The typical individual often does not realize that the Internal Revenue Service will negotiate on a tax bill when the conditions are right. This process is called an OIC, or offer in compromise, and can be as simple as an application process, but merely filing the form is not always that simple. There are conditions that must be met before the application is approved. In addition, the information provided also gives the IRS more information to use in collecting the debt in the event the application is denied. It is not advisable to file the form unless there is a definite chance the application will be approved.
There is a $150 nonrefundable application fee associated the filing. Individuals whose income falls below the poverty level can be excluded. Of course, some of the information requested will be annual income, along with documented evidence of other assets. Examples of assets are home ownership and vehicle registration. If the individual is married and lives in a community property state, the income of the spouse may also be requested. Payments may be made over a five-year period in equal payments of 20%, but the first payment must be included with the application. The agreement normally will not allow the first payment to be made with the next tax filing without permission.
There is a clear disadvantage to filing an application that is declined. First, all of the information provided can be used by the IRS in pursuing elimination of the debt. There is also a possibility that the number of documents requested by the IRS can be expansive. This will allow the agency to build an excessive profile for the taxpayer in a seemingly unreasonable debt pursuit. It does little good for the federal government to pursue small tax bills when other tax evasion cases are being postponed.
Always remember that the entire debt level can also be appealed by filing another form contesting the IRS tax calculation. It is important to remember that dealing with the IRS is always a legal matter and that the rights of the taxpayer still apply, even if the federal government attempts to pursue the case in governmental overreach. It is always a good idea to confer with a certified public accountant or an attorney when dealing with the IRS is inevitable.
Salt Lake City Tax Attorney Jim Gilland can help determine if you will qualify for an offer in compromise. If you are a good candidate for an OIC, Gilland law firm can guide you through the entire process from beginning to end. If however you will not qualify, there are many other options that can help end your IRS problems.