If your tax bill feels insurmountable, you may be able to qualify for an Offer in Compromise (OIC) with the IRS.
The question is whether you should file the paperwork yourself or hire an Offer in Compromise attorney to do it for you. In this article, we’ll outline four reasons why you should consider hiring an Offer in Compromise attorney.
An Offer in Compromise provides a way for taxpayers to negotiate with the Internal Revenue Service to reduce their tax bill. If the IRS accepts an Offer in Compromise, you will only pay a portion of your debt. The rest is forgiven.
Typically, someone seeks an Offer in Compromise when they know that it is impractical that they’ll be able to pay the taxes that have accumulated over one or more years. When this happens, the Offer in Compromise will be filed on the grounds of “doubt as to collectability.”
The IRS has a formula that helps them determine the probability of collecting the debt. The factors the IRS considers are:
– Your assets
– Your income
– Your expenses
– Your overall ability to pay
There are two other reasons that taxpayers may file an OIC, but they are not as common:
1. Doubt as to liability. Here, you would argue that you do not owe the amount that the IRS claims you owe.
2. Effective tax administration. In this situation, you are not arguing the amount you owe or your ability to pay. Instead, you may claim that paying the debt would result in a different type of financial hardship or the tax situation is “unfair.” As you can imagine, this argument requires skilled negotiation and is rarely accepted.
Naturally, the idea of getting a fresh start and not having to pay 100% of a tax liability is a desirable concept, but the IRS does not accept all OICs. There are several eligibility requirements that you must first meet to even qualify for an Offer in Compromise. Even then, the IRS only agrees to about 40% of the “offers” that get submitted.
There is no standard “discount” that applies to accepted offers. Some taxpayers can reduce six-figure debt to a few dollars, while other taxpayers are lucky to get a 10% discount. An Offer in Compromise lawyer can evaluate your situation and give you some potential ranges that are most likely to apply.
An Offer in Compromise attorney can also help increase your chances of acceptance by ensuring that all steps are followed properly, and your argument is persuasive.
Even though you can apply for an OIC yourself, there are several reasons you may want to hire an attorney to see you through the process.
1. You Don’t Currently Qualify for an OIC
If you don’t meet the IRS’s eligibility requirements for an Offer in Compromise, an attorney can help you get everything ready. As a preliminary step, you can check your eligibility here by submitting some preliminary information to the IRS.
The requirements as of 2021 include the following:
– You have filed all necessary tax returns
– You are not currently undergoing bankruptcy proceedings
– You must submit all required documents
There are additional requirements for businesses and partnerships that can further complicate the process.
If you don’t currently qualify or are unsure if you would qualify for this form of tax resolution, you can consult with an Offer in Compromise attorney. Together, you can review your financial situation and discuss the obligations you have to meet to increase your chances of having an OIC accepted.
2. Paperwork is Not Your Forte
The process of submitting an Offer in Compromise can be complex. You’ll have to be 100% transparent with the IRS about your finances, and the government will ask you for a lot of detailed information.
There is a lot to keep track of, and there is also a large quantity of paperwork that you’ll have to submit. The paperwork burden can span several boxes and months of correspondence in some cases.
If you’re not the most organized person in the world or you would prefer not to spend hours in a back-and-forth exchange with the IRS, having an attorney handle it for you may be the better choice.
3. You Want the Best “Offer” Possible
Though there’s no guarantee that a tax professional can reduce your debt to pennies on the dollar, working with an attorney does increase your odds of a favorable outcome. The reason is that Offer in Compromise attorneys submit offers on a regular basis. They have uncovered patterns during their years of experience and may have a general sense of how low they can go and still have an offer accepted.
If you act alone, you may err on the side of being conservative, leaving thousands of dollars that could potentially be “forgiven” on the table.
4. You Need to File an Appeal
You already know from earlier in this blog post that the IRS rejects approximately 60% of Offer in Compromises. The good news is that you can resubmit an offer or a file an appeal for a rejected OIC.
However, if you do choose to file an appeal, it must be initiated by an attorney. In turn, the attorney will represent you in tax court and argue on your behalf.
Next Steps
Before filing for an Offer in Compromise, you may want to first check your eligibility status. At Levy & Associates, we can discuss your situation and help you determine a clear path for moving forward.
Reducing a tax bill and eliminating your tax problems can create an incredible and freeing feeling. Contact our law firm at 800-TAX-LEVY to schedule an appointment.
Levy & Associates is available for free initial consultations. We’re happy to answer any questions you have about the audit process or address any concerns about your specific situation.
There’s never a good time to be audited, and the time-consuming process will take away from your business or family if you try to face it alone. Let us handle and coordinate communication, so you can return to your daily life.