pay your taxes due is to use Form 4868, the Online Payment Agreement application, which can be found at www.irs.gov. You will be given an additional 120 days to pay your debt and will not be charged a fee for this extension program; however, you may incur some minimal interest and penalties.
  • Installment Agreement: By filing Form 9465 with your return, you will be put on an installment agreement which generally will cover a longer length of time for tax payment. Given that this extension is longer, you can expect greater interest accruals and penalties, as well as a fee for set up of the plan.
  • Extension of Time to Pay: Under the IRS Fresh Start Initiative, qualifying individuals can use Form 1127 which grants an extension to pay taxes owed and waives late payment penalties.

For most taxpayers, these three alternatives usual can accommodate nearly all circumstances.  An experienced tax attorney can suggest to you the best option by determining your ability to pay and over what period of time is most feasible for you and your family.

Offers in Compromise (OIC)

In another category lie those taxpayers who have limited assets and financial means to cover their tax liabilities.  For these individuals an OIC may be the best bet to settle unpaid taxes for less than the full amount owed.  It is important to note that the IRS really has no legal right to reduce a tax bill; in fact, the decision is entirely up to the IRS agent’s discretion.

In order to be able to participate in the OIC program you must qualify for it.  That means, eligibility is consider for only those who are current with filing and payment requirements and not under bankruptcy proceedings.  In addition, hardship circumstances are considered in the following circumstances:

  • Ability to pay
  • Income
  • Expenses
  • Asset equity

Merely having a desire to participate in the OIC is unquestionably not enough to gain acceptance.  The IRS must establish either a clear doubt as to collection of the taxes owed or find that an unreasonable economic hardship would incur due to payment that would justify such action to be inequitable.

The formal steps for inclusion in the OIC program begin with filling out Form 656 and submitting it with the required fee.  Be warned that the acceptance for an OIC is an exhaustive process and one that is not easily attained; therefore the suggestion is that you seek the advice of a tax attorney in order to explore all your tax payment options before making the decision to try for acceptance for an OIC.

After submitting the required form and fee, the IRS will ask for documentation to support your hardship claims.  As you can imagine, the necessary paperwork can be widespread and difficult to accumulate.  Moreover, essentially in the end you will be giving over all information to the IRS that pertains to your assets and income and may in the future serve to bring collections against you if your OIC is rejected.

Talking with an experienced tax attorney before consideration of applying for an OIC is the best decision you could make, especially because interest keeps getting tacked on to your tax obligation while your application is pending.  You do not want to end up being rejected and with a larger than ever tax liability.  Whether you are still exploring tax payment alternatives, thinking about applying for an OIC, or wanting to begin a formal appeal on the OIC decision you attained, Dallo Law Group has the expertise to advise you through these processes.  We will be happy to sit down with you and help guide you towards the best direction for your circumstances.

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