Installment Agreement Offer in Compromise

What is an IRS tax debt relief?

Should you happen to owe the IRS some back taxes,  you need to give back what you owe them —  just like any lender. It’s very important to seek proper representation when dealing with the IRS. Please choose a reputable firm to represent you.

Also, please try to pay what you owe, even if it starts with a minimal amount. It will go a long way in covering your debt over a certain period of time.

But, there are certain economic challenges that might prevent you from paying your taxes on time. This is where some sources of relief can step in.

Look into an Offer in Compromise (OIC)

When you enter into an agreement with the IRS to pay less than the full amount owed, that becomes an Offer in Compromise (OIC). The debt can be broken into installment payments or settled with a lump sum. Hopefully, you will be able to settle your tax debt with this mode of payment.

But, there are certain circumstances the IRS will consider before this relief is agreed upon. The original amount due should be deemed uncollectible. Or a “doubt to liability” may be presented because you doubt that the amount shown is what you actually owe. And finally, if the amount to be collected may cause undue hardship to the family, the IRS may consider collecting a smaller amount. Let’s just say that a younger member of the family may need some medical care, and paying the debt may impede critical treatment. The IRS is not that heartless to demand immediate compliance.

Proposing an IRS payment plan

Do not shirk your responsibility to pay what you owe. The IRS is willing to work with you because they want to collect what is due to the government. That’s why an IRS payment plan may be considered as a viable option.

If you’re given a period of five years, maybe an arrangement can be made to cover the debt so that it can be settled amicably. Of course, the arrangement is dependent on the amount owed and the type of tax debt incurred. Once you receive a notice from the IRS, please follow the instructions attached to the notice. The first thing you should do is contact them straight away through a phone call or by sending an email. Further instructions will come forward and the opportunity to request an installment agreement should be forthcoming.

What is the light at the end of the tunnel?

The fact that you have a debt to settle comes with its share of stressors and other challenges. But always remember that the IRS always seeks an amicable agreement to settle the debt. You need to take an active role to put your financial problem in order. When nothing is done, that might prove to be more precarious.

Asking help from an Enrolled Agent may give you the guidance you need. These professionals are quite familiar with setting up an Offer in Compromise or an IRS Payment Plan. They may not charge you unless they have achieved some success in alleviating your tax burden. Don’t be scared to work with the IRS and get some relief right now.


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Offer in Compromise

How to Appeal a Rejected Offer in Compromise

In 2016 alone, the IRS had reportedly rejected 57.14% of Offer in Compromise (OIC) applications.

You can appeal an Offer in Compromise with the IRS and find out the reasons why your application was denied. Moreover, you should understand the difference between a returned Offer in Compromise and a rejected OIC.

What is the Difference between Returned and Rejected Offer in Compromise

There are numerous reasons on why the IRS rejects Offer in Compromise applications. The rejected application is different from the one that is returned. On the one hand, you cannot appeal an Offer in Compromise that is returned, but you can always resubmit the returned OIC for corrections.

On the other hand, a rejected OIC will have some repercussions on your record, but you can always appeal an Offer in Compromise with the IRS.

 Most Common Reasons for a Returned Offer in Compromise

  • No application fee
  • No information provided to the IRS after a 14-day period of the request from IRS
  • Bankruptcy has been filed
  • Additional liabilities have grown during the application for an OIC
  • Offer is considered “senseless” or done to delay IRS collections
  • A similar offer has been submitted
  • Did not pay monthly payments after deciding to have a periodic payment

Common Reasons for Rejections

  • Very low offer
  • High living expenses
  • Full ability to pay

You should receive an explanation why your offer has been rejected. You can request for the information from the IRS if you didn’t receive anything.

How to Appeal an Offer in Compromise

You can appeal within 30 days from the date of the rejection letter. If the allowed time lapsed, your appeal for OIC will not be entertained.

The IRS online tool can help you figure out if you should appeal. The tool works if you meet the following qualifications:

  • A rejection letter for Offer in Compromise application has been received
  • W-2 employee
  • You are not working for yourself
  • You don’t own any rental properties

You can still file an appeal if your situation doesn’t fall on any of those mentioned above. Otherwise, you can use either of the two methods:

Method 1: Appeal an IRS Offer in Compromise

  • Fill out and complete Form 13711 or a Request for Appeal of Offer in Compromise
  • If a tax professional is signing your form, Accomplish Form 2848 or Power of Attorney and Declaration if you have a tax professional handle your situation
  • Mail those forms to the address found on your rejection letter

Method 2 to Appeal an IRS Offer In Compromise

You can send a letter to the IRS if you don’t want to complete Form 13711. In your letter, you need to express your intent to appeal and make sure to include this pertinent information:

  • Contact information (name, address, phone number)
  • Social Security Number
  • Copy of the rejection letter from the IRS
  • List of those tax years for the tax debt
  • Reasons why you disagree with the rejection
  • Some documents that prove your disagreement

Make sure to state that all information is true under “penalties of perjury.” Have the letter signed and send it straight to the address found on the rejection letter.

How to Make a Bigger Offer After a Rejection of a Previous IRS Offer in Compromise?

If you don’t want to appeal a formerly rejected offer,  you can do so for as long as you make a bigger offer than the previous amount.

All you need to do is submit the original paperwork together with a letter stating the increased offer amount.

Can a Tax Professional Help with an Offer in Compromise?

Yes, of course, the tax professionals know how to navigate the complex tax laws. They can help you achieve a higher chance for the IRS to accept your offer.

Offer in Compromise

How to Pay for an Offer in Compromise?

There are two main payment options for an IRS Offer in Compromise, and you can choose which payment option is best for your situation.

Form 656 will ask you to choose the payment method you prefer.

Lump Sum Cash Offer

If you choose lump sum method, then you will have five payments or less.

After the offer is accepted, you must hand over those payments within five or fewer months. You will have to pay additional 20% of your offer, including the application fee, when you submit your application for the IRS Offer in Compromise.

Periodic Payments

This payment allows you to pay a maximum of 24 months and a minimum of 6 months.
During your application, you must send your first monthly payment and application fee. While waiting for a reply from the IRS, you should make your first monthly payment until such time your offer has been accepted. You must continue paying until you’ve paid the entire amount.

Failure to make payments will only lead to the rejection of your offer and appeal rights.

You need to secure two checks — for the initial payment and the application fee — named to the United States Treasury when you send in your application for an Offer in Compromise. Take note that the payments with your application are non-refundable. This means that if the IRS refuses your Offer in Compromise, then it will deduct your payments from your total balance. To avoid rejection from the IRS and to avoid the waste of money, you should make sure that you have provided correct and sufficient information.

It’s best to send your payments plus IRS forms and other financial documents via Certified Mail, because this will help you find out when the IRS received those stuff.

Here’s a checklist from IRS to guide you with your Offer in Compromise.

Don’t get too relaxed with your application. It’s difficult to get approved for an Offer in Compromise because the IRS intentionally makes the entire process difficult.

To increase your chance of getting IRS approval, you should seek help from a tax expert or a tax professional, who can navigate you through the entire process.

Offer in Compromise

Offer in Compromise: Qualifications & Eligibility Requirements

What is an Offer in Compromise (OIC)?

It is an agreement between the IRS and the taxpayer that settles the latter’s tax liability for less than the full amount owed.

Taxpayers who can settle their tax due through an installment agreement or other options will not qualify for an Offer in Compromise.

There are three main conditions where the IRS allow an individual to undergo an Offer in Compromise or OIC. You need to fall into one of these categories or eligibility considerations before the IRS allows you to do so.

Doubt as to Collectibility

The IRS foresees that they cannot collect the tax debts from you in the near future. Why? Your assets and income are less than the amount owed.

If you answer “no” to these questions, this will increase your chance of being accepted into an OIC.

  •        Would the IRS be able to collect from you through forced collection or through an offer?
  •        Will your financial condition improve or will get better over time?
  •        Would other people think the offer was inappropriate?

Remember that the IRS is more interested in getting the best deal possible. When you make an offer with the IRS, your offer must be equal or more than your Reasonable Collection Potential (RCP). The IRS calculates your RCP through Form 433-A OIC.  Your RCP is equivalent to your monthly disposable income multiply by the payment period and equity in assets.

Doubt as to Liability

This happens when IRS thinks that your tax bill is incorrect when an assessor makes a mistake or an examiner refuses to accept your documents. You may also provide new documents, showing that you owe less tax.

Effective Tax Administration

If the IRS believes that paying your tax debts means struggling with a financial hardship, then you may be considered for an Offer in Compromise. You may also fall into this category of the IRS feels that it paying a tax debt would be very unfair.

Other OIC Eligibility Requirements

If your case falls into one of those categories, you may qualify for an Offer in Compromise.

Here are the other requirements:

  •        You are not going through bankruptcy
  •        File all federal tax returns
  •        A business that wants to file for an OIC must file for required federal deposits
  •        If a sole proprietor or partner is the one with tax debts, he or she must comply with the estimated tax payments
  •        Pay the OIC application fee
  •        Submit all the required documents

The Fresh Start Initiative is a streamlined OIC program. The IRS will consider state taxes and student loans in calculating monthly living expenses. The amendments to the OIC program allow it to be available to a larger group of taxpayers.

Filing for an Offer in Compromise can be stressful. It’s best to ask help from a tax professional or expert to navigate you to the right process and increase your chances for an OIC. You may also download the Form 656 Booklet for Offer in Compromise information.

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