The Basics of Offer in Compromise
The ultimate goal of an Offer in Compromise or an OIC, is the settlement and eradication your tax debt. In this arrangement, both parties, the taxpayer and the IRS, attempt to arrive at a mutually beneficial agreement.
The IRS receives Offer in Compromise for the intention of settling unpaid tax dues at a lesser amount. However, they will only entertain such an offer if they feel that the full amount cannot be collected. The amount that is submitted by taxpayer in the OIC must be a close reflection of the likelihood that the debt will be collected in the near future. For instance, if the likelihood of collecting that amount is higher, then a higher amount should be declared in the OIC. If the opposite is true, then he/she should put a lower amount.
If you want to file for an Offer in Compromise, be certain that you have filed your tax returns in the years applicable to the said request. Although the IRS has a record of your taxable earnings, it will not consider your request until official tax returns and estimate of your earnings are presented. Filing for tax returns should be thoroughly done to avoid IRS problems, including imprisonment.
The belief that the OIC is primarily about how much taxes you owe is a fallacy. In fact, an Offer in Compromise is all about how much the IRS believes they will be able to collect from you. Applicants of this said payment scheme should prove that they will no longer be able to pay more than the figures indicated in the OIC. The possibility of getting an approval for this request increases when the requirements are conscientiously followed.
On the other hand, the IRS will still attempt to collect money from you while your OIC is still being processed. To collect your tax dues, they will resort to wage garnishments, tax liens or levies. Fortunately, you have the option to appeal to any of these procedures by undergoing a process called the Collection Due Process Appeal. During the actual hearing, you can make use of an installment agreement and payment plan or your OIC. Both of these are substitutes to the collection methods that the IRS will be implementing.
In conclusion, believe that tax debts, notwithstanding its amount, will be eventually settled. Even if the IRS deems that you are capable of paying the entire amount, if you can adequately prove otherwise, you will still be able to put an end to these tax problems. Let the IRS realize that a tax settlement will keep overhead costs lesser, and they will surely take this alternative as this is necessary for effective tax administration.
Filed under Blog by on Oct 9th, 2009. 
