Tips for Filing Your IRS Offer in Compromise
An Offer in Compromise is an agreement between you and the Federal Government to settle your back taxes for less than you owe.
An Offer in compromise is strictly based on numbers; basically, your income versus your expenses and the equity in your assets.
If you can prove to the IRS you do not have the ability to pay back your taxes in full before the Statute of Limitations expires, then you may be eligible to file an Offer in Compromise. However, it will depend on your Reasonable Collection Potential and how much time is left before Statute of Limitations on the debt expires.
Make Sure Your Tax Returns Are Filed
Before you can begin any negotiations, you must file any and all outstanding returns. Has the IRS filed a Substitute for Return on your behalf? File an original return as soon as possible as it will most likely result in a lower balance due, or a refund. Not sure if you should file a return? Obtain your wage and income transcripts from the IRS website to determine if a return should be filed.
Telling yourself you can’t afford for someone to assist in preparing your tax returns? There are many options out there depending on your income, such as IRS Free File, Volunteer Income Tax Assistance Centers listed on the IRS website, Turbo Tax, etc. The bottom line is, this needs to be a priority, so get this step done right away.
File Your Offer Sooner Versus Later
Now is the time to file an Offer In Compromise. The mentality is to wait until you have more money to file, and it’s quite the opposite. Are you unemployed due to COVID-19? Is your bank account purging funds just to keep up with your day to day expenses? If you answer yes, now is the time to file when you have nothing.
Prepare Your Documents
As mentioned, you will be submitting many documents to support your Offer and the reason why you are asking the IRS to compromise your tax debt. Some documents can include:
- Copies of your paystubs and earning statements.
- Copies of tax returns that were recently filed within the last 60 days.
- Copies of bank statements and business bank statements, if self-employed.
- Copies of mortgage statements, vehicle statements showing monthly payments, loan payoff amounts and current balances due.
- List of Notes Receivable, again only if self-employed.
- Proof of payment plan with the State if back taxes are owed.
- The list goes on…
Hire Some Help
As filing an Offer in Compromise is a detailed and, can be, confusing process, it’s best to hire a professional. A Certified Tax Resolution Specialist is experienced in dealing with the IRS and knows the best way to obtain a positive result. If you are eligible for an Offer, it’s time to seriously think about hiring someone to help to ensure a successful outcome.
Don’t Forget to Include Your Payments
Once your OIC applications are complete, don’t forget to send the application payment of $205 along with the 20% down payment, if applicable. Be sure to send your application and supporting documents in a way you can track it, such as USPS Certified Mail, UPS or FedEx. Also, don’t forget to make a copy of our Offer in the event you need to re-send.
If you chose to pay your Offer in a lump sum, if accepted, you will have five months to pay your Offer amount in full. If you chose the deferred payment option, you must begin to pay your Offer in 24 equal payments starting with the first payment being sent with your Offer. Lastly, if your Offer has not received a determination within two years, then it is automatically accepted by the IRS. So, don’t forget to make that final payment within five months.