Posted On March 08, 2018
Do you have reason to apply for an offer in compromise?

Do you have reason to apply for an offer in compromise?

When you must contend with any kind of debt, you can easily begin to feel overwhelmed. When the debt relates to back taxes owed to the Internal Revenue Service, you may not only feel overwhelmed by the remaining balances but also stressed about potential consequences. As a result, you may wonder what options you could have.

Finding the right way to address tax debt issues can be a tedious and sensitive affair. You may worry that the IRS will immediately punish you if you attempt to address those issues. However, ignoring the problem will not make it go away. Therefore, you may want to learn more about options such as offers in compromise.

Offers in compromise

An offer in compromise may be created between you and the IRS if a reason for the agreement stands. This agreement could allow you to come to a settlement with the government institution that allows you to address your outstanding tax debt by paying an amount that is less than what is fully owed. However, an OIC does have stipulations that you need to meet, for example:

  • You must have made all necessary estimated tax payments for the year.
  • You must have submitted all tax returns.
  • If you are a business owner, you must have made necessary federal tax deposits for the quarter.

If you meet these stipulations, you may be able to move forward with applying for an OIC.

IRS acceptance

Generally, the IRS will only accept an OIC agreement if you meet one of three scenarios. Those scenarios include:

  • Doubt regarding liability — If a true doubt exists that you do not hold the liability for the debt or for the amount of debt in question — or if the debt does not exist — an OIC agreement may be accepted.
  • Doubt regarding collectibility — An OIC may prove acceptable if your assets and income cannot cover the full amount of the tax debt.
  • Effective tax administration — The IRS may also grant an OIC if paying the full amount of debt would cause undue economic hardship on you or your household or if extenuating circumstances exist that would make collection of the debt unfair.

If you feel uncertain as to whether you have any of these grounds for an OIC, you may wish to find out more information on this option. Speaking with a Nevada tax attorney may help you better understand this and other legal avenues for addressing tax debt.