What is an Offer in Compromise?
An Offer in Compromise (OIC) is a program offered to the taxpayers by IRS to assist them pay their tax financial obligations. Those who qualify the conditions for eligibility might be permitted to make an offer and guarantee to pay a lesser amount of tax owed to the IRS. This enables taxpayers to settle their prior financial obligations and start over fresh so that they can quickly pay their current and future debts in full and on time.
Qualifying conditions for an Offer in Compromise
In reality, IRS will not consider an offer in compromise if it isn’t equal to or greater than RCP (Reasonable Collection Potential). It is the determining tool utilized by the IRS to evaluate the taxpayer’s paying capability. RCP is the worth recognized from the taxpayer’s assets including his real estate home, checking account, cars and so on. Also consisted of in the RCP is the expected future income of the taxpayer minus his living expenses.
An offer in compromise can only be accepted by the IRS under these three scenarios:
1) Uncertain Liability:
If you wish to discover how to get an offer in compromise approved, you need to understand that your offer will only be thought about qualified and acceptable by the IRS if there is an uncertain liability. A doubt as to liability indicates that there is a conflict as to the precise and genuine amount of tax debt to be paid by the taxpayer under the law.
2) Uncertain Collect ability:
Another condition under which one can discover the answer to how to get an offer in compromise approved by the IRS is if you are able to show that there is uncertainty that the amount in taxes owned are completely collectible. In such a case where the taxpayers; income and assets, are less than what he/she owes as tax liability, IRS may think about an offer in compromise, also called doubt regarding collect ability.
3) Effective tax administration
Finally, IRS might consider your offer in compromise acceptable if it is based upon effective tax administration. Under this condition, there is no certainty that the amount owned is legally payable or whether the amount owed can be collected. Under this kind of offer, the taxpayer demands the IRS that he/she is already faced with financial difficulties, and paying loan as taxes will only contribute to the burden. The IRS under such scenarios may alleviate the tax pressure from the indebted individual based upon his poor financial resources and assured future income development.