Each year, many people find that they owe the Internal Revenue Service more than they can pay. If this happens to you, you may find IRS relief from taxes by asking for an offer in compromise. Here are some of the details.
To apply for an OIC or offer in compromise, one must fill out some special forms which asks the IRS to accept your payments, even though they total less than what you owe. Yet, if you can pay these taxes through any other means, there is not much chance of your offer being accepted.
The Internal Revenue Service uses reasonable collection potential or RCP to determine if your offer is worth accepting or not. In other words, they look at all of your assets and earnings. This includes cars, houses, bank accounts, and other possessions. They also look at future earnings and needs.
The Internal Revenue Service may accept your offer, and you will have two choices for payment. A lump sum payment agreement allows you to satisfy the tax bill in 5 months time. When you apply for the OIC, you have to enclose 20 percent of the total as the first payment. Most people must add $150 for application fees. Your money is not refunded if the OIC is refused. Instead it is used to pay on your taxes.
You may pay your OIC agreement in installment payments and this is known as a periodic payment offer. When you apply, you must include your first proposed payment with a $150 application fee. You also must continue to make monthly payments until your OIC is accepted or denied. These payments are not refundable.
Not everyone will have to pay an application fee with their offer in compromise forms. If there is sufficient doubt as to whether you actually owe the taxes, you may not need an application fee. Also, if you meet low income guidelines you will not be required to pay a fee. However, you will need to enclose a first payment and file some extra forms and paperwork.
If you find that you owe more than you can pay on your federal income taxes, there is no reason to panic. You may be able to pay with an offer in compromise. You may pay the amount in 5 months. However, the installment option allows you to pay on a monthly basis until the entire amount has been paid. It is vital to make all payments on time, and a professional tax person can best advise you on IRS relief.
When you are billed for more taxes than you have monetary resources, IRS relief is readily available. Request an Offer in Compromise to ease your tax obligation.