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Information on IRS Offer in Compromise

It might seem unfair that when one is debt ridden and has only found painful respite to achieve debt freedom through debt settlement, debt cancellation or bankruptcy; one has to think up of ways and means of getting respite from tax collections from the IRS. Often people would have noticed advertisements about the IRS offer in compromise or the OIC and wondered about the same. In 1997 there were amendments made to the IRS law as it was noted that when a person has settled his or her debt through debt settlement or bankruptcy, the amount of debt that got cancelled or forgiven would generally amount to indirect income and hence would fall under the purview of income tax laws and hence be taxable; it would not be payable by the tax payer as the tax that would be levied would be high and the taxpayer would have no means to pay the IRS. The IRS tax debt would also add to the taxpayers’ woes.

The IRS offer in compromise is a scheme that addresses the issue of taxation where the actual amounts settled through debt settlement and the current financial condition of the taxpayer would be considered so as to provide a tax relief to the individual.

The offer in compromise is a scheme through which tax payers might negotiate with the IRS regarding their tax liabilities and the income that may be taxable. To be considered for tax relief under the offer in compromise, the IRS Publication Form 982 would need to be duly filled and submitted to the IRS. It might be borne in mind that all taxpayers looking for tax relief and who submit the OIC might not qualify for the offer in compromise. To qualify for the IRS offer in compromise, the taxpayer would have to provide proof regarding the tax payer’s inability to repay the IRS debt within the time frame in which the IRS would collect the taxes payable. The documents that would be scrutinized that might prove the tax payer’s inability to pay would be the tax payer’s overall income, monthly living expenses that might be allowed by the IRS  and any of the assets held by the taxpayer as an owner.

The IRS offer in compromise is a scheme that covers income taxable from debt settlement and also offers a means to the taxpayer for an IRS tax debt settlement. In case an individual qualifies for OIC, the amount of the tax debt settlement that IRS might accept would be dependent on the accuracy of information disseminated in the submitted OIC Form. Usually Form 982 submitted by tax attorneys on behalf of the taxpayer might have higher chances of approval as against one filed by the individual taxpayer on his own. The reason for this discrepancy might be attributed to meeting the OIC standards of the forms submitted by professionals.

Often the documents submitted for offer in compromise with the IRS would take a long time to be decided upon. This might be because of the long and tiring bureaucratic process the documents need to go through. Hence when one applies for an offer in compromise, it might be nearly a year before which one might hear about one’s qualification. As per norms laid down by the IRS, the OIC application would need to be decided within two years from the date on which the OIC was submitted. In case no final decision is made within these two years, then the OIC would qualify automatically. Employing the services of a qualified and experienced tax attorney might be helpful in case one is unable to pay tax debt.

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