Owing the IRS money can be incredibly stressful, but it’s not the end of the world. If you are having difficulty paying your tax bill, you may want to consider making an offer in compromise. This agreement allows you to settle your tax bill for less than what you owe. Tax attorney Brian Kawamoto of Aiea, HI, provides further insight on OICs to help you navigate the process.
How to Qualify for an OIC
For the IRS to accept your offer in compromise, at least one of the following conditions must exist:
- There’s doubt that the IRS can collect your tax bill now or in the future because your assets and income amount to less than the taxes owed.
- Paying your tax bill in full would cause you to endure an economic hardship.
- There’s doubt about whether the tax amount owed is correct.
How to Submit an OIC
The first step in the process is completing IRS Form 656. You also are required to provide detailed information about your finances using Form 433-A (individuals) or Form 433-B (businesses). If you are filing an offer in compromise because there’s doubt the tax liability you owe is correct, you have to file Form 656-L instead of Form 656 and Form 433-A or Form 433-B.
Form 656 requires a $185 application fee. However, if your income is below the poverty level, you may be exempt from paying this fee.
Appealing an OIC
If your offer is rejected, keep in mind that you have 30 days to file an appeal. A common reason offers are rejected is because the offer is too low. If this is the case with your offer, the IRS will let you know what amount is justifiable.
If you need assistance with your offer in compromise, contact Brian Kawamoto at (808) 486-6107. He previously served as an IRS tax attorney and provides various services, including stopping IRS levies and audit representation. For more information, visit his website.