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IRS Tax Debt Relief

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by: No more debt !
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Word Count: 682
Date: Sun, 23 Nov 2014 Time: 8:35 PM
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Many taxpayers are still in disbelief that IRS will settle their tax debt for less than what they owe.  I often here things like, that's probably a scam.  Believe it or not, taxpayers can settle their tax debts for less than the full amount they owe, if they qualify.  IRS has a Offer in Compromise Pre-Qualifier to confirm your eligibility.  Before IRS consider your offer, you must be current with all filing and payment requirements (estimated taxes).  You are not eligible if you are in an open bankruptcy.   If you can't pay your full tax liability, or doing so creates a financial hardship, IRS will consider your unique set of facts and circumstances:    

  • Ability to pay;
  • Income;
  • Expenses;
  • Asset equity

IRS will generally approve an offer when the amount offered represents the most they can expect to collect within a reasonable period of time.  Taxpayers will need to spend the necessary time to reconcile their income, expenses, assets to come up with an offer.  The process normally takes 6 months or longer, but it's worth it in the end if you can Start Fresh again.    

Select a payment option  

Your initial payment will vary based on your offer and the payment option you choose

:   Lump Sum Cash:

Taxpayer must submit an initial payment of 20 percent of the total offer amount with their application.  Wait for written acceptance, then pay the remaining balance of the offer 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 ($186.00) or the initial payment and you will not need to make monthly installments during the evaluation of your offer.  

Understand the process

While your offer is being evaluated:  

  • Your non-refundable payments and fees will be applied to the tax liability.
  • A Notice of Federal Tax Lien may be filed;
  • Other collection activities are suspended;
  • The legal assessment and collection period is extended;
  • Make all required payments associated with your offer;
  • You are not required to make payments on an existing installment agreement; and 
  • Your offer is automatically accepted if the IRS does not make a determination within two years of the IRS receipt date, so send it certified.

  In general, an OIC is an agreement between a taxpayer and the IRS that settles the taxpayer's tax liabilities for less than the full amount owed.  An OIC is generally not accepted if the IRS believes the liability can be paid in full as a lump sum or through a payment agreement.  The IRS looks at the taxpayer's income and assets to make a determination of the taxpayer's reasonable collection potential. OICs are subject to acceptance on legal requirements.    

Allowable Living Expenses  

The Allowable Living Expense standards are used in cases requiring financial analysis to determine a taxpayer's ability to pay.  The standard allowances provide consistency and fairness in collection determinations by incorporating average expenditures for basic necessities for citizens in similar geographic areas.  This is an the most important component of the process that many taxpayers are overlooking that could qualify them for a settlement, also known as Fresh Start Program.  

This is another in a series of steps to help struggling taxpayers under the Fresh Start initiative.

To learn more visit www.irs.gov   www.djonesproserv.com

About the Author

I am season tax preparer, and licensed financial representative. My career began with an intern program with the I.R.S. at the University of North Florida while pursuing a BBA. I've been dedicated to the financial world for over 30 years.


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