Given a bad current financial situation and the large amounts you owe the IRS, the Taxpayer may consider an Offer in Comprise (OIC) with the IRS. The IRS is authorized to enter into an Offer in Comprise (OIC) agreement with a taxpayer to settle a Tax Debt at a lower amount than what the taxpayer generally owes.
The Offer in Compromise offers eligible taxpayers a path toward paying off their Tax Debt and getting a “fresh start.” Generally, when proposing an Offer in Comprise (OIC) to the IRS, you must pay an application fee and provide an initial non-refundable lump sum payment.
However, the IRS has the authority to waive these payments for low-income taxpayers. Additionally, you must make an appropriate offer based on what the IRS considers your true ability to pay. There is no assurance that the IRS will accept your offer.
There are several requirements that must be met in order to file an Offer in Compromise. First, before we submit your offer, you must file all tax returns you are legally required to file and make all estimated tax payments for the current year. Failure to file all tax returns will result in a non acceptance (emphasis added).
In addition, as a business owner with employees, you must make all required federal tax deposits for the current quarter.
Generally, the IRS will not accept an offer if you can pay your tax debt in full via an Installment Agreement or a lump sum.
Also, you should be aware that Tax Penalties and interest will continue to accrue during the time the IRS is evaluating your offer.
If you do not have sufficient cash to pay for your offer, you may need to consider borrowing money from a bank, friends, and/or family. Other options may include borrowing against or selling other assets. Note that, if retirement savings from an IRA or 401k plan are cashed out, there may be future tax liabilities owed as a result.
If your Offer is Accepted, you must continue to timely file and pay your tax obligations. If you fail to file and pay your required tax returns, before your offer is paid in full, or for five years after your offer is accepted, whichever is longer, your offer may be defaulted. If your offer is defaulted, all Compromised Tax Debts will be reinstated.
In order to prepare an Offer in Compromise that the IRS will accept, we will need to work together to calculate an appropriate offer based on your assets, income, expenses, and future earning potential. We will have to describe your financial situation in detail and provide the IRS with documentation that supports our position.
Please contact the office of Don Fitch Accountancy at (760)567-3110 or Email Don.Fitch@CPA.com if you have any questions or would like additional information.
DON FITCH, CPA
74478 Highway 111 #3
Palm Desert, CA 92260
Toll Free: (877)CPA-Help or (877)272-4357
P.S. My firm is based upon referrals. Please feel free to refer my firm to anyone you know that is looking for a new CPA and/or tax preparer. Thank you in advance.
(Updated 04/18/2021 08:22 320-650)