If you owe taxes that you cannot pay in full, you may wonder how to get an offer in compromise approved by the IRS. This option allows you to settle your tax debt for less than what you owe. It helps those who are unable to pay their full balance due to financial hardship or other qualifying reasons. Understanding the process and submitting a complete application is key to increasing your chances of success.
Understanding an Offer in Compromise
An offer in compromise is an agreement with the IRS where you pay a portion of your tax debt based on your financial capacity. This program is not granted automatically. The IRS reviews your financial records carefully before making a decision.
To qualify, you must meet specific conditions. The IRS considers your income, living expenses, and the value of your assets to decide if you are eligible. They may approve your offer if paying the full amount would cause significant financial strain or if there is doubt about collecting the full balance within a reasonable time. The IRS has clear offer in compromise guidelines to assess applications. Following these guidelines can help you present a strong case for approval.
Who Qualifies for an Offer in Compromise?
The IRS reviews specific factors to decide if a taxpayer qualifies for this program. You must have filed all required tax returns and made current-year payments, if applicable. Business owners need to make sure all tax deposits are up-to-date. You cannot apply if you are in bankruptcy.
You may qualify under three conditions. The first is when your income and assets show you cannot pay the full amount. The second applies if you believe the tax assessment is incorrect. The final condition applies if forcing you to pay would create financial hardship or be unfair to your situation.
Steps to Submit an Offer in Compromise
Submitting a complete and accurate application is important to avoid delays. You must fill out IRS Form 433-A or 433-B, depending on your situation, and IRS Form 656. These forms include detailed information about your income, assets, and expenses.
You also need to include an application fee and an initial payment. You can choose between two payment methods. A lump-sum offer requires 20% of the proposed settlement amount upfront, while a periodic payment plan allows you to make monthly payments while the IRS reviews your offer. Carefully review your forms before submission. Errors or missing information can result in rejection or unnecessary delays.
How the IRS Evaluates Your Offer
The IRS will evaluate your ability to pay, income, expenses, and the value of your assets. They aim to recover as much of the debt as possible. Your proposed settlement amount should reflect what you can reasonably pay based on your financial situation.
Submitting an unrealistic or low offer reduces the chances of approval. Be honest and transparent about your finances. The IRS will verify the information you submit, so accuracy is key.
Common Mistakes to Avoid
Submitting an offer in compromise can be a complex process, and certain mistakes may lower your chances of approval. One common error is providing incomplete or inaccurate information on your application forms. Every detail about your income, expenses, and assets must be accurate and supported by proper documentation. Missing deadlines is another pitfall, as the IRS has strict timelines for submissions and responses.
Failing to propose a reasonable settlement amount is another mistake that can lead to rejection. Unrealistic offers may give the impression that you are not serious about resolving your tax debt. Additionally, neglecting to stay current on your tax obligations during the application process may signal to the IRS that you are not committed to compliance.
How Long Does the Process Take?
The timeline for an offer in compromise can vary depending on your circumstances. On average, the IRS takes six to twelve months to review and process applications. During this time, they will evaluate your financial information and verify the details you submitted. Providing clear and accurate documentation can help prevent delays.
Once your application is under review, the IRS may request additional information or clarification. Responding promptly to these requests is critical to keeping the process moving forward. While the waiting period can be stressful, patience and thorough preparation can improve your chances of a positive outcome.
Benefits of an Approved Offer
An approved offer in compromise provides significant financial relief. It allows you to settle your tax debt for less than the total amount owed, which can make repayment more manageable. Approval also brings an end to aggressive collection efforts, such as wage garnishments or bank levies, giving you peace of mind.
Another benefit is the chance to start fresh. After meeting the terms of your agreement, you can work toward staying compliant with your future tax obligations. Many taxpayers find this program to be a lifeline, helping them regain financial stability and focus on rebuilding their lives.
How Financial Documentation Impacts Your Offer
The success of your offer in compromise hinges on the accuracy and completeness of your financial records. The IRS uses this information to determine your ability to pay and decide if the settlement amount you propose is fair. Submitting all required documentation, including bank statements, pay stubs, and expense records, is a critical step in the process.
Organizing your financial information in advance can help make the application process smoother. Being thorough and transparent demonstrates your commitment to resolving your debt, which may improve your chances of approval. If you are unsure about the documents required, consulting a tax professional can be a smart move.
When to Seek Professional Help
While it is possible to apply for an offer in compromise on your own, working with a tax professional can simplify the process. Professionals understand the IRS’s requirements and can help you prepare a stronger application. They can also assist in negotiating a settlement amount that reflects your financial situation.
At Rush Tax Resolution, we have experience helping clients successfully navigate tax relief programs. We aim to reduce the stress of dealing with the IRS and help you find a solution that works for you. If you are unsure about where to begin or need guidance, reaching out for help can make all the difference.
Tips to Increase Your Chances of Approval
Preparing a strong application can help improve your odds of success. Make sure you are up-to-date on all tax filings before submitting your offer. Double-check your application for errors and include all required documents.
Avoid taking on new tax debts while your application is under review. If your offer is denied, consider appealing the decision. Appeals allow you to present additional information or correct errors in your initial submission.
Working with professionals can help simplify the process. At Rush Tax Resolution, we help taxpayers reduce stress and improve their chances of settling their tax debt through programs like the tax offer in compromise.
What to do if Your Offer is Denied
If the IRS denies your offer, you can file an appeal. To do this, submit Form 13711, which allows you to request a review of your case. Appeals allow you to strengthen your case by including additional evidence or correcting issues from your original application.
It’s important to act quickly after receiving a denial notice. The IRS has specific appeals timelines, so you must respond promptly. With proper preparation, an appeal can still lead to a favorable outcome.
Why Choose Rush Tax Resolution?
Handling tax debt can feel overwhelming, but you don’t have to face it alone. At Rush Tax Resolution, we specialize in tax relief services, including helping individuals and businesses prepare accurate and detailed applications for programs like the offer in compromise. Our team focuses on finding personalized solutions to fit your needs and help you resolve your tax debt.
If tax debt affects your life, consider an offer in compromise as a potential solution. Understanding the process and submitting a strong application can help you settle your debt for less. For professional help tailored to your unique situation, contact us today to get started.