You owe the government thousands of dollars in taxes, and you have no idea how you are going to pay them.
You want to make an offer to the Internal Revenue Service to pay off back taxes and stop the letters. You’ve seen the ads on TV - pay the company money and they will stop all contacts by the IRS, stop any levy processes while under consideration and have you pay pennies on the dollar for what you owe.
Wow! Sounds like a plan. Let’s call.
What they fail to tell you in the ads or sometimes what you miss when they are talking to you, is that not everyone can make an Offer in Compromise to reduce and pay off what is due to the IRS.
For many years the Internal Revenue Service has opened the Offer in Compromise program (OIC) to more taxpayers. The streamlined version can be used by taxpayers with income up to $100,000 and tax debt under $50,000. Even though you are having a professional make the offer for your debt, there are still items you must provide to get the offer in place.
To be considered you must:
- Prepare form 656. Prepare forms 433A for individuals and self-employed or 433B for businesses, along with all required copies of bank statements, utility bills, pay stubs, copies of other sources of income (brokerage statements, rental income, interest and dividends, statements of retirement accounts, mortgage statements, vehicle loan statements, and any other documentation to substantiate expenses for child support, alimony, court ordered payments or state/local taxes that are due).
- Make sure you have listed the correct amount of living expenses for your household. I have seen clients get very creative here thinking the IRS will take pity on them as their expenses are higher than what they can reasonable pay to the IRS on back taxes. The IRS has a publication of National Standards for housing and other living expenses based on your geographic location, so the service will reduce any item that appears excessive to the national standard
- Make sure all tax returns have been filed and estimated taxes are current if you are self-employed.
- Pay the application fee with certified funds.
- Be able to make the payments via a monthly draft.
If you are prepared to get the tax monkey off your back, do not be afraid. You’ll never know if they will take less.
Karen S. Durda, EA, President of Century Accounting and Tax Services, Inc., has been in the profession since 1984. As an Enrolled Agent credentialed by the Treasury Department, she has the rights as afforded by Congress to represent individuals and businesses before tax authorities. Since May 2012, she has also had the distinction of being a Dave Ramsey Endorsed Local Provider, assisting in budgeting and financial peace for a four-county area and parts of Myrtle Beach.As a Qualified Business expert with the New Hanover County courts, she has experience and knowledge of various scopes of professions and industries, such as medical, health services, legal, construction, retail, real estate, auto sales and service, insurance and restaurant. Continuous tax law courses throughout the year keep her up-to-date on all tax rules, regulations and law changes, as well as business trends, to better serve her clients.