The Offer in Compromise program is a tax debt settlement provision for IRS and New York State tax debtors. It allows tax debtors to settle their tax debts for less than the full amount they owe. In simple terms, it is a tax relaxation scheme for qualified IRS & NYS tax debtors that allows them to get certain tax exemptions for their tax debts. The tax debts compromised (i.e., lowered) can be income taxes, sales taxes, payroll taxes, and other tax types.
It is a very useful as well as a legitimate provision especially for those taxpayers who are unable to pay the full amount of their tax liability due to some genuine reason such as long-term illness, business closure, insufficient funds, family crisis, insolvency, or paying their tax liability creates an extreme financial hardship for them. If you are a tax debtor, and if you can justify why you can’t pay the tax authorities in full, the Offer in Compromise program is for you. Otherwise, there are many other options for tax debt settlements (such as installment agreement, and currently not collectible status), you can tax advantage of as per the requirements and eligibility.
Therefore, the Offer in Compromise programs are tax debt settlement provision for the IRS and New York State tax debtors who need tax relief. It allows tax debtors to settle their tax debts for less than the full amount they owe and often the tax authorities wipe away the total interest and penalties owed, and a portion of the tax debt is paid. For instance, the IRS will accept such offers only if you can provide some genuine reasons and the offer amount is reasonable. As much as making an offer sounds very easy, its acceptance or refusal by the IRS or New York State Tax Department takes time and effort because of the complications involved during its processing.
How to Apply For an Offer In Compromise?
Generally, you have two options. First, you can apply for it by yourself by visiting the official online OIC portal of the IRS Offer in Compromise | Internal Revenue Service (irs.gov) and New York State Tax Department Offer in Compromise program (ny.gov) and completing all the required forms such as completing and submitting the Form 433-A (OIC) (individuals) or 433-B (OIC) (businesses) and Form 656(s) – individual and business tax debt (Corporation/ LLC/ Partnership), or the NYS versions DTF 4.1 and DTF 5. Second, you can hire a professional tax attorney or a tax law firm to apply for it on your behalf (POA). Both options are open for you and legitimate as well. However, there are some pros and cons of each option that you must be aware of before deciding on which one to select for your tax debt settlement.
Hiring a Tax Attorney or Tax Law Firm for applying for the Offer In Compromise Program
1. They’ll complete all the forms required by offer in compromise. You won’t have to do them yourself (a pro). They’re experienced professionals who know these official forms very well and can provide you with accurate information about the offer in compromise process and provide judgment related to the correct amount to offer. However, they will charge a fee (a con) so you would only want to hire them if the taxes you owe are greater than about $20,000.
2. The OIC application process is full of complicated procedures, especially if it is your first time applying for it. Let a professional IRS tax relief specialist handle this instead so that you don’t make any mistakes (a pro).
Which Option You Should Choose?
To determine which is a better option, you will have to understand the scenario of the Offer In Compromise process, and what needs to be submitted. Let’s take a look at the below-mentioned points. The IRS and New York State Tax Department highly consider a few things to determine whether or not your offer should be accepted. Those are:
- Ability to Pay (long term)
- Your Income (current)
- You Expenses (current)
- Asset Equity (current)
To examine all these points, they check and analyzes your tax returns, property records, bank records, and current financial statements so that they can determine whether or not you are the right candidate for OIC.
According to a journal published in Forbes, the Internal Revenue Source accepts an average of 40% of Offer in Compromise applications, which means they reject 60% of OIC applications every year. Considering this fact, you shouldn’t take the risk of handling an OIC application process if you don’t have enough knowledge and understanding about the process as you can make a mistake and miss the chance. In the event of rejection of your OIC application by the IRS, you go back into the collection group and are at risk of a levy. If you disagree with the rejection of your OIC application, you can use “Request For Appeal of Offer In Compromise, Form 13711” to appeal. However, this can be a very complicated and lengthy process.
Why Should You Choose a Tax Attorney and Why Should You Not Do It By Yourself?
Basically, a tax attorney is a legally approved, and experienced tax lawyer who mainly deals with all types of IRS & NYS tax matters whether it is tax debts settlement, or creating payment plans. He/she is a law graduate, has the expertise and immense experience in practicing tax law. Tax attorneys very well know how to smartly handle the different types of IRS tax matters. They also have great negotiation skills which they use to maximize your benefits and minimize your risks. Overall, they can interpret the tax law in your favor to benefit you. These all are the major reasons why should you trust a tax attorney for handling your Offer In Compromise. They will certainly help you to the best of their potential and ensure you get the best result. Now, answering your query – why you should not apply for it by yourself, the simple and straightforward answer is you are not a tax attorney. That means you don’t have enough knowledge, understanding, and experience of the Offer in Compromise application process. If you apply for it by yourself without having much knowledge about it, there are high chances of making a mistake. And if you make even a single mistake in your OIC application, the IRS officer will reject your application when he/she may have otherwise approved it.
We Are Here To Help You
If you need more information or clarification regarding the Offer in Compromise Program, we are here to help you. We offer a free consultation, so you can decide at no cost if hiring us makes sense.
