I can’t pay my tax debt…It’s very common for an IRS tax debt to be more than the average person can afford. But what can you do when you owe the IRS money and you actually can’t afford the full balance? What can you do when the financial security of your family is threatened? You can settle your IRS tax debt for a lesser amount, or “pennies on the dollar” as they say, but it isn’t easy.
What is this miracle solution? The official term for tax debt settlement is the Offer in Compromise, or an OIC for short. Before you breathe a sigh of relief and start thinking this will settle your IRS tax debt, you need to know something. The IRS does not want to settle for “pennies on the dollar”. Uncle Sam does not like giving discounts. There is a reason it’s hard to settle your IRS tax debt and below are just a few of the hurdles you will have to overcome.
First, you have to prove to the IRS that you will never be able to pay back the entire tax debt, or prove that paying off your debt would create “undue hardship”. When you deal with the IRS you are guilty until proven innocent.
Second, you have to commit to a full financial disclosure. You let the IRS look at your income and lifestyle expenses. And know that the IRS is very thorough in their investigation. They inventory all of your accounts, your possessions, and the equity in your home. You have to tell and show them everything. Only 2% of all Offers in Compromise are actually successful.
Third, getting approved is a long process, and there is no guarantee that you’ll be approved for a tax debt settlement. It can take up to a year for an Offer in Compromise to be approved. And if you are denied, you have to owe the original debt plus any interest and penalties for that year.
Fourth, if the Offer in Compromise is accepted, you have to enter into a five year contract with the IRS. You have to file all returns on time and pay any tax debt you may incur during the five year period. Failure to live up to the terms of the contract will result in the entire debt being reinstated and you’ll now owe the original amount plus any additional interest and penalties.
How do you know if you might get approved for a tax debt settlement through the Offer in Compromise program? Ask yourself this question: Can I afford to pay this tax debt in full or in installments without having to make very serious sacrifices. If you said “yes”, then you will not qualify for tax debt settlement of your IRS delinquent taxes.
What is this miracle solution? The official term for tax debt settlement is the Offer in Compromise, or an OIC for short. Before you breathe a sigh of relief and start thinking this will settle your IRS tax debt, you need to know something. The IRS does not want to settle for “pennies on the dollar”. Uncle Sam does not like giving discounts. There is a reason it’s hard to settle your IRS tax debt and below are just a few of the hurdles you will have to overcome.
First, you have to prove to the IRS that you will never be able to pay back the entire tax debt, or prove that paying off your debt would create “undue hardship”. When you deal with the IRS you are guilty until proven innocent.
Second, you have to commit to a full financial disclosure. You let the IRS look at your income and lifestyle expenses. And know that the IRS is very thorough in their investigation. They inventory all of your accounts, your possessions, and the equity in your home. You have to tell and show them everything. Only 2% of all Offers in Compromise are actually successful.
Third, getting approved is a long process, and there is no guarantee that you’ll be approved for a tax debt settlement. It can take up to a year for an Offer in Compromise to be approved. And if you are denied, you have to owe the original debt plus any interest and penalties for that year.
Fourth, if the Offer in Compromise is accepted, you have to enter into a five year contract with the IRS. You have to file all returns on time and pay any tax debt you may incur during the five year period. Failure to live up to the terms of the contract will result in the entire debt being reinstated and you’ll now owe the original amount plus any additional interest and penalties.
How do you know if you might get approved for a tax debt settlement through the Offer in Compromise program? Ask yourself this question: Can I afford to pay this tax debt in full or in installments without having to make very serious sacrifices. If you said “yes”, then you will not qualify for tax debt settlement of your IRS delinquent taxes.