Offers in Compromise

Dealing with tax debt can be overwhelming and stressful for both individual taxpayers and businesses alike. When taxpayers find themselves unable to pay their outstanding tax liabilities, an Offer in Compromise (OIC) can be a viable solution. An Offer in Compromise is an agreement between the taxpayer and the Internal Revenue Service (IRS) that allows the taxpayer to settle their tax debt for less than the full amount owed. A seasoned tax attorney can play a critical role in assisting taxpayers with Offers in Compromise, understanding the process, and increasing the chances of successful resolution.

As previously mentioned, an OIC with the IRS is a program that allows eligible taxpayers to settle their tax debt for less than the full amount owed. It is designed to provide a fresh start to taxpayers who are facing financial hardship and are unable to pay their tax liabilities in full. The IRS may accept an Offer in Compromise if they believe that it is the most they can reasonably expect to collect from the taxpayer within a reasonable period of time. A tax attorney can help a taxpayer demonstrate that they are eligible for an OIC.

To be eligible for an OIC, taxpayers must meet certain criteria. First, the taxpayer must demonstrate that they are unable to pay the full tax debt due to financial hardship. The taxpayer must provide detailed financial information to support their claim. Additionally, in some cases, taxpayers may dispute the accuracy of their tax liability. They can request an OIC based on doubt as to the amount of tax owed, presenting evidence that the IRS made an error in calculating their tax liability. Furthermore, in some cases, even if the taxpayer can afford to pay the tax debt in full, there may be exceptional circumstances where forcing payment would create an undue economic hardship or against equity and good conscience. 

Tax attorneys have a deep understanding of the complex regulations, tax codes, and IRS procedures. Their knowledge and experience are invaluable when negotiating with the IRS on behalf of their clients. As previously mentioned, not every taxpayer is eligible for an OIC. Tax attorneys can assess a client’s financial situation and evaluate whether an OIC is a suitable option. They can assist their clients in gathering the necessary financial documentation and also determine if there are other potential alternatives to resolving their tax debt. 

If a tax attorney decides that a client is eligible for an Offer in Compromise with the IRS, they can be instrumental in crafting a strong strategy for a successful OIC. They can analyze the taxpayer’s financial situation, tax history, and potential risks to create a well-rounded proposal that maximizes the likelihood of acceptance and will advocate on behalf of their clients, presenting compelling arguments to the IRS in support of the OIC.

The OIC process involves completing the necessary forms, providing detailed financial information, and submitting an offer to the IRS along with a non-refundable application fee. Preparing an Offer in Compromise requires meticulous attention to detail. A tax attorney can assist their clients in completing the necessary forms, ensuring all required documentation is included, and submitted to the appropriate IRS office. 

Once submitted, the IRS will review the OIC, assess the taxpayer’s overall financial situation and the taxpayer’s ability to pay. They will consider factors such as income, expenses, assets, and future earning potential when making their decision. The OIC process can be a complex and time-consuming process during which a seasoned tax attorney will handle all negotiations with the IRS, protecting their clients from undue stress and potential pitfalls. 

During the Offer in Compromise process, the IRS typically suspends collection actions against the taxpayer. However, without proper legal representation, taxpayers may not be aware of their rights and protections during this time. A skilled tax attorney can safeguard their clients from aggressive collection actions, such as bank levies or wage garnishments.

If the IRS accepts the Offer in Compromise, the taxpayer will need to comply with the agreed-upon terms and make the settlement payment. The IRS may also require the taxpayer to remain in compliance with all tax obligations for a specified period following the acceptance of the OIC. However, in the event of an OIC rejection, taxpayers have the right to appeal the decision. A tax attorney can guide clients through the appeal process, reviewing the reasons for rejection and identifying potential areas of improvement for a strong appeal. Their expertise can significantly increase the chances of a favorable outcome during the appeal process.

Finally, unrepresented taxpayers attempting to negotiate an Offer in Compromise often fall into common pitfalls that could jeopardize their chances of acceptance. These may include incomplete or inaccurate documentation, unrealistic settlement offers, or failing to address the IRS’s concerns adequately. Tax attorneys can help avoid these common pitfalls, ensuring a well-prepared and compelling OIC submission.

Attorneys specializing in tax law play a vital role in assisting taxpayers with Offers in Compromise. With their expertise taxpayers gain a higher likelihood of achieving a successful resolution with the IRS and finding relief from the burden of tax debt. If you find yourself facing tax debt and are considering an Offer in Compromise, the team at Premier Legal Services, PLLC are here to help you navigate the complexities of tax law. Contact them at (267) 245-0649 or for a consultation.