Yes, if your circumstances fit. The IRS has the authority to cancel all or part of your tax debt and reach an agreement with you for less than you owe. This is called a compromise offer or OCI. A returned offer is different from a rejection because there is no right to appeal when the IRS returns the offer.
The IRS will charge interest at the federal short-term rate plus 3% (interest may change every quarter). If you agree to pay using a direct debit or payroll deduction plan, the IRS will not impose any tax burden on you. Despite one of the longest economic expansions in history over the past decade, millions of Americans are still struggling to pay their taxes. The IRS will keep any refund, including interest, that may be due on tax returns filed up to the date the IRS accepts the offer.
You can use the Offer in Compromise prequalification tool to confirm your eligibility and prepare a preliminary proposal. You must provide detailed information about your financial situation on IRS Form 433-A (individuals) or Form 433-B (businesses), collection information statement. As useful as it is for the IRS to offer more options to struggling taxpayers, you also need to do your bit. In recent years, the Internal Revenue Service (IRS) has been more willing to calculate late tax payments, usually through installment agreements.
In some cases, an OIC is returned to the taxpayer instead of refusing it, because the taxpayer failed to submit the necessary information, filed for bankruptcy, did not include a required application fee or a non-refundable payment with the offer, failed to file the required tax returns, or failed to pay current taxes obligations at the time the IRS is considering the offer. Make sure that the IRS tax controversy and IRS collection rulings are the backbone of your practices. For an extension based on financial hardship, you'll only qualify if you can show that paying the tax you owe would cause you financial hardship, in accordance with IRS financial regulations. The taxpayer has the right to specify the particular tax liability to which the IRS will apply the 20 percent payment.
Learn how to apply for an IRS payment option, such as an extension of payment or an IRS installment agreement, when your company owes taxes and can't pay. To qualify for an ICO, the taxpayer must have filed all tax returns, received a bill for at least one tax debt included in the offer, have made all the estimated tax payments required for the current year and, if the taxpayer is a business owner with employees, must have made all required federal taxes deposits for the current quarter and the previous two quarters. You can use the Pledge Offer Prequalifier on the IRS website to determine if you are eligible and prepare a preliminary proposal.
