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An IRS Offer in Compromise (OIC) is another possible route to take in paying off a tax debt when all other avenues have been exhausted. When filing for an OIC, if approved, the tax debt is settled for less than originally owed. If that sounds too good to be true, that’s because it usually is—OIC approval is rare. However, having a tax lawyer to help dramatically increases approval chances.
What exactly an OIC entails is also often a matter of confusion. Less transparent tax relief companies often claim that they can vanquish all tax obligations—wiping out the entire debt without any significant costs. In reality, though, this is not possible with an OIC or by any tax procedure. The point of a successful OIC is to reduce or eliminate the fees or penalties from a tax bill and build a realistic path towards full repayment.
The IRS bases OIC approvals on four pieces of criteria: ability to pay, overall income, total expenses, and asset equity. Based on these facts, the IRS will decide if paying the tax debt in full will bring financial hardship to the applicant. The petitioner must be able to prove, beyond a reasonable doubt, that paying off the tax debt in full is not a viable option.
It’s worth noting that if the IRS rejects an OIC application, the rejection can be appealed within 30 days of said rejection via a Request for Appeal of Offer in Compromise. However, hiring a reputable tax lawyer can save filers the trouble of ever venturing down a road that may lead to rejection.
Also, if a taxpayer has not filed all the mandatory tax returns and fails to make the required estimated payments, the IRS is going to kick back the application. No question. The Los Angeles tax resolution specialists at Tax Shark are well versed in tax law. With extensive tax law knowledge, their experienced tax lawyers can quickly assess eligibility for an OIC.
The OIC application process is no walk in the park. There is an application fee, a non-refundable initial payment, a payment option to select, and an appropriate offer to present at the case’s onset.
There is no getting around the $186 application fee. However, the required initial payment can vary significantly based on the offer presented, and the payment plan chosen. There are two payment options: a lump sum of cash or a periodic payment plan.
The lump-sum cash option requires paying twenty percent of the total offer when applying. If the offer is accepted, the remaining balance is paid in a series of five payments or less. The strategic experience of a Los Angeles tax lawyer can be crucial in deciding if this is the best route to take.
The periodic payment plan can grant taxpayers more time to settle their balance. This payment plan allows for an initial payment with the application and then monthly installments thereafter. If the application is approved, the routine monthly payments will continue until the balance is paid off entirely.
Additionally, if the applicant receives tax refunds within the calendar year of OIC acceptance, these refunds will be applied to the overall outstanding tax debt. A qualified tax lawyer considers these details when designing a tax debt resolution plan.
The bottom line is, to settle back taxes a payment plan that promotes financial security and a structure the debtor can afford to follow is essential. Tax Shark understands that there is a lot to consider when it comes to an IRS Offer in Compromise. Their Los Angeles tax lawyers enjoy articulating the nuances of tax law, and they are happy to help through every step of the OIC process.
An OIC is in place to help taxpayers in unique situations. It is a viable route toward tax debt relief, but because of the unique nature of the process, working with a tax lawyer is a critical first step in filing an OIC.
Call the trusted Los Angeles tax lawyers at Tax Shark by dialing (213) 425-0026 or by clicking the button below to start your relief today.