Generally, the IRS will only settle for what it deems feasible to pay. To determine this, you will consider your assets (home, car, etc.) A transaction offer is an agreement between a taxpayer and the IRS that settles a tax debt for less than the total amount owed. A transaction offer is an option when a taxpayer cannot pay the full amount of their tax liability. It is also an option when paying the full tax bill would cause financial difficulties for the taxpayer.
The goal is to achieve a commitment that meets the best interests of both the taxpayer and the agency. If you qualify for an OCI, the IRS will then determine how much it will accept from you to pay off the debt. The amount of this offer is also called reasonable collection potential (RCP). This is the amount the IRS can reasonably charge you before the collection law expires.
The best approach is to evaluate your tax situation, personal finances, and IRS collection alternatives, and then develop the best approach to paying the lowest amount owed. However, in real life, it's not that easy to get the IRS to settle a tax debt for cents on the dollar. A “compromise offer” is a little-known but remarkably effective way for thousands of people with problems with the IRS to routinely eliminate tens of thousands of dollars in tax debts. Jim is also the author of the Tax Problems and Solutions Manual, a publication intended to help tax professionals work more effectively on post-tax filing issues and to resolve their clients' most common tax problems.
And within the Code and other rules and regulations that the IRS must follow, U.S. taxpayers have a variety of options when it comes to paying back taxes. Before you submit your offer, you must (file all tax returns that you are legally required to file), (make all estimated tax payments required for the current year) and (make all required federal tax deposits for the current quarter) if you own a business with employees. The OIC, out of doubt as to collectability, is for people who are unlikely to be able to pay the IRS before their collection statute expires (usually 10 years after the date the IRS evaluates the tax).
A transaction offer (OIC) is an agreement between a taxpayer and the IRS that settles the taxpayer's tax liabilities for less than the total amount owed. If you can pay the agreement to the IRS within five months of acceptance, the IRS values your monthly cash flow by multiplying it by a factor of 12. If you are 30 years old and have earning potential and have a master's degree, the IRS can forgive a significant debt if you agree to make payments in the future, as long as your income reaches its potential. As you can see in Bob's case, if he qualifies, his tax debt to the IRS could be settled for a fraction of what he owes. Most people will not qualify for an OIC unless they have filed all tax returns and made all the estimated tax payments required for the current year (if applicable).
While the IRS maintains its reputation as the world's most powerful and feared collection agency, it's important to remember that all of its powers come from the Internal Revenue Code or Tax Code. While this may seem like a quick and easy solution, it's important to note that a compromise offer has strict requirements, and the decision to apply for an OCI should only be made with the help of a licensed tax relief professional. Prior to his current position, Jim's consulting practice focused on the areas of tax controversy and tax administration, which included leading the development of tax problem software products for tax professionals, testifying before Congress, advocating for the transparency and efficiency of the IRS, and proposing innovative large scale solutions for taxpayers and tax professionals. .