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VTL Eligibility Requirements for an Offer In Compromise

Offer In Compromise

Eligibility Requirements for an Offer in Compromise:

  • Tax Liability: You must have an existing tax liability, which means you owe taxes to the IRS. This includes any assessed tax debt, penalties, and interest.
  • Filing Compliance: You must be up-to-date with all your tax filings. This means you have filed all required tax returns for the current tax year and any past due returns.
  • Estimated Tax Payments: If you are a business owner with employees, you must be current on your estimated tax payments for the current tax year.
  • No Ongoing Bankruptcy: If you are currently in an open bankruptcy proceeding, you are generally not eligible for an Offer in Compromise. Bankruptcy laws provide a separate process for addressing tax debts.
  • Collection Status: The IRS will consider your offer if they believe they cannot collect the full amount owed through other means, such as a regular installment agreement. You must demonstrate that paying the full amount would create a significant financial hardship.
  • Doubt as to Liability or Collectibility: You need to prove one of the following:
  • Doubt as to Liability: You can demonstrate that you do not owe the tax debt.
  • Doubt as to Collectibility: Even if you owe the tax debt, you can show that paying it in full would cause financial hardship.
  • Ability to Pay: You must provide detailed financial information to the IRS, including your income, expenses, assets, and liabilities. The IRS will assess your ability to pay the debt over time.
  • Fees and Application: There is a non-refundable application fee for submitting an Offer in Compromise. However, low-income taxpayers may qualify for a waiver of this fee.

who specializes in OIC applications can be valuable in navigating this process and increasing your chances of success.

Frequently Asked Questions

What is an Offer In Compromise (OIC)?
An Offer In Compromise is a program offered by the IRS that allows eligible taxpayers to settle their tax debt for less than the full amount owed. It’s designed to help individuals and businesses who are facing financial hardship and cannot pay their tax liability in full.
Who is eligible to apply for an Offer In Compromise?
  • To be eligible for an OIC, you must meet specific criteria, including:
  • You must have filed all required tax returns.
  • You must have received a bill for at least one tax debt included in your offer.
  • You must not be in an open bankruptcy proceeding.
What are the financial eligibility requirements for an OIC?
The primary eligibility criterion for an OIC is demonstrating that paying your tax debt in full would cause financial hardship. The IRS evaluates your ability to pay based on factors such as income, expenses, assets, and future earning potential.
Can businesses apply for an OIC?
Yes, businesses, including corporations and partnerships, can apply for an OIC. However, they must meet the eligibility criteria and provide the necessary financial documentation.
What types of tax debt can be included in an OIC?
An OIC can include most types of federal tax debt, including income tax, self-employment tax, payroll tax, and certain penalties and interest.
Are there fees associated with applying for an OIC?
Yes, there is a non-refundable application fee for submitting an OIC. However, this fee may be waived if you meet certain low-income criteria.
What happens if my OIC is accepted?
If your OIC is accepted, you will need to comply with the terms of the agreement, which typically includes making the agreed-upon payments and staying current on your tax obligations for a specified period (usually five years).
What happens if my OIC is rejected?
If your OIC is rejected, you have the right to appeal the decision. You can also explore alternative options, such as setting up an IRS Installment Agreement or seeking professional tax advice.
Can I negotiate with the IRS regarding the OIC amount?
Yes, you can negotiate with the IRS during the OIC process. It’s often beneficial to work with a tax professional who can help you present a strong case and negotiate effectively on your behalf.
Is it advisable to seek professional help when applying for an OIC?
Many individuals and businesses find it beneficial to work with tax professionals, such as tax attorneys or enrolled agents, when applying for an OIC. These professionals can provide guidance, ensure your application is complete, and negotiate with the IRS on your behalf to increase your chances of success.

Remember that OIC applications can be complex, and the IRS has specific criteria for approval. Seeking professional guidance is often a wise decision to navigate the process successfully.

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