Are you so drawn into tax debt that you could not see any way out? Are you wishing for some magic to happen so that whatever you owe to the IRS could magically disappear? Well, that’s actually possible. Yes, it is! NYS offer in compromise allows taxpayers to pay less than they own to the IRS. It is a very common way to resolve your tax debt matters in this way, but you would need to take the help of a tax attorney.
There are specific situations where you can make an offer in compromise to the IRS. For example, if you are facing financial hardships as a result to which you are finding difficulty in paying off your taxes. This means that your accounts are in “Currently Not Collectible” (CNC) status. An offer in compromise often embodies a positive solution for people looking to settle their tax debts and live life peacefully without any debt tensions.
What Is An Offer In Compromise?
An offer in compromise is a contract that permits a defaulter to settle their tax debts for less than they owe. It is an agreement between you and the IRS where you are allowed to pay off your tax debt lesser than the amount you actually owe. This is the most common way to resolve huge tax debts that debtors are unable to pay due to financial hardships, or making a decision in the situations that involve accounts that are under Currently Not Collectible (CNC) status.
Is an Offer in Compromise The Accurate Solution?
An Offer in Compromise is basically a negotiation between both parties that suits both the IRS and the taxpayer. It is believed to be a win-win situation for the taxpayer as he/she gets a chance to say goodbye to the old debts and start a new life of financial freedom by paying the negotiated amount. The offer taxpayer puts forward depends on the level of their capability to pay back their debt.
Something that you need to understand is that submitting an application for an Offer in Compromise doesn’t actually mean that it will be accepted. The IRS performs due diligence to make certain whether your present financial situation deems you incompetent of paying what you owe in taxes. The authorities look into your current income, expenses, assets (if any) you own. They also consider if there is any future earning potential you may have before accepting your Offer in Compromise. You will have to explicitly outline what your financial situation is and you have to present documents to back up your statement. The process of tax compromise starts by determining whether or not you are a suitable candidate for the offer.
What are different types of IRS Offer In Compromise?
The IRS may accept your application of an “Offer In Compromise” of a tax debt based on three main grounds:
Doubt as to Collectability: This doubt means that the taxpayer can ever pay the full tax amount he/she owes within the remaining time period of the statutory collection. The best example to understand this is – Consider if a taxpayer owes $50,000 as unpaid tax liability and agrees that the tax owed is correct. And the taxpayer is not able to meet her necessary living expenses through the monthly income. Moreover, she does not own any real property and is not capable of paying the full liability now, or through monthly installment payments.
Doubt as to Liability: This genuine doubt exists that the calculated tax liability is correct and unsettled. Potential reasons to submit a doubt as to liability offer comprise of
- The auditor made a mistake inferring the law
- The tax auditor botched to deliberate the taxpayer’s evidence presented
- The taxpayer has new evidence to support her condition
For example, The taxpayer was vice president of a corporation from 2006-2007. In 2009, the corporation amassed unpaid payroll taxes, and the taxpayer has evaluated a trust fund reclamation penalty as a liable party of the company. The taxpayer was no longer a corporate officer and had resigned from the corporation on 12/31/2007.
Exceptional Circumstances: When it is assured that the tax amount owed is correct, and there is a possibility to collect the full amount of the tax owed, but there is an exceptional condition exists that would consent the IRS to think about an Offer In Compromise. To be entitled to compromise under this basis, a taxpayer must prove that how the collection of the tax would generate an economic hardship or would be partial and inequitable.
The example that best describes this – Mr. Taxpayer has sufficient assets to fulfill the complete liability and also agrees that he owes the tax. He mentions that he gives full-time care and assistance to a dependent child, who has a serious enduring illness. It is predictable that Mr. and Mrs. Taxpayer will have to use the equity in assets to give satisfactory basic living and medical care to the child.
Those taxpayers who qualify, an IRS Offer in Compromise program, this is a great way to resolve the taxes they owe, giving them a chance to have a fresh start with the IRS. However, the decision to make an Offer Compromise is very complex and the IRS has to consider multiple factors to properly analyze the situation. The success of your “Offer” completely depends on the application of the tax laws that you submit, experience with the IRS, and attention to details of your case so that you can get the best results.