From Thomson Reuters and the Pinnacle CPA Advisory Group —
Dear Clients:
If you have an outstanding tax liability that is beyond what you can afford to pay, you should consider making an Offer in Compromise (OIC). An OIC is a written agreement with the IRS that enables you to pay a lesser amount in full satisfaction of the unpaid tax liability, including interest and penalties.
The IRS will consider an Offer in Compromise if you can show that it is unlikely that the tax can be collected in full, but the amount offered reasonably reflects the amount the IRS could collect through other means. This requires a detailed analysis of your financial condition, from both a net worth and a future income potential standpoint.
The IRS uses the financial information provided to determine your ability to pay. If the amount offered is less than the amount determined, the IRS will reject the OIC.
The IRS will not process or accept an Offer in Compromise unless you are current on filing your returns and your current year withholding and estimated tax payments, and or/ credits are sufficient.
With your permission, we can verify with the IRS that your account is current and qualifies for an OIC. If the OIC is accepted, you must stay current on filing and payment of taxes for the next five years.
Generally, a $205 application fee is required to make an Offer in Compromise. Also, for lump sum OICs, an initial payment equal to 20% of the amount offered must be made when the application is filed. For periodic payment OICs, you must make periodic payments based on your own payment schedule, starting when the OIC is submitted.
These payments generally are nonrefundable if the OIC is rejected and are, instead, applied to your outstanding balance. An Offer in Compromise provides a considerable benefit because it closes your entire tax liability for the period covered. Read more about OICs at IRS.gov.
We can help you determine whether you qualify for an Offer in Compromise and prepare the request on your behalf. Please call if you would like to discuss whether submitting an OIC would be beneficial to you.
Sincerely,
Kleshinski, Morrison & Morris CPAs
Contact KM&M CPAs
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