Offer in Compromise (OIC)
If you owe back taxes or have not filed one or more returns, it can have serious consequences. You may find life challenging or that you are unable to achieve certain financial goals. You may live in fear of receiving an IRS demand letter or being hit with a tax lien or wage garnishment. Eventually, you’ll feel compelled to address the situation. In that case, we can provide a proven strategy for coming to grips with unpaid back taxes, involving offer in compromise modifications.
Through this program, the IRS (and many state tax authorities) will allow you to settle tax-related debts for less than you owe. Better yet, under the Fresh Start Initiative, the agency will now limit reviews to one year of your income when considering discounted one-off lump sum offers to satisfy outstanding tax obligations, and two years of earnings when evaluating short-term periodic offers, representing a more accommodating stance than in the past.
In addition, the initiative allows taxpayers making up to $100,000 annually to apply for a reduction in the amount owed and also permits states tax and student loan obligations to be considered as valid expenses in its calculations, unlike in earlier times. Finally, loans secured to cover OIC preparation and the offer amount are also taken into account when evaluating the funds available for repayment after living expenses.
Calculating the offer
Generally speaking, the formula used for calculating the offer in compromise amounts to the sum of the net equity of any assets you own and 12 months of your disposable income. Because the IRS approach to making this assessment can be complicated and complex, however, it is important to secure the services of a licensed tax professional, who can clarify whether the program may work for you.
Moreover, unlike firms that promise they can reduce your tax obligations before obtaining a comprehensive picture of your financial situation, Aristide CPA can provide you with this information at no cost to you and without any additional obligation on your part. Should you decide to work with us, we can assist you in requesting information from the IRS and understanding whatever options you might have, including the following:
- Calculating how much the IRS claims you owe in back taxes, penalties and interest.
- Determining whether any tax returns are missing.
- Ascertaining whether indicated tax and penalty assessments are accurate.
- Establishing how long the agency has to collect what is owed.
- Working with the IRS to forestall liens or levies while figuring out the best strategy for addressing the issues in question.