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People sometimes get into more tax debt than they can pay. In these cases, it may be possible to get the IRS to accept less than the full amount of the debt.
An Alexandria offer in compromise lawyer can help you settle your tax debt and end IRS collection efforts. There are strict rules regarding eligibility and the application process requires extensive supporting documentation, so it is important to work within an experienced tax controversy attorney.
The IRS’ offer in compromise program (OIC) allows taxpayers who meet the eligibility requirements to settle their debt for less than they owe. The purpose of the program is to allow taxpayers who cannot meet their full obligation without suffering financial hardship to pay what they can to settle their tax debt. The program is available to individuals and businesses.
Eligibility requirements are strict. If the taxpayer’s net worth exceeds their tax debt, they are ineligible for OIC. Only taxpayers who have filed returns every year can participate in the program and they must be up-to-date on the current year’s estimated tax payments.
An attorney in Alexandria can confirm whether a taxpayer is eligible to participate in the offer in compromise. If so, they can help you complete the application and prepare for the IRS investigation before it accepts the taxpayer’s bid to participate in the OIC program.
The IRS reserves participation in OIC for taxpayers who will experience financial hardship if they were to pay their full debt. Accordingly, the IRS reviews an applicant’s assets, lifestyle, and living expenses to determine whether they have the resources to pay their debt.
The taxpayer must submit documentation proving their living expenses, which is strict and includes basic needs only. For example, credit card payments, educational expenses, and voluntary contributions to retirement accounts are not considered necessary living expenses.
Compiling the necessary documentation to establish the value of your assets and your necessary living expenses can be challenging. We can guide you through this process and help you respond to any IRS requests for further information.
An OIC application will propose a reduced amount that you can pay to settle your tax debt. You can offer to pay in a lump sum or in monthly installments over a reasonable period of time.
You must still make tax payments while the OIC application is pending. If you propose to settle the debt with a lump sum payment, your application must include a deposit of 20% of the proposed settlement amount. If you seek a monthly payment plan, you must include the first payment with your application and make monthly payments while the IRS is considering your application. You must also stay up-to-date with the current year’s tax payments while the IRS is considering your application.
The law at 26 United States Code § 6331(k)(1) requires the IRS to pause collection efforts while your application is pending. If the IRS rejects the offer, payments you have made during the application process will be applied to your debt. If your offer in compromise application is rejected, an Alexandria attorney can help you come to alternative arrangements with the IRS to resolve your remaining tax debt.
The IRS will typically pursue full payment of tax liabilities. However, when you cannot pay a debt without incurring significant financial hardship, it is sometimes possible to resolve a tax debt for less than you owe.
Work with an Alexandria offer in compromise lawyer with significant experience guiding applicants through the OIC program. This application process can be slow and require multiple forms, so call us today to get started.
Pontius Tax Law, PLLC is a tax law firm that strives to resolve sensitive tax problems through trust, dedication and value. The law firm was founded by John Pontius with offices in Washington, DC, Rockville, MD, Bethesda, MD, Fairfax, VA, and Alexandria, VA. Mr. Pontius represents individual and business clients with sensitive and serious tax matters before the Internal Revenue Service and state taxing authorities. His client base is local, national, and international.
Over the course of his career, Mr. Pontius has represented businesses and individuals with complex tax issues in the following areas: FBAR examinations, offshore and domestic disclosures, FATCA, FIRPTA, tax planning, unfiled tax returns, release of tax liens and levies, trust fund recovery penalty, IRS and state audit examinations, as well as appeals, penalty abatement, U.S. Tax Court litigation, along with defense of tax fraud and evasion. If you require assistance from a tax lawyer, contact Mr. Pontius to discuss your situation.
