So, it’s a brand new year and the due date to file your income taxes is just around the corner. But what happens when you can’t pay the IRS what you owe? The thought of not being able to afford one’s taxes oftentimes conjures images of a vengeful IRS seeking to ruin your life by taking everything you own.
Certainly, if you try to hide from your tax bill things are only going to get worse for you. There will be penalties levied and interest charged, and even the potential for criminal charges if you willfully try to defraud the IRS.
Fortunately, however, one of the biggest myths about the IRS is that they are unwilling to work with taxpayers when it comes to fulfilling their tax liabilities. There are several programs and options in place which can help you settle your tax bill, the most prominent of which is perhaps the IRS “Offer-in-Compromise” program.
The Offer-In-Compromise program allows taxpayers, under certain circumstances, to settle their debt with the IRS for less than what they owed.
In order to be eligible, the taxpayer must be completely unable to afford the full tax bill, or they must be able to demonstrate that paying the full bill would create an undue financial hardship in their lives.
You will begin the process by submitting an offer to the IRS for the amount of your tax liability that you are willing to pay along with an application fee of $186. You must also submit a financial statement with your offer. A major benefit of an Offer-in-Compromise is that all collection efforts by the IRS will cease while they consider your offer. Generally, the IRS will accept the offer if it is clear that the amount you have submitted is the most they can reasonably expect to collect from you.
You will also have to submit your choice of two payment plan options. You can choose to pay a Lump Sum Payment, where you are required to submit 20% of the lump-sum offer with your application, and pay the rest of the lump-sum offer if and when the offer is accepted.
The second option is a Periodic Payment plan where you will split up the payments to the IRS into monthly installments for a specific period of time. You must submit the first of these installments with your application and continue to pay according to your offer until the offer is rejected or accepted by the IRS. If it is accepted you will continue to make payments until your offer-in-compromise is fulfilled.
Some of the factors the IRS will consider in deciding whether or not to accept your offer-in-compromise include:
- Ability to pay
- Current and expected income
- Equity in assets
Additionally, those who fulfill specific IRS “Low Income” guidelines will be exempt from paying the application fee or the initial payment(s) normally required with the application while the offer is evaluated.
If your offer is rejected by the IRS, you may be able to appeal the rejection. Either way, it is vital to consult with a skilled and knowledgeable tax attorney like Robert Boeshaar to ensure that you give yourself the best chance to have your offer-in-compromise accepted by the IRS. If you are struggling to pay your tax liabilities, please contact our law office today to discuss your options and whether or not you may be eligible for the Offer-In-Compromise program or some other remedy.
Robert V. Boeshaar Attorney at Law, LL.M.,PLLC
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