If you owe the IRS more taxes, interest and penalty than you can pay, or if you don’t think you owe the amount the IRS says you owe, you may be able to get the IRS to accept an Offer-in Compromise. An Offer-in-Compromise can be made based on doubt as to liability or based on doubt as to collectability. If the Offer is being made based on doubt as to liability, the taxpayer explains to the IRS why the taxpayer does not owe the amount the IRS has assessed. Even though the taxpayer may have no appeal rights left, the IRS will review the matter under the Offer-in-Compromise program and will waive or reduce the tax if the IRS agrees with the taxpayer’s position.
If the Offer is being made based on doubt as to collectability, the taxpayer will need to submit detailed information concerning the taxpayer’s assets, liabilities, income and expenses. The IRS will use this information to determine whether or not to accept the taxpayer’s offer. In order for an Offer to be accepted, the amount offered must represent all of the net equity in the taxpayer’s assets, plus an amount calculated by multiplying the taxpayer’s monthly disposable income (income minus allowed expenses) by a factor of 48 or 60 (depending on length of repayment period). The Offer amount may be paid in a lump sum or over a period of time.
The Offer-in-Compromise generally takes 3 months to complete. While the offer is pending, the IRS typically puts collection activity on hold. The State of Ohio and other states have a similar (but different) offer process.
If you or a friend are having trouble paying federal income taxes, submitting an Offer-in-Compromise may be the way to go. At best, the IRS waives or reduces the amount of tax, penalty and interest you owe. At worst the IRS ceases collection activities for the period of time they spend evaluating your offer. Give me a call or email if you want to know more about the Offer-in-Compromise process. Jsenney@pselaw.com or 937-223-1130.
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