Many of us dread April 15th. Tax day. After all, you work hard for your money and just handing it over to the federal and state governments, having no idea what it will be used for, is unsettling for many. And if you owe the IRS money and don't have the funds readily available, you may be in freak-out mode. This is where the Law Offices of Charles Frazier in Nashville can help. Charles Frazier is a tax attorney, specializing in helping individuals and businesses through audits, tax collection matters, and any other tax situation. We explain in layman's terms to our clients the applicable tax laws and how we can help. If you need help with a tax issue, contact our offices today. Below, we will explain what are offers in compromise, which may be a boon to those who owe the IRS back taxes.
What are Offers in Compromise?
An offer in compromise (OIC) is an agreement between you, the taxpayer, and the Internal Revenue Service that settles your tax liabilities for less than what you owe. In essence, if you are accepted for this program, your tax slate can be wiped completely clean.
Who Qualifies for an Offer in Compromise Work?
- This program is mainly for those who are incapable of paying their tax bill in full. For those who can pay their tax bill in installment payments, they typically will not qualify for an offer in compromise.
- A taxpayer must have filed all of their taxes to qualify. After all, how will the federal government know you can't pay if they don't know the amount you owe?
- Some sort of payment may be required upfront for you to even apply. This can include paying the current quarter's tax liability.
- Reasonable collection potential (RCP), or your ability to pay your tax liabilities, must be calculated. This can include all of your assets, including cash on hand, property owned, and even cars. Furthermore, often future income is taken into account as well, minus the cost of living in your area.
Things to Consider Before Submitting for an Offer of Compromise
- An offer in compromise should be one of your last resorts to settle your tax bill. This is not an easy program to qualify for. Proof of your income can take months to approve, with some cases, such as with a business, requiring you to submit boxes of documentation.
- The decision is subjective. The federal government has no legal obligation to compromise or settle with you at all.
- Submitting to this program will bring IRS scrutiny, much more so than if you just apply for an installment payment plan.
- Because the IRS now knows your entire financial situation, the IRS now has all the information it needs to accelerate collection efforts against you.
The Law Offices of Charles Frazier recommends you only submit an offer in compromise when you are fairly certain your application will be approved. The IRS offers an online pre-qualifier assessment tool for just this purpose. Another drawback to the offer in compromise program is that interest is still accruing on the amount you owe during the application process, which, as previously stated, can take a while. As almost always with the federal government and IRS processes, you do have the right to appeal a rejected offer.
Charles Frazier is a Nashville lawyer who specializes in tax law, business law, and estate planning. We can help with all of your business tax matters as well as your nonprofit organization. Our mission is to help you stay compliant with all applicable state and federal tax laws. Contact us today!