8 Credit Card Offers That Could Backfire Later
Credit card companies have their own interests before yours. Read between the lines before accepting an offer.
If you can’t pay back tax debt due to hardship, an Offer in Compromise (OIC) allows you to reduce debt in a way that won’t hurt your outlook.
An IRS Offer in Compromise (OIC) is a tax debt settlement plan. It allows taxpayers to agree with the IRS to settle a tax debt for less than what they owe. Given that the IRS always seeks to collect as much of your tax debt as possible, only a fraction of OICs are accepted each year.
The IRS received 59,000 OICs in 2018, but only accepted 24,000 of them.The Offer in Compromise program is a lengthy and detailed one. It involves revealing every aspect of your finances to the IRS. Therefore, it is best to ensure you are a good candidate for the program before you apply. An unsuccessful OIC will only prolong the collections statues on your debt. And it gives the IRS every bit of information they need to enforce collections against you.
If the IRS rejects your OIC, they now know everything about your financial situation; namely, where your income comes from, where your bank accounts are, and what you own. If the IRS rejects your OIC and decides to levy you, they know exactly where to go.
There are many things to consider before requesting an Offer in Compromise with the IRS. First, the IRS requires you must be compliant with all of your tax filings. You must also be current with your yearly tax payments. This means your last six annual income tax returns must be filed.
Keep in mind that one misstep can cause your OFFER IN COMPROMISE to be returned with no rights of appeal.
Another extremely important consideration is to understand that if your Offer in Compromise is accepted, you must stay fully compliant for the next five years. Folks who get accepted often lose their settlement by failing to file future tax returns on time or by filing a return with a new balance due. If the offer defaults, all of the tax debts come back with additional penalties and interest. Plus, none of the funds paid towards the settlement are refundable. It is crucial to have a plan to stay compliant prior to requesting the offer.
There are also different types of Offer in Compromise programs to consider prior to filing your request. The most common OFFER IN COMPROMISE is a request for “Doubt as to Collectability”. In short, this means that the settlement you are proposing is for the largest sum of money the IRS could reasonably expect to collect from you over the life of the debt, which is typically ten years. The IRS considers your current disposable income, all equity in assets, and your future earnings potential. Then they make a determination about accepting this type of OIC.
The other, less common programs are Doubt as to Liability and Effective Tax Administration. If you are applying for one of these programs, you are asking the IRS to ignore your financial conditions. Instead, you want them to consider extraordinary circumstances to rule in favor of settling your debt. In these cases, the IRS considers reasons why you may not owe the debt or why else your debt should be settled, such as for health reasons.
When you submit an Offer in Compromise, you are required to submit to full financial disclosure. This means you have the tell the IRS EVERYTHING about your financial situation. The IRS reviews your income, expenditures, your assets and any equity you have to determine how much they can realistically expect to get. The IRS follows strict standards when considering which expenses are allowed. This is why it is very important to weigh all your options before deciding to attempt an OFFER IN COMPROMISE.
Before submitting an IRS Offer in Compromise, be sure that you can afford to pay the reduced amount. With an OFFER IN COMPROMISE, you have two options for repayment – lump sum and periodic payment. The IRS expects you to be able to pay off a lump sum Offer in Compromise within five months of approval and a Period Payment plan is divided into 24 equal monthly payments beginning when you file the OIC application.
Maintaining these OFFER IN COMPROMISE payments is paramount to the success of the OIC. Defaulting on an agreement will invalidate the entire OIC, meaning you would again be responsible for the original tax debt amount plus penalties and interest. Moreover, it makes it more difficult to qualify for a tax debt payment plan again, as the IRS will need a satisfactory explanation for the default. It is very important to be completely aware of what you are doing when submitting an Offer in Compromise.
Submitting an Offer in Compromise requires the completion of extensive paperwork, including full financial disclosure, which for many can be both tedious and time-consuming. Consulting a tax professional is advisable when you are contemplating an Offer in Compromise. A licensed tax professional will be able to advise you on the likelihood of your offer being accepted as well as negotiate the terms and conditions of the agreement, based upon your particular situation. Remember, the IRS will reduce the tax debt only if they find that the reduced amount is the maximum that they can hope to get unless you have extraordinary circumstances. Of course, having a tax lawyer to negotiate with the IRS is a big advantage.
Professional help for tax debt reduction will assist you in exploring all available options to get the most reduction in tax debt. As tax debt reduction requires negotiation with the IRS, knowledge of tax law and the tax code relevant to the case becomes crucial. For tax debt reduction, especially of a large tax debt amount, it is wise to use expert help to reach a smooth and beneficial resolution.
If the IRS rejects your OFFER IN COMPROMISE, they now know everything about your financial situation; namely, where your income comes from, where your bank accounts are, and what you own. If the IRS rejects your OIC and decides to levy you, they know exactly where to go. A carefully, and professionally curated Offer in Compromise will give you the very best chance at settling for pennies of the dollar!
Article last modified on July 1, 2019. Published by Debt.com, LLC