In 2020, Americans owed $114 billion in back taxes, interest, and penalties.
One of the main reasons Americans aren’t able to pay taxes on time is because the amount they owe is overwhelming. Paying back everything they owe would wipe out their bank accounts.
If you’re unsure what to do about the large sum of money you owe, the IRS, don’t run and hide. There are several solutions to the issue, including establishing an Offer in Compromise (OIC).
Make sure to keep reading because below is a guide on everything you need to know about this type of agreement.
What Is an Offer in Compromise?
An Offer in Compromise is an agreement established between the taxpayer and the IRS. The agreement settles the liabilities for less than what the taxpayer currently owes.
Oftentimes, if the taxpayer is eligible for other tax repayment options, they won’t be eligible for an OIC. Another repayment option is an established installment plan.
Are you curious about your eligibility? Hire a professional tax relief firm offering tax relief services.
Filing for an Offer in Compromise
Settling tax debt is a long, formal process. Unfortunately, it’s not as easy as deciding whether you’ll opt for an Offer in Compromise agreement. (We wish it were that easy!)
First, you must apply for an OIC by filling out IRS Form 656 and paying the application fee. Depending on your monthly income, you may be exempt from having to pay that fee.
You’ll then have to fill out some forms, including 433-A. This form provides detailed tax information about individual applicants.
The IRS Offer in Compromise process is exhausting for anyone involved. Be prepared as best as you can to reduce stress.
The IRS will ask for pay stubs, vehicle registration forms, and plenty of other items proving your financial status. Have all of these items ready to go!
Remember, the interest on your tax debt will continue to build throughout your application process. Work on responding as quickly as you can to any of the IRS requests.
Turn to a tax relief specialist if you need clarification on any of the items the IRS is requesting. A specialist can help you make the application process more efficient and organized, helping both you and the IRS.
Settling Tax Debt: An Offer in Compromise
Paying what you owe to the IRS each year can take a hit on your family’s finances. No family should have to sacrifice bill payments and hearty meals to pay the IRS. Consider filing for an Offer in Compromise to settle your tax debt.
Filing for an OIC is a complicated process, but the outcome is worth it to many individuals. Turn to a professional if you need assistance in filing for an OIC.
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