An Offer in Compromise is an agreement between the taxpayer and the government that settles a tax liability for payment of less than the full amount owed. The goal is to achieve collection of what is potentially collectible at the earliest possible time and at the least cost to the government. The program is not designed to simply allow taxpayers to get out of paying their tax obligations. In fact it is quiet the opposite...it is designed to allow the government to collect something when it is unlikely that the tax liability can be collected in full. The requirements are largely financial in nature and are more strict than most would think after hearing advertisements flood the marketplace that make it sound easy to settle with the IRS for "pennies on the dollar". While some cases may very well settle for pennies on the dollar a taxpayer's situation has to meet certain criteria for that to be the case. An OIC is a legitimate alternative to declaring a case currently not collectible or to a protracted installment agreement. It is crucial that professional representation be obtained in preparation and submission of an OIC as relatively few are approved.
If you have written a check to the IRS, the Service codes that information into the C.A.D.E. computer system for future IRS Audit or Collection use.
If you have called the IRS, they may ask for the information over the phone. If you have given it to them, the computer is thus marked.
If the IRS has secured a financial statement in the past, that information usually stays in the system for 7 years and becomes a part of your file for the duration.
There is still yet another option to request a payment plan and that is to call the toll-free number on the bill. The IRS will respond to a request usually within 30 days as to whether it has been approved or denied. The taxpayer must specify how much they can pay each month and on which day they wish to make that payment.
The IRS will expect to receive the payment on the day specified so the taxpayer must make sure they account for mailing time. It is also advisable that the taxpayer choose an amount that is realistic and will not cause them to miss or make late payments. There are a number of options available for payment and they include: * Direct debit from a bank account * Payment via check or money order * Payment by credit card via phone or internet * Payment by Electronic Federal Tax Payment System (EFTPS) * Payment by Online Payment Agreement (OPA) * Payroll deduction from your employer As a condition of an installment agreement any refund due to the taxpayer on future returns will be applied against the tax due owed amount. Once an agreement is in effect it is important for the taxpayer to make timely and consistent payments and remain in compliance with future filings.
Missing payments, making late payments or being out of compliance with future returns may cause the taxpayer to be in default of the agreement resulting in the filing of a Notice of Federal Tax Lien or other IRS collection activity. Also there are fees if an installment agreement is modified, reinstated or restructured so it is important to honor the terms of that agreement.
The IRS can also get Tax Levy information from your credit report. This provides a wealth of information and a field day for the IRS. If your case goes to the field for a Revenue Officer to work, your credit report becomes a harvest for the Agent. Lastly and contrary to popular belief, the IRS does not dragnet the banks. They do not have the time or the resources to do that on most cases. They will do that only on high profile, very large dollar, jeopardy and drug cases.
If you have written a check to the IRS, the Service codes that information into the C.A.D.E. computer system for future IRS Audit or Collection use.
If you have called the IRS, they may ask for the information over the phone. If you have given it to them, the computer is thus marked.
If the IRS has secured a financial statement in the past, that information usually stays in the system for 7 years and becomes a part of your file for the duration.
There is still yet another option to request a payment plan and that is to call the toll-free number on the bill. The IRS will respond to a request usually within 30 days as to whether it has been approved or denied. The taxpayer must specify how much they can pay each month and on which day they wish to make that payment.
The IRS will expect to receive the payment on the day specified so the taxpayer must make sure they account for mailing time. It is also advisable that the taxpayer choose an amount that is realistic and will not cause them to miss or make late payments. There are a number of options available for payment and they include: * Direct debit from a bank account * Payment via check or money order * Payment by credit card via phone or internet * Payment by Electronic Federal Tax Payment System (EFTPS) * Payment by Online Payment Agreement (OPA) * Payroll deduction from your employer As a condition of an installment agreement any refund due to the taxpayer on future returns will be applied against the tax due owed amount. Once an agreement is in effect it is important for the taxpayer to make timely and consistent payments and remain in compliance with future filings.
Missing payments, making late payments or being out of compliance with future returns may cause the taxpayer to be in default of the agreement resulting in the filing of a Notice of Federal Tax Lien or other IRS collection activity. Also there are fees if an installment agreement is modified, reinstated or restructured so it is important to honor the terms of that agreement.
The IRS can also get Tax Levy information from your credit report. This provides a wealth of information and a field day for the IRS. If your case goes to the field for a Revenue Officer to work, your credit report becomes a harvest for the Agent. Lastly and contrary to popular belief, the IRS does not dragnet the banks. They do not have the time or the resources to do that on most cases. They will do that only on high profile, very large dollar, jeopardy and drug cases.
About the Author:
Harris Smith offers advice on home equity line of credit and obtaining credit. Debt Consolidation provides nationwide debt management services for those who are struggling with moderate to severe debt issues.