If you owe taxes you cannot afford to pay, do not ignore collection letters from the Internal Revenue Service (IRS). If you respond promptly, there are options available to resolve your debt.
One alternative is an offer in compromise, which stops IRS collection efforts and allows you to pay less tax than you owe. Contact a Fairfax offer in compromise lawyer at Pontius Tax Law to determine whether you are eligible. If so, our attorney will work with you to complete the application and compile all the supporting documents the IRS requires.
What Is an Offer in Compromise?
The offer in compromise is an IRS program that allows you to settle your IRS debt for less than the full amount that you owe. It is only available when you can demonstrate that other ways of resolving your tax liability would cause financial hardship.
If the IRS accepts your offer in compromise, you can resolve your debt by making a lump sum payment or paying an agreed amount in installments. When the IRS accepts an offer in compromise it agrees to cease efforts to collect the full amount owing if you abide by the terms of the agreement.
An offer in compromise usually requires you to pay an amount equal to what the IRS could expect to collect from you over five years. A Fairfax attorney can evaluate whether an offer in compromise is a good solution in your situation, and help you build a compelling case to persuade the IRS to accept your application.
Criteria Used When Considering Your Application
The IRS will not consider an offer in compromise unless you have filed all your tax returns. A missing return may disqualify you. You must continue to file returns and pay all new taxes due while the IRS considers your offer, and during the term of the agreement if it accepts your offer in compromise.
The IRS will scrutinize your financial information to determine whether an offer in compromise is justified. An analysis of your income, expenses, and the value of your assets must point to significant financial hardship if you are forced to pay everything you owe. The IRS is likely to reject your application if your net worth exceeds your tax debt, and your application will be rejected if you have initiated bankruptcy proceedings.
The team at Pontius Tax Law includes former Revenue Officers who are familiar with the IRS process for evaluating and accepting these applications. When a Fairfax tax specialist from our firm prepares your offer in compromise application, you have the benefit of their inside knowledge.
Understanding the Application Process
Individuals file Form 433-A (OIC) and businesses must file Form 433-B (OIC), which collect information about your income, assets, and liabilities, and require extensive supporting documentation. You must also submit Form 656, Application for Offer in Compromise—if you seek tax relief as an individual and a business, you must submit separate Forms 656 for each.
You must pay a non-refundable fee for each Form 656 you submit. You must send a payment equal to 20% of the amount you propose to pay. The IRS may waive the application fee and initial payment if you qualify for the low income certification.
There are other requirements as well, depending on whether you propose to resolve your debt in a lump sum or by installments. A Fairfax attorney could ensure you understand your obligations while your offer in compromise application is pending.
Apply for an Offer in Compromise With a Fairfax Attorney
An offer in compromise can be an excellent way to resolve tax debt if you qualify, but the IRS rejects many applications due to incompleteness or not qualifying. Enhance your chances of approval by working with a Fairfax offer in compromise specialist at Pontius Tax Law. Our experienced tax attorney and former Revenue Officers can provide further information on how to come into compliance when you do not have the assets or income to fully pay the debt.