Back Tax Returns: When Does an Offer in Compromise Make Sense?

Posted on 01. May, 2012 by in Back Tax Returns, Back Taxes, Need to File Back Tax Returns

What does this mean for the taxpayer attempting to settle their tax debt?  Statistics show that the IRS has accepted numerous Offers in Compromise.   As of May 2010, 24% of offers were accepted by the IRS.  This was up from the over 19,000 offers (14%) approved in 2004.  Submitting an OIC may be the best way to resolve delinquent tax debt for much less than is owed.

Being successful with submission of the OIC requires that the application is absolutely complete and accurate with all of the appropriate documentation included.  A certified tax attorney or licensed tax specialist is best qualified in assisting taxpayers with various tax issues and can work with the tax payer to fulfill all of the requirements of submitting an Offer in Compromise.

If an OIC is not an option there are other options.  With an installment agreement, penalties and interest on the debt will continue to accrue and over time can be more costly than paying the full tax liability immediately.   It also might be the only solution for individuals that do not have the means to pay the debt in a lump sum.   Similar to a loan provided by a bank, interest and penalties are assessed on the unpaid balance.  This may be the best option in situations where the taxpayer does not qualify or get relief via an Offer in Compromise, Bankruptcy Relief, or a Statute of Limitations Expiration.

Finalizing an installment agreement may not stop the IRS from filing a tax lien against the taxpayer , however, the IRS may not collect on personal property during the time in which the installment agreement is being reviewed for approval.  This may provide some temporary relief from IRS collection action.

Our experienced team of CPAs and tax professionals know how to deal with IRS tax issues.  Call us now at 1-888-570-1033 for a FREE consultation.

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