For many people with tax arrearages, there could seem like no way out. Especially if you in a tough financial situation where you can’t pay your tax debts, it might seem like an impossible situation.
One of the best options for people in your situation is an offer in compromise (OIC) with the IRS. An OIC is a way to pay less than the full amount owed. If you can pay less, it is a tremendous benefit. But this option is not available for everyone, only for those who qualify.
How do you know if you qualify for an OIC?
There are a few essential things that need to be in place in order to qualify for an OIC:
- All your past returns must be completed and filed.
- You must have received a bill from the IRS for back taxes owed.
- You have made all the required estimated tax payments for the current year.
- You filled out the application completely and without error.
- You are not in an open bankruptcy proceeding.
These are a few of the essential components for qualifying for an OIC. The IRS will return your application if you have not filed all your past returns, if you are in an open bankruptcy proceeding, etc.
Should you delay your offer in compromise?
While the OIC is a great option for many taxpayers, the timing can be crucial. For many who have back tax debts as well as debts coming up for 2021, it might be a good idea to delay the offer. In some cases, you could fold in the current year’s tax arrearages into the OIC, which could further reduce the overall amount you end up paying.
Determining whether you qualify for an OIC, deciding on the timing for filing, preparing the necessary paperwork and filing the application all involve complicated considerations and detailed knowledge of the tax process. The most important thing you can do is work with an experienced tax lawyer who can protect your financial interests throughout the process and help you avoid costly errors.