Tax Debt Settlements Solutions
Finding Your Financial Peace: Tax Debt Settlement Solutions
Tax Debt Settlements Solutions
The IRS will typically approve an offer in compromise or tax debt settlement when the amount proposed reflects the maximum the IRS can anticipate collecting within a sensible timeframe. However, the Offer in Compromise program is not suitable for everyone.
Each year, taxpayers submit 52,000 Offers in Compromise. Out of those 52,000 submissions, the IRS accepts 12,000. The average settlement amounts to 14 cents on the dollar, and the typical settlement time is 5 months. Half of all Offers in Compromise eventually end up in the Appeals Division.
Working on an Offer in Compromise or Tax Debt Settlement, the IRS invests between 20 to 40 hours. This effort is akin to an IRS tax audit of your entire financial situation. The IRS will examine all three credit bureaus, conduct a comprehensive asset search, perform a Google name search, and obtain an Accuriant Report detailing your complete financial history for the past decade. They will also assess future earning potential, age, and education levels. Extreme care should be exercised before filing an Offer in Compromise or tax debt settlement.
To start the Offer in Compromise / Tax Debt Settlement process, you need to submit the 656 and the 433 OIC forms. However, if you are inexperienced with dealing with the IRS, it’s best to avoid filling these forms out yourself. The accepted forms must be filled out accurately, or they will be rejected by the IRS. It’s crucial to answer all the questions in the forms to ensure their acceptance.
To be eligible for IRS’s offer consideration, you need to ensure that all your filing and payment requirements are up to date. You won’t be considered if there is an ongoing bankruptcy proceeding. In case of being a self-employed individual, you must make estimated tax payments, whereas, those employed should ensure their taxes are being withheld.
Submission your Offer in Compromise / Tax Debt Settlement
- Form 433-A (OIC) (individuals) or 433-B (OIC) (businesses) and all required documentation as specified on the forms
- Form 656
- $150 application fee (non-refundable)
- Initial payment (non-refundable)
Selecting a payment option for your Offer in Compromise / Tax Debt Settlement
Your initial payment will vary based on your Offer and the payment option you choose:
- Option 1: Submit an initial payment of 20 percent of the total offer amount with your application. Wait for written acceptance, then pay the remaining balance of the offer in five or fewer payments.
- Option 2: Submit your initial payment with your application. Continue to pay the remaining balance in monthly installments while the IRS considers your offer. If accepted, continue to pay monthly until it is paid in full.
If you meet the Low Income Certification guidelines, you do not have to send the application fee or the initial payment and you will not need to make monthly installments during the evaluation of your offer. See your application package for details.
Understanding the Offer Process
While your Offer in Compromise / Tax Debt Settlement is being evaluated by the Internal Revenue Service:
- Your non-refundable payments and fees will be applied to the tax liability (you may designate payments to a specific tax year and tax debt)
- A Notice of Federal Tax Lien may be filed
- Other IRS collection activities are suspended
- The legal assessment and collection period is extended
- Make all required payments associated with your offer in compromise
- You are not required to make payments on an existing installment agreement
- Your offer is automatically accepted if the IRS does not make a determination within two years of the IRS receipt date
Should you have any questions regarding the filing of an Offer in Compromise or Tax Debt Settlement call us today for a free professional tax consultation.
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