As a taxpayer, when you fail to file your federal income tax returns by the annual tax filing deadline, you become a debtor to the Internal Revenue Service. And it is nothing less than a nightmare. No taxpayer wants to become a debtor to the IRS as things get worse over time with the addition of penalties, higher interest rates, and criminal charges. Even sometimes, taxpayers have to take loans and sell their properties to pay their tax debts.
To avoid becoming an IRS debtor, every taxpayer should file its federal income tax return by the annual tax deadline, even if he/she is not able to pay the full amount of tax. You can pay more than the half amount of your tax if you are able to pay or you can request an extension for the filing of your returns if you are unable to pay. Doing so may help you avoid higher penalties, higher interest rates, and criminal charges. However, you should always try your best to file your returns by the tax deadline otherwise things can get worse for you.
Tax Debt Relief Options
If you have tried your best but a particular reason is becoming a barrier and you are not able to pay your taxes by the annual tax deadline, there are some tax debt relief provisions for you. Those include Offer in Compromise, Installment Agreements, Partial Installment Agreements, and Currently Not Collectible. You can apply for any of these provisions if you meet their requirements or you have reasonable causes for the failure-to-file and failure-to-pay.
Offer in Compromise has been the first choice of IRS debtors as it allows them to settle their tax debts on less than the full amount of their tax debts. If you also want to settle your tax debt with the IRS, you can apply for it either by yourself or by hiring a tax attorney or tax law firm to apply for it on your behalf. However, we will highly recommend you to take professional assistance from a tax attorney as he/she will provide you with the desired result.
Well, whether you want to settle your tax debts with the IRS by yourself or want to appoint a professional tax attorney on your behalf to apply for an offer in compromise, a few things are important to know. Let’s explore what are those important things.
Things to Consider Before Settling Your Tax Debts With The IRS
All Tax Returns, Tax Payments, and Tax Deposits Must Be Filed
Before you start filling your Offer in Compromise application form, make sure you have filed all tax returns, made all estimated tax payments for the current year, and made all federal tax deposits. If any of these payments are pending, you should first pay them otherwise the IRS will not entertain your OIC application. You can know about your tax status and if there is anything pending, you can check through mails from the IRS or evaluate your tax account.
You Must Have a Reasonable Cause With Proofs
The IRS officers do not entertain any story without reasonable cause and proof. So, make sure you have one or more solid reasons with proofs to defend your case. If they are convinced with your explanation for the failure-to-file, failure-to-pay, and failure-to-deposit, then they may accept your Offer in Compromise request. However, there is no guarantee of acceptance of your application, even if you present reasonable causes with proofs. So, be prepared for this. And it will be a better option to take professional assistance from a tax lawyer or a tax law firm.
Open Bankruptcy Will Stop You
Generally, tax debts are resolved during the personal bankruptcy filing. Therefore, when applying for the tax debt settlement, you must not have an open bankruptcy. It is clearly mentioned in the eligibility requirements of the OIC. So, if you have an open bankruptcy, it is better to avoid applying for the OIC because doing so will be only a waste of time and a waste of energy.
Application Form Must Be Filled Appropriately
Any mathematical error and wrong information or statement in your application form will definitely give a reason to the IRS officers to reject your Offer in Compromise application. So, when filling your application form, you must be careful enough. If you don’t have enough knowledge and understanding of filling an OIC application form, take assistance from a professional tax lawyer or a tax law firm.
Unlawful Manipulation Can Be Bad
If you are not eligible to apply for the Offer in Compromise, yet you manipulatively apply for it, its consequences can be bad. You need to understand one thing clearly that you cannot unlawfully manipulate the IRS officers as they check and analyze every single aspect of your matter. If they find you doing unlawful activities, they may levy harsh penalties and criminal charges on you.
So, these are a few very important things you need to understand. Before you apply for an Offer in Compromise, keep these things in mind. If you don’t meet the eligibility requirements of tax debt settlement, you should not apply for it rather you can look for other options. If you manipulatively try to settle your tax debts, you will have to pay for it.