The Internal Revenue Service (IRS) may consent to resolve a taxpayer's debt for a reduced amount via an Offer in Compromise (OIC). This pathway is potentially viable for individuals who contest the accuracy of their tax assessment or who encounter financial difficulties that render full payment unfeasible. However, obtaining such an agreement can be challenging. Enlisting a skilled tax attorney significantly enhances the chances of preparing a persuasive offer that the IRS might accept. A knowledgeable professional is adept at identifying the necessary evidence and articulating it compellingly to convince the IRS to lessen your tax burden.
It's critical to comprehend the most recent IRS regulations to ascertain your eligibility for an Offer in Compromise. Key eligibility criteria include:
Doubt as to Liability
This applies if substantial proof suggests the tax assessment is incorrect, concluding that the taxpayer shouldn't be liable for the full claimed amount.
Doubt as to Ability to Pay
Suppose a taxpayer needs to demonstrate a current inability to fulfill their tax debt, and it appears unlikely that the IRS will be able to collect the total amount in the foreseeable future. In that case, they might qualify for a reduction under this principle.
Effective Tax Administration
Targets taxpayers who, due to significant age or severe health complications, find it impracticable to settle their tax debt.
The Offer in Compromise comes in several forms, each with a payment structure based on the taxpayer's financial resources, including income, allowable expenses, and asset value:
Lump Sum Cash Offer
This is a preferred and economical option, as the payment calculation considers the taxpayer's available income after deducting allowed expenses and anticipated future earnings.
Short Term Period Payment Offer:
This arrangement spreads the debt repayment across monthly installments over 24 months, offering a longer time frame for settlement at a higher overall cost.
Deferred Payment Offer
Permits monthly payments over a more extended period, based on the taxpayer's disposable income, typically resulting in the most costly option without offering substantial advantages to the taxpayer.
Consulting with a tax attorney could be invaluable for individuals exploring the possibility of an Offer in Compromise and seeking to understand their options and the most advantageous route. Such a consultation could provide insight into your situation and guide you towards the most suitable resolution.
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