The IRS Offer In Compromise Program is designed to help struggling taxpayers to clear up their debt with the IRS and to get a Fresh Start. But not everyone who is “struggling” meets the eligibility requirements necessary to use the Offer In Compromise. Our tax resolution experts can help find out if you are qualified for this Fresh Start. Yes, you can use the questionnaire that the IRS publishes on its website to determine if you are eligible for the Offer In Compromise and Fresh Start, but we think our expertise and our experience in dealing with the IRS will give you better results in seeking a Fresh Start.
YOU CAN TRY THE OFFER IN COMPROMISE OPTION ON YOUR OWN
Yes, you can try to navigate the IRS Offer In Compromise and the IRS Fresh Start Program on your own. And the purpose of this article is to show you what’s ahead of you if you want to apply for this help on your own.
If, after reading all this, and digesting the language and requirements of the IRS, you need our help, we offer a free telephone consultation to explain what we can do. More on that below. But first, what the IRS says you must do to apply for an Offer In Compromise to get that Fresh Start.
ABOUT THE IRS QUESTIONNAIRE
Before you apply, the IRS wants you to fill out its questionnaire about your financial ability to pay. The IRS questionnaire uses strict limits for income and expenses with no leeway. This is the main reason you should talk to our tax resolution experts. Our tax resolution experts might find factors that you might not think about when filling out the IRS questionnaire on your own. For example, you might be eligible for the IRS Innocent Spouse Rules — and the IRS questionnaire mentions nothing about that.
Our tax experts can also suggest alternatives if you are not qualified for the IRS Offer In Compromise Program.
THE IRS HAS A NEW APPLICATION FORM
The IRS has a new application form for the Offer In Compromise Program. Here is a summary of the major points the IRS wants you to know about with its Offer In Compromise Program.
An offer in compromise allows you to settle your tax debt for less than the full amount you owe. It may be a legitimate option if you can’t pay your full tax liability or doing so creates a financial hardship. The Offer In Compromise program will consider your unique set of facts and circumstances including:
- Ability to pay
- Income
- Expenses
- Asset equity
The IRS also says “we generally approve an offer in compromise when the amount you offer represents the most we can expect to collect within a reasonable period of time. Explore all other payment options before you submit an offer in compromise.” But if you read the IRS instructions you’ll see that very little money is ever left for anything but a bare-bones existence.
As far as any other debts you have, the position of the IRS is that the IRS must be paid first. Don’t expect there to be other money left over to pay your credit cards.
“The Offer in Compromise program is not for everyone,” says the IRS and we agree. But sometimes it is the best option. The IRS also suggests that “if you hire a tax professional to help you file an offer (such as us), be sure to check his or her qualifications.” We are qualified and we will gladly tell you about the qualifications of our tax attorneys, CPAs and Enrolled Agents.
WHO IS ELIGIBLE — THE IRS QUESTIONNAIRE
The IRS offers what it calls the Offer in Compromise Pre-Qualifier Tool. This is the questionnaire. You can fill it out now just to see how demanding the IRS can be. But even if you meet the stringent requirements of the IRS and are willing to accept a bare bones budget there are other requirements you must meet.
To be eligible to apply for an Offer in Compromise you also must meet these requirements:
- Filed all required tax returns and made all required estimated payments
- Aren’t in an open bankruptcy proceeding
- Have a valid extension for a current year return (if applying for the current year)
- Are an employer and made tax deposits for the current and past 2 quarters before you apply (If you are not an employer this does not apply to you)
IF YOU APPLY AND ARE NOT ELIGIBLE
If you apply for an Offer in Compromise and the IRS can’t process your offer, the IRS will:
- Return your application and offer application fee
- Apply any offer payment you included to your balance due
THE NEW IRS APPLICATION FORM
You will find the forms to submit an application and step-by-step instructions in the Form 656-B Offer In Compromise Booklet. If you want to do this yourself, you’ll find the booklet available on the IRS.gov website. But our tax resolution experts can do this for you.
To complete an application package on your own, this is what you’ll have to fill out and submit:
- Form 433-A (OIC) (individuals) or 433-B (OIC) (businesses) and all required documentation as specified on the forms
- Form 656(s) – you must submit individual and business tax debt (Corporation/ LLC/ Partnership) on separate Forms 656
- $205 application fee (non-refundable)
- Initial payment (non-refundable) for each Form 656.
Still want to do this on your own? If so, read on:
NEXT SELECT A PAYMENT OPTION
Here’s what the IRS says the payment options are.
Your initial payment varies based on your offer and the payment option you choose:
- Lump Sum Cash: Submit an initial payment of 20% of the total offer amount with your application. If we accept your offer, you’ll receive written confirmation. You must pay any remaining balance due on the offer in five or fewer payments.
- Periodic Payment: Submit your initial payment with your application. Continue to pay the remaining balance in monthly installments while the IRS considers your offer. If IRS accepts your offer, continue to pay monthly until it is paid in full.
The IRS also points out that if you meet certain low income guidelines you don’t have to:
- Send the application fee or the initial payment
- Make monthly installments while we review your offer.
While IRS evaluates your Offer In Compromise application:
- Your non-refundable payments and fees are applied to the tax liability (you may designate payments to a specific tax year and tax debt)
- IRS may file a Notice of Federal Tax Lien
- IRS suspends other collection activities
- Your legal assessment and collection period is extended
- You make all required payments per your offer
- You don’t have to make payments on an existing installment agreement
- Your offer is automatically accepted if the IRS doesn’t not make a determination within two years of the IRS receipt date (This does not include any Appeal period.)
IF YOUR OFFER IN COMPROMISE IS ACCEPTED
- You must meet all the Offer Terms listed in Section 7 of Form 656, including filing all required tax returns and making all payments
- IRS doesn’t release federal tax liens until your offer terms are satisfied
- Certain offer information is available for public review
IF YOUR OFFER IN COMPROMISE IS REJECTED
- You may appeal a rejection within 30 days
- You can slso use the IRS Independent Office of Appeals
NOW, DO YOU WANT TO SEEK AN OFFER IN COMPROMISE ON YOUR OWN?
Now, do you want to seek an Offer In Compromise on your own? We think you should take us up on our offer to give you a free consultation. This video will explain to you how easy it is to take advantage of our free telephone consultation.
Now you decide. Yes, you can try the IRS Offer In Compromise and Fresh Start Program on your own. Or call us first for a free consultation so we can discuss the Fresh Start Initiative and other options to settle your IRS debt.
And here’s a tip: use the free consultation we offer. You can’t beat a free consultation.