Taxes are something that every citizen has to pay to keep the country running and also play their role in giving back the country from what they are gaining from it. Every year everyone in united states pays their taxes and get some amount in return too. The problem comes in when some people are behind on their tax bills, and they have to pay them off. Many different reasons can be there why they haven’t paid the taxes, but then again there is always a way out of the stickiest of the situations. One of the ways to resolve the problem that your tax preparer or an accountant will tell you is to make a deal with the internal revenue services IRS and that deal is called as OIC or offers in compromise.
When it comes to OIC, it is not just that you cannot pay taxes and decide just to pick up the phone and ask IRS to make a deal with you. It is a very complicated process and also involves a lot of legal necessities. This all calls for your complete and utter understanding of offers in compromise.
What is OIC?
We know offers in compromise are made when you cannot afford to pay taxes, but for the government, OIC is the money that they can acquire from you instead of the full amount, consider it as gaining something instead of losing it all. You should understand that not paying taxes will make you end up in a terrible position.
When can you apply for OIC?
When you apply for OIC, the government will consider the aspect that you are not able to pay your taxes, but they will not accept that without any sort of proof. Which means when you will apply you will have to submit your work proof, your car information, your housing details and also other details and evidence including that of your bank statement that you do not have any way to pay your taxes. This means that government will take hold of all your financial details so if you are thinking of applying for OIC make sure that you have odds of approval on your side. If you try to trick the government, know that they have hold of all your documents now, and if they want, they can work it against you, and you might face the legal penalty against you.
How to apply for offers in compromise?
Once you have spoken to the tax preparer or accountant that you are working with, than the first step for you will be to apply using IRS Form 656 and also as a part of it you will have to submit financial form 433 A or 433 B if you are an individual or a business respectively. For the form 656, there is a $186 fee that you will have to pay, but this fee can be waived for individuals who can prove that they fall under the poverty line of the state.
How much to offer?
Now that you have understood the risks and procedure you need to know that how much is that you can offer to IRS. The offer that you make should be the minimum amount that should be paid; the IRS is going to determine if you are qualified for OIC or not. If you are eligible for offers in compromise, then they will let you know if your proposal put forth is enough or not, if it is enough, then you can proceed further and pay taxes in the installment form. But if your offer is not acceptable then under freedom of information act, you have a right to know that what was the issue, and usually, you are told by revenue officer that how much you should offer to be accepted for the application to proceed.
Offers in compromise is a tricky process and meanwhile a very helpful one. It is because some people are genuinely not able to pay taxes and OIC protects them from adversities, however, if you are a phony trying just to dodge tax then be advised that OIC will prove to be a nightmare for you.