There are several steps to settle your tax debt with the Offer of Compromise (OIC) program. Using this IRS program, taxpayers who cannot pay their debt can settle their bill for a reduced amount. This program is beneficial for individuals facing financial hardships as well as those who are unable to pay their owed amounts. As a taxpayer with an owed bill, you need to take certain steps to meet eligibility requirements and complete the application properly. This way, the IRS is more likely to accept your application. Of course, you can also better manage your debt and increase credit. Read on to learn how to settle your tax debt with the Offer of Compromise program.
Meet IRS Acceptance Criteria
To settle your tax debt with the Offer of Compromise, you first need to meet the IRS acceptance criteria. For example, your tax filings must be current to qualify for a reduced debt amount. In addition, you need to have received at least one tax debt bill to include in your offer. Furthermore, you must make all of your tax payments for the current year. Without meeting these basic qualifications, the IRS simply returns your offer. To determine your eligibility, the IRS provides a pre-qualification questionnaire on their website. Besides these requirements, it also asks about certain restrictions. For instance, if you have open bankruptcy proceedings, they will deny the OIC. Therefore, it is essential to meet IRS acceptance criteria to settle your owed taxes with the OIC program.
Once you’ve met the IRS acceptance criteria, you need to apply online through the IRS website. For this process, you must complete Forms 433-A to record your financial information. First, this form asks for basic personal and employment information. They also require a summary of your assets. In this section, you need to enter your bank account information as well as the cash you have that is not in an account. This includes any earned side income you may have. The IRS also requires you to input investment and credit financial information. Importantly, they also need your annual income and expenses as well. They then walk you through several budgets according to their collection standards and limits. When applying online, be sure to fill out the form as accurately as possible for a proper settlement.
Submit Your Offer
Next, you need to submit your offer for your compromise using Form 656. Ideally, you should come up with a reasonable amount that the IRS will view favorably. Typically, they apply a formula for this offer. It’s usually based on any leftover monthly income you have after your essential expenses and needs are met. They also add in any available income from your assets as well. When calculating your offer, remember that a failure to pay your OIC installments will you remove you from the program. Then, the IRS requires you to pay your remaining original balance. Naturally, this lowers your chances of entering future settlement agreements. Therefore, it is essential to calculate your offer accurately when submitting your offer.
Select A Payment Plan
Moreover, you also need to select a payment plan once you’ve completed the application. Typically, if you meet Low-Income Certification guidelines, you do not need to submit an application fee. Plus, you likely won’t need to make monthly payments while your application is under review. On the other hand, many applicants require an initial payment. With the Lump Sum Cash option, you submit an initial payment that is 20% of the total offer amount. Alternatively, you can opt for a periodic payment with your application. With this option, you pay monthly installments as the IRS evaluates your application. When settling your IRS debt with this strategy, it is essential to select a payment plan that works for you.
Act According To Results
Furthermore, you need to act according to your results. If your offer is accepted, it is essential to meet the Offer Terms listed in Section 7 of Form 656. Notably, this includes filing your tax returns and paying your installments. In addition, any refunds due in the calendar year will be applied to your tax debt. If your offer is rejected, you can appeal to the IRS using Form 13711. To do this, complete the Request for Appeal of Offer in Compromise within 30 days of your results. Fortunately, the IRS provides assistance for completing the form through their Office of Appeals. Once you’ve submitted your application and made your initial payment, act according to your results.
There are several steps to settle your tax debt with the Offer of Compromise (OIC) program. First, you need to meet the IRS acceptance criteria. Next, apply online using Form 433-A to input your personal financial information. Then, submit your offer using Form 656. In addition, you need to select a payment plan if applicable. Furthermore, act according to your results to complete your settlement. If approved, you should maintain your payments. If rejected, you can complete the appeals form. Follow these steps to settle your tax debt with the Offer of Compromise.