How An Offer In Compromise Works For Settling A Tax Debt
One thing you should never do is ignore a letter from the IRS that states you owe money. Owing money to the IRS puts you in a position where you must act. If you ignore the letter and do nothing about it, the IRS may garnish your wages or place a tax lien on your home. You can prevent this by working out a plan with the IRS. One plan option you have is an offer in compromise (OIC).
What Is an OIC?
An OIC is a settlement plan. It is a plan the IRS allows people to create when they experience financial problems that prevent them from repaying the taxes they owe. You cannot use an OIC without getting it approved by the IRS, and you should never use one without consulting with a tax lawyer. A tax lawyer must examine your situation to determine if you qualify. They must also create a plan for you. While you can do it alone, there is a greater chance of the IRS approving it if a lawyer makes it for you.
How Do You Qualify?
You must meet the criteria for an OIC if you want to use one. The IRS has guidelines that tell you what the requirements are for OICs, and one rule is that you must be current on your tax return filings. If you have unfiled tax returns, you must file them before you are eligible for an OIC. Secondly, you must prove that you cannot repay the taxes in full right now and in the future. You may have to submit documents that show your income, and you might have to write a hardship letter to include with your application.
How Does It Work?
Your tax attorney will walk you through the steps of an OIC. The first step begins with analyzing your situation to make sure you qualify. Next, the lawyer will fill out the application and attach any necessary documents. When the IRS receives the application, they will review it and decide how to respond. If they accept it, you must stick with the repayment plan you offered to pay in your application.
What Should You Do Right Now?
If you have the letter from the IRS and have not taken any steps yet, start by contacting a tax attorney. The attorney will explain your options and help you choose the right plan for your situation.
For more information on OIC, reach out to a local tax attorney.