The commercials for tax relief are broadcast at all hours of the day and night on radios and televisions across Michigan. In some cases, the paid advertisement that touts taking advantage of the government’s tax debt settlement program. At Rebeck & Allen, we often assist clients in handling IRS issues that help achieve the best possible outcome.
Accounting Today reports that the IRS does have a program called Offer in Compromise. The solution is not as simple as the ads make it seem. There is some information you should have before setting out on this course of action.
There are three types of OICs, and the program is quite strict. Your circumstances dictate which you may qualify for if any.
You must file all required tax returns for at least the past six years before applying for the program. All unpaid back taxes for that time frame can roll up, into the OIC.
There must be payment compliance, which means you will not owe on next year’s tax return. This may require that you have enough withholding or made tax payments during this tax year.
The IRS determines how much, if anything, you must pay by using a straightforward formula, not negotiation. For the length of payment terms, it uses the statute expiration date. When calculating the payment amount, it takes net equity in assets and monthly disposable income to arrive at the reasonable collection potential. If this total is less than the sum owed, you can qualify for the program.
Depending on the payment method, a down payment and sizeable fee may come with the application. If the IRS rejects your OIC, the down payment and fee may go towards the tax liability. A legal professional can help you understand the costs and risks associated with the program. Visit our webpage for more information on this topic.