If you have pending tax refunds which you are expecting to be cleared sooner or later, and you assume that refund to be channeled towards your offer in compromise. After all, it makes perfect sense, right? No, it doesn’t. Tax refunds cannot be measured as payment. That would be like getting money out of one pocket and putting it in the other. Here is how it goes – Assume that the IRS accepts your offer in 2019. When you file your returns in 2020, you found that you are due for your tax refund. This refund is applicable to your tax debt. To understand this whole process, it would be better to hire an NYS offer in compromise lawyer who can guide you well on this.
In Case You Have Doubt As To Liability
Many times, your doubt regarding the amount the IRS claims you owe in back taxes might be genuine. In such a situation, you can make an Offer in Compromise through Doubt as to Liability application. When you are making this kind of Offer in Compromise, the taxpayer should avoid submitting it laid-back with an Offer as to Collectibility. Whatever suspicions you have with respect to what you owe in tax liability must be settled before you send the details of your capability of making payments to the IRS and OIC.
Most often, taxpayers submit an offer in compromise to the IRS under conditions where taxpayers would experience difficulties in paying back the liability. In such cases, the taxpayer normally requests to pay less than what they actually indebted. However, before the IRS accepts such an offer in compromise, they first evaluate the financial circumstances of the taxpayer. They deeply analyze a taxpayer’s assets, wages, expenses, and liability. The IRS will make an effort to establish a “reasonable collection potential (RCP).” This would be an amount that the IRS could realistically consider they would collect if they take the matter through the litigation procedure.
The IRS will never accept such an offer in compromise automatically if they believe that the agency has the capability to collect the taxes through other sources which could comprise several agency collection efforts.
Offer In Compromise Application Process
Finding out how to fill in the OIC application and what is the procedure behind it, should be your next step. Make sure that your application includes the following:
- Form 656 – Offer in Compromise Form
- Form 433-A – Collection Information Statement for Wage Earners and Self Employed Individuals along with supporting documentation
- Form 433-B – Collection Information Statement for Businesses along with supporting documentation
- Application fee except if you are a low-income earner
- Preliminary offer payment unless you are a low-income earner
If the above-listed forms are not fully completed and properly signed, your offer will not be accepted. It will be returned to you. Make sure you attach any and all supporting documents you consider essential to get a positive result. If the IRS doesn’t determine your application within a period of two years, your OIC is automatically accepted.
Additional Thoughts On Offers in Compromise
The present circumstances will continue until the determination of your Offer in Compromise application. This states that any interest and penalties on outstanding tax debt will endure growing in the meantime. The same is applicable when it comes to filing your taxes. You are still lawfully indebted to pay all the required taxes due. Failure to fulfill these requirements will automatically disqualify you from the offer.
On the other hand, even if the IRS accepts your offer, your existing filing status and payment commitments still have to be up-to-date. This rule is applicable for the first five years from the time when your offer was accepted. It takes into consideration any postponements that may have been granted. If your case is forwarded to the Department of Justice, then your offer cannot be accepted. Furthermore, the IRS cannot accept an offer that comprises any refund amount that was ordered by a court of law, or tax debt that was abridged as a result of a judicial ruling. Additionally, the law makes it obligatory for the IRS to broadcast information concerning any accepted offers. This lets the public to look over and evaluate the facts of the OIC.
If Your Offer In Compromise Is Rejected
It is so disheartening to find out that your Offer In Compromise has been rejected. However, you have different options when this happens.
First, you can file a petition against the decision by submitting Form 13711. This is a Request for Appeal of Offer in Compromise. You will need to do this within 30 days of the rejection of your OIC application.
Before you appeal, experts recommend using the online self-help tool. This will help you govern whether or not you should continue the process.
Hiring A NYS Offer In Compromise Lawyer
It seems to be easy to handle all this by yourself, but it is not. You would definitely need to hire an attorney who has knowledge and expertise in handling tax matters with the IRS.