When you fall behind on your taxes, one of your options is to find out if you qualify for an offer in compromise (OIC) program. In order to qualify, you must meet the strict requirements of the IRS, as the majority of taxpayers do not qualify. Here are ways that an experienced tax attorney can help you qualify for the OIC program.
What You Must Prove
A taxpayer can qualify for the program by proving one of three scenarios: doubt of liability, undue hardship and doubt of collectability. If you can show doubt regarding the amount the IRS claims it’s owed with evidence, you are in a favorable position. You may also qualify or negotiate with the IRS by showing that a debt payment will create extreme hardship. Perhaps the most common qualification is doubt that the taxpayer can repay the debt before a certain date.
Negotiating with the IRS
Once you qualify for the OIC program, you will need to make an offer to the IRS. It requires finding out what the IRS has calculated as a reasonable collection potential (RCP). This amount includes the value of taxpayer assets if sold at liquidation prices and a percentage of your income. Your offer to the IRS should be as much or more than the RCP.
A tax attorney can help you overcome IRS issues, especially if you owe back taxes. Many times the IRS rejects the first penalty abatement submission, so it’s important to work with an experienced tax attorney who can provide guidance throughout the process. In the event you do not qualify for the OIC, the attorney can help set up installment agreements for monthly rates that fit in with your budget. The attorney can also thoroughly review your agreements before you make decisions on them.