If you owe taxes to the IRS, then don’t worry as you are not alone. Many owe back taxes. A study has revealed that the IRS estimates more than $12 billion in back taxes owed. To receive their money, the IRS offers different options for the taxpayer to work out their payments. Many like you take great pains to make sure that your taxes are filed correctly while obtaining the maximum deductions possible. Sometimes, you fail to pay your full tax bill.
The IRS has some useful tools at its disposal to recover unpaid taxes. The IRS is the only one that has the authority to get a hold of your business or home and can even take money from your bank accounts without any need of getting court orders. That’s why when people owe taxes, they come to the IRS and try to settle down their debts without extreme measures. Some lucky people with genuine condition get an NYS offer in compromise.
There is an essential update regarding Offer in Compromise fees which has been increased this year. If you are still not clear about the offer in compromise checkout some essentials below that you should know.
What Is an IRS Offer in Compromise?
An IRS Offer in Compromise allows you to settle your debts with the IRS by paying less than what you actually owe. It is an agreement between you and the IRS to settle the owed taxes. Here is an example to explain it – if you owe $10,000 to the IRS and you ask for an Offer in Compromise which is approved, you might end up paying only $8,000 rather than the original amount that you owed. This is a great way to settle down your tax burden.
The IRS considers several factors before approving your Offer in Compromise. These include:
- Asset equity
- Ability to pay
- On-hand cash
The IRS investigates how much the individual or company owes in taxes, and how much income they have versus living expenditures to govern the amount that the individual might be able to convincingly pay without getting bankrupt.
What Are The Standards to Apply for Offer in Compromise?
There are 3 ways to be eligible for an Offer in Compromise. The reasons for acceptance include:
- Proving distrust that the taxes are collectible.
- Proving distrust of the exact amount payable to the IRS.
- Collection could cause destitution to the taxpayer.
The most common reason for acceptance encompasses distrust that the taxes are collectible. You must ascertain that your possessions and earnings don’t cover the debt owed.
What Are The Qualifications For An Offer In Compromise?
There are so many other ways to pay down your tax debt. You should explore these choices before applying for an Offer in Compromise. There are some precise eligibility requirements for an Offer in Compromise, such as:
- You must have filed all of your necessary tax returns.
- You have to make at least one essential estimated payment.
- You can’t currently have open insolvency.
If you file for an Offer in Compromise without fulfilling the necessities, the IRS will return the application fee but won’t give back any initial payments. It will apply that payment to the amount you owe.
What Is New With the Offer in Compromise Program?
The tax laws constantly change. The amount you owe, deductions you can avail, and the charges for various programs are almost always away from changing. In 2020, the Offer in Compromise user fee has changed.
The application fee was $186 in the past which has increased to $205. This is approximately a 10% increase in the fee. However, it is significantly less than the initially discussed increase to $300. The IRS also extended its characterization of low-income taxpayers who are excused from the several user fees.
Common user fees that are affected comprise of:
- The Offer in Compromise program fee
- Historic Easement which is associated with charitable deductions for historical district easements. You can’t take this deduction without paying the fee.
- Income Verification Express Service (IVES)
- Form 8802, Application for the United States Residency Certification
How Does Increase in Offer in Compromise Fee Affect?
The increase in user fees is going to affect everybody who is filing for relief using the Offer in Compromise program. However, low-income taxpayers may find these new rules an advantage as it has extended the range that can be a part of low-income for fee payment purposes.
If you are planning to ask for an Offer in Compromise to make the amount you owe in taxes more convenient, you don’t want to go for it alone. You would definitely need the help of New York tax lawyers who could provide you with the necessary assistance. You need someone who can help you get fast action and proven results. When you need assistance, make sure you speak to a tax attorney who completely understands the Offer in Compromise program. This is important as Offer in Compromise is the only option available for dealing with your tax issues when you are genuinely not able to pay the amount that you owe back to the IRS.