Many taxpayers are interested in the Offer in Compromise (OIC) program because it provides tax debt forgiveness. However, many offers are rejected because the taxpayers don’t qualify, don’t complete their applications properly, or don’t submit the right offer amount.
Before you submit an OIC, make sure you know these three things about the IRS tax debt settlement program.
You Must Have All Tax Returns Filed
Let’s say you submit an OIC, but you forgot to file a tax return six years ago. Assume you were legally required to file a return for this tax year. How will the IRS respond?
- Your offer will be returned without being considered. You won’t even know whether the IRS would have accepted your offer if you had filed all your tax returns.
- The IRS will keep any initial payment you send.
- Your application and application fee will be sent back to you.
If you have unfiled tax returns, that means you could have additional tax debt that still needs to be assessed. The IRS doesn’t want to settle your tax debt in this situation, and it doesn’t benefit you either. If your seeking tax debt forgiveness, make sure all of your returns are filed.
Your Offer Can Be Rescinded After Acceptance
If your offer is accepted, you may think you’ve said goodbye to your tax problems forever. However, the IRS requires that you comply with all tax laws for the next five years or your offer can be rescinded. This means your full tax debt would be reinstated.
Follow these steps to ensure that your offer doesn’t go into default:
- File all tax returns on time for the next five years.
- If you have a balance due, pay it on time and in full.
- Make all estimated tax payments or federal tax deposits on time.
Many Offers Are Rejected
The IRS rejects a lot of OICs. Fortunately, you have the right to appeal this decision and try to negotiate a deal. You may need to determine how the IRS is calculating your reasonable collection potential and look for any items you dispute. A tax attorney can assist you with this process.
Get help with your Offer in Compromise by calling The Gartzman Law Firm at (770) 939-7710. We can listen to your concerns and help you find the best tax resolution strategy for your case.