Getting into debt with the Internal Revenue Service potentially comes with numerous stressful problems. Attempts to budget a way to pay down the taxes owed could become incredibly challenging for financially struggling Texas residents. Thankfully, lawmakers long ago understood not everyone is capable of paying what they owe, so regulations went into effect to provide solutions. For some taxpayers, an offer in compromise might be a workable option.
Submitting an offer in compromise
An offer in compromise involves making an agreed-upon account-closing payment equal to a portion of the tax debt owed. Essentially, the IRS might accept the offer and consider the debt paid. If the taxpayer owes $20,000, the IRS could agree to an offer of $14,000. Of course, different taxpayers will owe varying amounts and make offers based on their financial means.
The taxpayer could pay the tax debts in one lump sum OIC or set up a multi-payment plan. The key point focuses on whether the IRS considers the taxpayer eligible. Simply put, a person must be unable to make the full payment due to financial problems, hardships, or legitimate disagreements over the amount owed.
Establishing the validity of the offer
An offer in compromise could be preferable to a standard installment agreement payment plan. Sometimes, getting rid of the debt as fast as possible might be a better approach. Don’t expect the IRS to wipe away debt when someone can pay, though.
Financial disclosures are a critical part of an offer in compromise. Expect to present detailed information about assets, liabilities, living expenses, and more. Errors and omissions could lead to delays in denial, and such outcomes are not helpful.
Carefully compiling and submitting an offer in compromise may move the process in a better direction. Working with a tax professional could help things further.