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The IRS Offer in Compromise

March 05, 2012 | Comments: 0 | Views: 136

Under its Offer in Compromise program, the IRS sometimes will negotiate a settlement for less than the balance owed. (Internal Revenue Manual § 57(10)1, IRC § 7122.) The Offer in Compromise (or OIC) program, in the United States, is an Internal Revenue Service (IRS) program allows qualified individuals with an unpaid tax debt to negotiate a settled amount that is less than the total owed to clear the debt. For example, in 1994, after hounding the country singer Willie Nelson since 1980, the IRS accepted a final compromise settlement of $59 million on a $32 million tax bill. The IRS accepts many offers in compromise that are properly submitted and not too outlandish.

Don't think that the IRS takes the forgiving of any tax debt lightly. It will accept less only if it is doubtful more will be collected later. To get the IRS to accept an offer in compromise, you must demonstrate to the IRS that it's in its-not your-best interests.

There is an IRS filing fee for making an offer unless you are indigent. And, in most cases, a partial payment of 20% of the tax debt must be made with the offer filing.

An offer in compromise must be made on IRS Form 656. It must be accompanied by a completed IRS Form 433-A (individual) and, if you have a separate business entity, Form 433-B (business). (These are the financial disclosure forms used in all IRS collection situations.)

You'll be asked to provide verification of your finances-such as bank statements for the past three to 12 months, living expense receipts, vehicle rides, mortgage notes, rental and lease agreements, and a list of outstanding debts.

EXAMPLE: The Smiths, whose failed computer business left them with $300,000 in tax debts, make an offer in compromise. They give a Form 433-A and documentation to verify their poor financial state. After losing most of their assets to creditors, the Smiths' financial form is relatively simple. Form 433-B is not necessary, because the Smiths are no longer in business and now have jobs earning minimum wage. They offer the IRS $25,000, to be provided by Jeannie's mother. Will the IRS accept this offer? I think the Smiths have a good shot.

When the IRS Can Take Your Assets If you and the IRS don't agree on a repayment plan and you don't file for bankruptcy, you face what the IRS calls enforced collection. This usually means a tax lien and levy.

For more information visit Deductible Business Expenses which is powered by IRS Tax Relief

Source: EzineArticles
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