3 Things To Know About An Offer In Compromise
Posted on: 27 January 2023Share
Tax debt is not something that should be ignored. If you owe the IRS a significant amount of money, you are putting your assets and freedom at risk. There are some ways to negotiate with the IRS in an effort to reduce your tax debt.
One tool that taxpayers often turn to is an offer in compromise, or an OIC. An OIC is intended to allow taxpayers to settle their tax debt for an amount that is less than what they actually owe. This sounds like a great option, but it may not be the right option for your situation.
Here are three things that you need to know about an OIC so that you can make an informed decision.
1. OIC Applications Are Scrutinized
You must realize that the IRS carefully scrutinizes each application for an OIC that they receive. It is in your best interest to work closely with a tax attorney as you draft your application.
An IRS representative will look through your assets, liabilities, and income to determine a reasonable collection potential that applies to your situation. An attorney can help you go through your financial history to estimate your collection potential.
Once you have a rough estimate of what you could be asked to repay, you will be able to determine if applying for an OIC makes sense.
2. An OIC Gives You Control
It's easy to feel out of control when the IRS is attempting to collect your tax debt. Many people live in fear of having the IRS seize their assets or freeze their bank accounts.
An OIC can be a simple way for you to regain control over your tax debt. Once you have signed an OIC agreement with the IRS, collection efforts will cease.
As long as you pay your OIC payment as scheduled, you can rest assured that the IRS will not surprise you with asset seizures or bank freezes in the future.
3. An OIC Isn't a Fresh Start
Too many taxpayers view an OIC as being the same as a bankruptcy. This isn't the case.
An OIC doesn't provide you with a fresh financial start with the IRS. You will still be required to pay a portion of your tax debt, and that portion is decided solely by the IRS.
An attorney will be able to help you determine if the amount you must agree to with an OIC presents the best possible savings. Other tax relief programs could require you to pay less than an OIC when settling your tax debt.
Contact a tax lawyer for more information.