How To Settle Your Taxes With The IRS - Step By Step Guide
Let me start off by making one thing crystal clear. If you want to settle your taxes with the IRS, it is possible, but very rare and does not happen often.
Let me start off by making one thing crystal clear. If you want to settle your taxes with the IRS, it is possible, but very rare and does not happen often. The IRS most definitely has the authority to write off some or all of your tax debt. This is known as an Offer In Compromise or OIC.
Let’s go over exactly how you can do this yourself.
What is an Offer In Compromise?
An offer in compromise is an agreement that you make with IRS. It allows you to prove to the IRS that you are 100% unable to meet your tax obligations and instead settle for less than the full amount you owe.
If you are able to demonstrate and prove that you are definitely unable to you pay your tax debt, then the offer in compromise is a way to settle your taxes with the IRS.
Who qualifies for an Offer In Compromise?
Not everyone qualifies for an Offer In Compromise. The IRS is very skeptical when it comes to OIC request. Generally, the IRS will accept an Offer In Compromise if you can convince them that:
- You are unable to pay the amount you owe in full or even over a payment period agreement
- The amount of tax that you owe is inaccurate, and you owe much less than they claim
- The payment in full would cause an “economic hardship” or be “unfair” or “inequitable”
To see if you indeed qualify, the IRS will take a very close look at to your income and all your assets. All of this information we provided by you when you fill out your form 433-A form.
If they go over your claims about your finances, then the IRS will consider helping you settle your taxes.
How to apply for an Offer In Compromise
Now that you understand what an Offer In Compromise is and who qualifies for one, then it’s probably clear if you personally qualify or not. If you still believe that an OIC is a good option for you, here is how you apply for one:
- Complete the Offer in Compromise Form 656
- Pay the $186 application fee
- Complete the Form 433-A that discloses all your financial information. You will also need to submit supporting documentation to your claims
- Once the IRS receives, reviews, and accepts your application, they will begin to negotiate your settlement
- You and the IRS will come to an agreement on the percentage of how much taxes you are to pay back over a certain period of time. It’s typically expected to be repaid in under 2 years.
How to evaluate your personal situation
Like any financial situation, it varies by individual. The IRS, fortunately, provides a tool called the OAC Qualifier Tool. This little tool helps you go to the qualification process and see if you qualify to request Offer In Compromise and settle your taxes with the IRS.
This whole process can get rather complicated, so it’s always highly recommended to work with a qualified tax expert to help you determine your assets, liabilities, and income. They can definitely help you determine if you qualify before attempted to go through the process. They can also help you determine how much to offer when dealing with the IRS and settling your taxes.
The more accurate and complete your application is, the higher your chances of it being accepted. So make sure you work with a professional that’ll help you and guide you through the process.
Wish you the best of luck!
