How do I qualify for OIC?

The ability to offer and possibly have your offer accepted to pay less than what you owe on your taxes. Although anyone can be eligible to submit an offer in compromise, given they are currently in compliance with their taxes, not everyone will be accepted. As matter of fact, a minority of the people that request an offer will receive it. At Bullseye tax relief we work with you to see if an offer in compromise is the best solution for your particular situation or you are better off with other available strategies and solutions.

How long does it take for the offer to be decided on?

It’s hard to say, but many offers can be accepted in about 6 months or less, unless there are delays that increase the time required to process and decide on your offer, with some taking less or more than that. The most important thing we do in Bullseye is to help you avoid delays that can increase the length of the process.

What is Trust Fund Penalty?

A Trust Fund in terms of employment tax should not be mistaken with a trust fund in terms of wealth management. This is the payroll tax amount assessed to the officers of the business. Tax resolution can help reduce and or arrange the payment of these taxes.

What is a Trust Fund Recovery Penalty (TRFP)?

A Trust Fund Recovery Penalty can be assessed if the unpaid trust fund taxes cannot be immediately collected from the business. This often happens if the business falls on hard times and taps into that fund for any reason. According International Revenue Code 6672(a) an individual can be held liable for penalty for willful failure to collect, account for, or pay to the IRS the taxes for the business.

Who is Held Responsible for the TRFP?

According to the IRS, the TRFP can be assessed against any person who is: responsible for collecting or paying withheld employment taxes, willfully fails to collect or pay the taxes.

Offer in Compromise

What is Offer in Compromise (OIC)?

Offer in Compromise (OIC) allows you to settle your tax debt for less than the amount you owe. Offer in Compromise was created for those in tax debt that could not pay off their debt in full without experiencing financial hardship in doing so. In some cases, it may be impossible to pay your full tax debt due to your financial situation, even with the help of installment plans and other tax resolution. In situations of severe inability to pay off tax debt, an Offer in Compromise can be a great deal of help. By negotiating an amount with the IRS, you can pay off your debt by an exponentially smaller amount and your slate is wiped clean. You must submit the proper forms and the amount you offer must meet their specific set of rules and considerations. For more information, visit our tax problem resolution page.

Types of Offer in Compromise:

There are three different situations that make you eligible for an Offer in Compromise:

Doubt as to Collectability

This is the most common type of OIC. This is for people whose assets and income are less than the amount of tax debt owed and therefore, the full amount may not be collectable, This means that the taxpayer can settle for an amount that is less than the full amount.

Doubt as to Liability

The taxpayer does not think that they owe part or all of the debt in question.

Effective Tax Administration

The taxpayer owes the full debt without any doubt and is capable of paying off the full amount but paying off the full amount of tax debt may result in financial hardship for the taxpayer.

Are you eligible for Offer in Compromise?

Before you can apply for an OIC, you must meet a certain set of IRS requirements. In addition to these requirements, you must make sure that all of your tax documents have been filed on time. You should not have any past due penalties remaining on any previous tax debt.

According to the eligibility requirements for approval for OIC, you must also meet the following requirements before filing or your application will be discarded:

file all tax returns you are legally required to file.
have received a bill for at least one tax debt included on your offer.
make all required estimated tax payments for the current year.
make all required federal tax deposits for the current quarter if you are a business owner with employees.

Your offer will be immediately returned without further consideration if you have not filed all tax returns you are legally required to file.

What to consider when negotiating an offer:

When applying for an Offer in Compromise, you will fill out IRS Form 656.
You must consider your “reasonable collecting potential” when setting up an offer.
To the IRS, ‘reasonable collecting potential” means that your offer must be at least equivalent to your current assets as well as your anticipated income and assets, minus your basic living expenses.

The Process:

1. Both you and the IRS agree that there is no possible way that you can pay the full tax debt amount without potentially experiencing financial hardship.
2. You offer to pay the maximum amount that you can afford without experiencing financial hardship, even if the amount offered is significantly less than the full amount owed.
3. The IRS accepts the offer as the most you can reasonably pay.
4. You decide whether you want to pay the full amount up front or in installments.
5. Once you pay off the amount accepted by the IRS, the debt is considered “paid in full”.

Next Step

The application process for Offer in Compromise involves a lot of math and many forms. It is most beneficial to speak to a tax professional when considering filing for an Offer in Compromise due to the complicated process. Give us a call today. We can help you decide if filing for an Offer in Compromise is the best course of action for you and your business.