People with significant tax debt and an inability to pay are the least likely to come forward to obtain tax relief despite being some of the most eligible candidates.

Strangely this is especially frequent with what the IRS refers to as “hopeless cases”, i.e. people who owe more tax debt than would be reasonably collectible by the IRS. I’ve personally experienced several clients who were woefully inadequate from a collections perspective and mistakenly believed that if they tried to clear their back taxes they would be perpetually in debt to Uncle Sam or locked up!

Many People With Back Taxes Live In Perpetual Fear Of The IRS.

Fortunately for tax payers like this the IRS has a program that lets Americans who have been incorrectly assessed or even just don’t have sufficient funds, settle their tax debt for less than what they owe.

This IRS refers to this tool as an Offer-In-Compromise (OIC) which is an agreement between a taxpayer and the Internal Revenue Service to settle a taxpayer’s tax liabilities for less than the full amount owed. Taxpayers who can fully pay the liabilities through an installment agreement or other means, generally won’t qualify for an OIC in most cases.

Pristine Tax Can Help You Enter The Offer-in-compromise program (OIC).

Most clients often wonder how much they have to offer. Based on the ancient principle of not being able to get blood out of a stone, to determine a reasonable offer amount, the IRS will assess the taxpayer’s reasonable collection potential (RCP) – i.e. figure out how much blood they have! The RCP is used to determine the taxpayer’s settlement amount and what will have a good chance of being accepted by the tax man in full and final settlement.

What’s My Reasonable Collection Potential?

We’ll apply the IRS standard and consider your unique set of facts and circumstances:

• Ability to pay;
• Income (current and future);
• Expenses; and
• Asset equity.

The IRS will generally approve an offer in compromise when the amount offered represents the most they can expect to collect within a reasonable period of time. Working with you Pristine Tax will need to explore and exclude all other payment options before submitting an offer in compromise.

How You Will Pay
Your initial payment will vary based on your offer and the payment option you choose:

Lump Sum Cash: Submit an initial payment of 20 percent of the total offer amount with your application. If your offer is accepted, you will receive written confirmation. Any remaining balance due on the offer is paid in five or fewer payments.

Periodic Payment: Submit your initial payment with your application. Continue to pay the remaining balance in monthly installments while the IRS considers your offer. If accepted, continue to pay monthly until it is paid in full.

If you meet the Low Income Certification guidelines, you do not have to send the application fee or the initial payment and you will not need to make monthly installments during the evaluation of your offer. See your application package for details.

The Offer-In-Compromise Program Is Not For Everyone.

To qualify for an Offer-in-Compromise, the taxpayer must accurately report and document their income and expenses. The IRS is very strict and historically only accepts around 20% of the Offer-in-Compromises that are filed. However, a taxpayer’s likelihood of qualifying for an Offer-in-Compromise increase dramatically when working closely with a competent tax professional like an Enrolled Agent.

If you have questions regarding Offer-in-Compromise, use the form below or contact us at 609-630-8285 to schedule a free 30 minute consultation.