If you’re overwhelmed by mounting tax debt, you may be looking for a way to ease your financial stress. An Offer in Compromise (OIC) could be the solution. This program allows you to settle your tax debt for less than the full amount, but qualifying can be complex. In this guide, we’ll explain what an OIC is, what criteria the IRS uses to determine eligibility, and how it can benefit you. By the end, you’ll know if this option could help resolve your tax issues.
What Is an Offer in Compromise?
An Offer in Compromise (OIC) is a program provided by the IRS that allows taxpayers to settle their debts for less than the amount owed. It’s designed for those who are unable to pay their full tax liabilities due to financial hardship. The goal of the OIC program is to offer a way for taxpayers to pay a reduced amount if they are financially unable to settle the full debt. If you are facing overwhelming tax liabilities and can’t afford to pay them off, an OIC could offer a fresh start by reducing the amount owed.
Am I Eligible for an OIC?
To qualify for an Offer in Compromise, the IRS considers several factors. Here’s a breakdown of the main eligibility criteria:
- Financial Hardship: The IRS will review your income, expenses, assets, and potential future earnings. If paying the full tax debt would cause significant financial distress, you may qualify for an OIC.
- Doubt About the Tax Amount: If you believe the IRS has made a mistake in determining your tax debt, you might qualify for an OIC based on doubt as to liability. This happens when there’s evidence suggesting the tax amount is incorrect.
- Uncollectible Debt: If it appears that the IRS won’t be able to collect the full tax debt from you, they may consider offering an OIC. This is known as doubt as to collectibility and may apply if the IRS believes your financial situation makes it impossible for you to pay the full amount.
- Extraordinary Circumstances: In rare cases, even if you can technically pay the full tax debt, the IRS may still offer an OIC if your situation includes extraordinary factors like serious illness or extreme financial hardship.
Why is Tax Compliance critical with Offer in Compromise?
Here’s a sobering statistic: only 40% of Offer in Compromise (OIC) applications get accepted by the IRS. That means, 60% of all submitted OIC gets returned or rejected. While there are various reasons for failure, one stands out above all others – tax compliance.
What is Tax Compliance?
Tax compliance consists of two basic requirements:
- All past tax returns must be filed.
- Current tax payments must be up to date.
The Hidden Deal-Breaker
When an IRS offer examiner opens up your OIC application package, the first thing they check is your compliance status. If you’re not compliant, your application gets returned automatically – no questions asked, no exceptions made.
Staying Compliant: What You Need to Know
Your compliance requirements depend on your employment status:
- Employees (W-2 workers): Ensure sufficient taxes are withheld from each paycheck
- Self-employed individuals: Make quarterly estimated tax payments on schedule
- Business owners: Deposit payroll taxes on time, every time
The Bottom Line
Think of tax compliance as your entry ticket to negotiations with the IRS. Without it, you won’t even get a seat at the table. No matter how strong your OIC application might be otherwise, non-compliance automatically voids any potential deal.
Remember: Before preparing an OIC by yourself, carefully consider two critical factors: your understanding of complex IRS procedures, and your ability to develop strategies for responding to an offer examiner’s potential actions. Without these, you might waste valuable time and money on an application that could be rejected.
How to Get Professional Help
Navigating the Offer in Compromise process requires expertise. Working with a professional can increase your chances of qualifying and ensure you follow the correct steps to resolve your tax issues. At ACE Plus Tax Resolution, we specialize in tax debt relief and tax resolution in Los Angeles, CA. Our team can help evaluate your financial situation, determine your eligibility, and guide you through the entire OIC process. We offer personalized solutions for clients dealing with tax debt. Here’s how ACE Plus Tax Resolution can assist you:
- Eligibility Evaluation: We’ll thoroughly review your financial situation to see if an OIC is a viable and eligible option.
- Guidance Through the Process: From submitting your application to negotiating with the IRS, we’ll provide the support you need.
- Customized Strategy: Every taxpayer’s situation is unique. We’ll work with you to develop a tailored approach to resolve your tax debt.
Take Action Today with ACE Plus Tax Resolution
Dealing with tax debt can feel overwhelming, but you don’t have to face it alone. If you’re in Los Angeles, CA, ACE Plus Tax Resolution is here to help you explore all available tax relief options, including the Offer in Compromise program. James M. Cha, CPA, Certified Tax Resolution Specialist® has over 30 years of experience dealing with the IRS and will achieve the ideal outcome for your IRS tax problem issues and needs. We have the experience and expertise to navigate the IRS system and negotiate the best solution for you. Don’t wait for your situation to worsen. Take the first step toward financial freedom by contacting ACE Plus Tax Resolution at 213-600-7388. Book your free consultation today and start your journey to resolving your tax issues.
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