If you owe money to the Internal Revenue Service in Texas that you cannot pay in full, you may be able to negotiate a resolution. In this case, an Offer in Compromise (OIC) is an option available to you.
Understanding tax debt resolution
An Offer in Comprise is an agreement between the taxpayer and the IRS, where the latter agrees to accept a lesser amount than what the former owes in taxes. It reduces the total debt that you owe to something more manageable. For instance, if you owe the IRS $10,000 in taxes, they may accept an OIC of $5,000 as a tax debt resolution.
The Offer in Compromise process
It’s important to note that an OIC is not available to you yet if you are in an open bankruptcy proceeding. In addition to this, the IRS requires that you are up to date with all of your tax returns before they consider your application for an OIC.
The process begins by filling out Form 656-L, which includes detailed information about yourself, your finances and why you believe you qualify for an OIC. You must also submit a non-refundable $205 application fee and the form.
When the IRS receives your application, they will review it and determine your eligibility for an OIC. Some of the things that they consider include:
• If you have any assets (such as real estate or vehicles) that you can use to pay off your debt
• Your current income and expenses
• Your future earning potential
• Your age and health
What you pay
If the IRS accepts your offer, they will give you two options to settle your new, reduced tax debt. They include a lump sum cash offer and a periodic payment plan. A Lump sum cash offer is an agreement to pay the reduced amount in full within five months after acceptance of your offer. Alternatively, a periodic payment plan allows you to pay off the reduced tax debt in installments over 24 months.
Taxes are often a complex topic that can lead to financial burdens if mishandled. However, as a taxpayer in Texas, you have options for resolving your tax debt. An Offer in Compromise is one solution that can help reduce the amount you owe and make it more manageable to pay off.