If a taxpayer owes the IRS and outstanding #tax debt# they should first determine that #the amount# being reported to them through the IRS is correct. Taxpayers will usually find that their outstanding balance #with the# IRS has increased significantly #due to the# assessment of penalties and interest. After the taxpayer determines that #all of the# tax, penalties and interest balances they owe are precise, #they should# determine a #plan to# resolve the tax debt. Simply making minimum payments often leads to nothing #more than# paying the interest for the outstanding #tax debt#, leaving the balance to never disappear.
If a taxpayer owes a #tax debt#, the taxpayer can request the IRS grant them a tax settlement to resolve the #tax debt# for less than the full amount though #an offer# in compromise. The IRS will agree to #an offer# in compromise #only for# specific reasons and in specific circumstances. The most relevant circumstance for instance #to an# unemployed taxpayer with little income and minimal assets could be the claim #that the# #tax debt# is uncollectible which the acceptance from the offer would promote effective tax administration because collection of the tax would cause hardship to the taxpayer. The IRS carefully considers such offers so a professional tax resolution professional can be helpful in helping you in provided #all of# #the required# documentation.
A taxpayer submits an IRS offer in compromise by filing IRS Form 656, Offer in Compromise. Complete and accurate financial information must be filed using Form 433-A or Form 433-B. #If the# taxpayer is saying #a specific# financial hardship, the taxpayer must include a written letter explaining the special circumstances and why paying the #tax debt# in full would produce an economic hardship. The taxpayer must attach supporting documents that support this claim.
If a taxpayer submits and Offers in Compromise based the claim #that the# #tax debt# is simply not collectible, the IRS will only consider the offer #if the# taxpayer's income and total assets are less than the complete #amount of# the #tax debt# liability. The IRS generally #will not# accept #an offer# in compromise if #the amount# is #less than# the taxpayer's reasonable collection potential, #which is# #the amount# that can be collected from all available means, including administrative and judicial collection remedies. Simply put, the IRS will generally not accept an Offer in Compromise #if the# #think that# taxpayers has any #way of# settling the tax debt. In making this determination, the IRS takes under consideration the taxpayer's assets and income, #as well as# amounts collectible from third parties and amounts #available to# the taxpayer but beyond the reach from the IRS. Standard practice #of the# IRS #has been# #to judge# #an offer# amount #based on# the taxpayer's income from prior years but recently the IRS has allowed greater flexibility #for its# employees #to consider# the taxpayer's current and future income. The IRS may require, however, that a taxpayer getting into such #an offer# in compromise agrees #to pay# more #if the# taxpayer's financial situation improves significantly.
Even when the taxpayer has sufficient assets to pay the #tax debt#, the taxpayer may submit #an offer# in compromise if collection from the #tax debt# would cause hardship. The IRS's determination of whether #to accept# the compromise is #based on# the taxpayer's individual facts and circumstances. #If the# IRS accepts #an offer# in compromise, failure #to make# payments under the tax settlement agreement may cause the tax settlement agreement #to be# cancelled. However, the IRS has announced greater flexibility for taxpayers who miss a payment if ever the cause is employment loss or other financial hardship.
Generally the Offer in Compromise is a superb option for taxpayers that meet the particular acceptance criteria #of the# IRS. Many Tax Settlement firms quickly suggest that taxpayers submit an Offer in Compromise. Selected #a qualified# tax professional #will help# as #you determine# your eligibility and #the best# course of action. You certainly do not want #to go# though the long #process of# submitting #an offer# and #waiting for# the IRS approval only #to find out# #the application# is denied #and you# #are in# #the same# place you started from.
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