An offer in compromise (OIC) is a program offered by the Internal Revenue Service (IRS) that allows taxpayers to settle their tax debt for less than the full amount owed. This program is designed to help taxpayers who cannot pay their full tax debt due to financial hardship. However, not all taxpayers are eligible for an OIC. Here are the conditions required to get an offer in compromise from the IRS:
1. The Taxpayer Must Have Filed All Tax Returns
Before the IRS considers an OIC, taxpayers must have filed all their tax returns. This means that the taxpayer must be up-to-date with all their tax obligations. Filing all tax returns also allows the IRS to determine the full extent of the taxpayer’s tax liability.
2. The Taxpayer Must Have Made All Required Estimated Tax Payments
If the taxpayer is self-employed or has other sources of income that are not subject to withholding, they may be required to make estimated tax payments throughout the year. To be eligible for an OIC, the taxpayer must have made all required estimated tax payments for the current year.
3. The Taxpayer Must Not Be in an Open Bankruptcy Proceeding
If the taxpayer is in an open bankruptcy proceeding, they are not eligible for an OIC. This is because the bankruptcy court can determine how the taxpayer’s assets and liabilities will be handled, including any tax debts.
4. The Taxpayer Must Be Able to Prove Financial Hardship
To be eligible for an OIC, the taxpayer must be able to prove that paying their full tax debt would cause them financial hardship. The taxpayer must provide detailed financial information to the IRS, including their income, expenses, assets, and liabilities.
5. The Taxpayer Must Not Have the Ability to Pay Their Full Tax Debt
The IRS will only consider an OIC if the taxpayer cannot pay their full tax debt. This means that the taxpayer’s income and assets must be less than the total amount owed to the IRS. The IRS will review taxpayers’ financial information to determine their ability to pay.
6. The Taxpayer Must Be Current on All Tax Payments
If the taxpayer is currently making payments on a previous OIC or installment agreement, they must be up-to-date on all payments before the IRS considers a new OIC. This means the taxpayer must make all payments on time and in full.
7. The Taxpayer Must Comply with All Tax Laws
To be eligible for an OIC, the taxpayer must comply with all tax laws. This means that the taxpayer must file all tax returns on time, pay all taxes owed on time, and not engage in any illegal activities related to taxes.
Conclusion
Getting an offer in compromise from the IRS is not an easy process. Taxpayers must meet strict conditions before the IRS considers an OIC. Taxpayers must file all tax returns, make all required estimated tax payments, not be in an open bankruptcy proceeding, prove financial hardship, be unable to pay their full tax debt, be current on all tax payments, and comply with all tax laws. If a taxpayer meets these conditions, they may be able to settle their tax debt for less than the full amount owed.
Law Offices of Stephen B. Kass. P.C. offers professional law and CPA services to deal with tax settlements, IRS negotiations, and business bankruptcy. If you need an Offer In Compromise service in New York, we’ve got you covered! Get in touch with us today and let’s talk.
