When taxpayers are incapable of paying their tax dues through their monthly income and assets by the end of the given time period, the IRS may consider them eligible for the “Offer In Compromise” program. Under this program, eligible candidates can settle their tax dues by paying a fraction of the actual amount. The IRS also allows people to go with this option if paying the due amount can potentially create financial hardships or the total amount is somehow found to be unfair and unreasonable.
Very Few Applications Are Approved
Although there are unsurprisingly millions of people that face IRS tax problems and might have huge dues annually, only a small part of them are eligible to even apply for an offer in compromise. Furthermore, the number of applications accepted is almost one out of three as the IRS doesn’t approve them unless there is a special circumstance. It is highly recommended to hire an IRS tax attorney for help considering all the available options to settle your dues including applying for OIC. Besides, you cannot even consider this option if you haven’t paid your taxes and filed returns timely for the last year of applying.
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What is the “Actual” Amount You Pay
While some people think the IRS waives fines and interests and settles for a random fraction of the full due amount in an OIC, others believe the agency bargains with taxpayers about the amount to be paid. Well, none of these is true as the IRS tax problem resolution process does not work like that. If a taxpayer is found to be eligible for an offer in compromise, the IRS collects a reasonable amount, known as its “Reasonable Collection Potential” (RCP), in the due period. RCP is a combination of the taxpayer’s net realizable equity (NRE) in assets and a part of their future monthly expendable income, depending on the type of OIC payment they choose.
Other OIC Charges
First of all, you must know that no upfront payments are refundable, even if your application isn’t approved. There are two charges that a taxpayer has to pay when submitting an application for an offer in compromise- a $205 user fee and part of the offer amount. This amount may be 20% of the offer amount if the taxpayer chooses the lump sum payment method, or they’ll have to make monthly payments if they apply for the periodic payment method for as long as the IRS reviews the application. In addition, taxpayers cannot file for their next refund if the OIC application is accepted. Finally, they also have to deal with IRS tax attorney charges for expert help navigating the OIC process.
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Alternative Options
As mentioned before, for taxpayers that are considered to have low income, which means 250% or more below the poverty line for their income and family size, they don’t have to pay any user fee or partial payment for the offer amount when applying for an offer in compromise. The other options available include Partial Pay Installment Agreement (PPIA) and Currently Not Collectible (CNC). While the PPIA means that you can pay the monthly tax but won’t be able to pay the full amount in due time, CNC refers to situations where taxpayers are incapable of paying the dues with their monthly expendable income.
Conclusion
It is highly recommended to hire an IRS tax attorney to help you deal with the complicated OIC procedure. For individuals in need of an IRS tax attorney in Fort Worth or nearby areas, professionals at the Law Offices of Nick Nemeth can help. Our team of IRS tax attorneys can help you deal with all types of IRS tax problems. Fill out our “Contact Form” or email jamie@myirsteam.com. You can also call (972) 426-2553.
