In today’s world, there are many people who fail to pay their income tax or there may be cases where the employer withholds the tax. It is truly surprising to know that there are people who don’t file taxes on a regular basis. Recently the Ohio Supreme Court disbarred an attorney for not filing her taxes for twenty years. Since many people are unable to pay taxes, the IRS Offer in Compromise program may provide a relief to get out tax debt. So what does an IRS Offer in Compromise mean? It is an agreement where the IRS agrees to settle for a lesser tax debt, than for the amount actually owed .but every one cannot benefit from this offer. If the IRS feels the tax payer may be able to pay the debt completely or through a payment plan, then your application for IRS Offer in Compromise can be rejected. There are certain reasons for IRS to accept the Offer in Compromise. These reasons can be- firstly, if the IRS has doubts about the tax collection, secondly, if IRS has doubts about the tax that is owed and thirdly it recons that the collection of the tax would seriously cause financial crisis to tax payer.

You may owe money to the Internal Revenue Service (IRS) and you may not be accustomed to handle the payments. Or perhaps IRS wants you to make full payments or late payment are due or may be there are some other problems. All these might be stressful for a common man. But dealing with the IRS is not as difficult as it might seem. To make it simple, it is ideal to review your tax form. And if you have doubts, then it is better to approach a specialist to confirm the tax amount you may be paying for. If you feel that filing for tax is really burdening, then it is advisable to ask the IRS for a payment plan. It does not matter how much money you may owe. The IRS generally lets you pay installment payments. It is always good to keep in touch with the IRS throughout the process. This is because ignoring phone calls and not responding to letters could mean imposition of penalties. When you are in a situation where you feel that you are over paying or being charged for the penalties, then it is time to seek professional help from a lawyer and or an accountant.

Normally, IRS debt can be hard to avoid. The Government may resort to necessary procedures to recover the money. There may be instances where the IRS may garnish your bank account or salary or also place a lien on your property for the unpaid taxes. When the IRS is convinced that the taxpayer truly cannot pay his taxes anymore due to the financial situation, then they may offer IRS debt forgiveness through an Offer in Compromise.

You may have to fill form 433-A that would help the IRS determine the resources that you have or don’t have to pay your debts. This is called your Reasonable Collection Potential. You may also include any required documents proving your last tax return and proof of expenses. Now you may next fill Form 656 Offer in Compromise to propose your offer to the Internal Revenue Service. According to Dr. Sullivan and Company, the amount you propose to the IRS may be equal to the Reasonable Collection Potential or more. Hence, your debt cannot be fully forgiven until the Reasonable Collection Potential is $0. After sending both the forms to the IRS, you may have to wait for a response from them. Now according to Dr. Sullivan and Company website, your offer may be declined due to several reasons. It is not advisable to submit an offer which is closely related to a previously rejected offer. And also if you are in bankruptcy or if you have defaulted on past taxes or if you have been notified to garnish your bank account or wages and based on that if you apply for Offer in Compromise, then your offer may be rejected.

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Category: Finances
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