It’s important to know that the IRS has options for taxpayers who can’t pay their tax liability in full. Understanding the necessary steps to take if you find yourself in this situation is essential to avoiding stress and financial repercussions that may result from unsettled tax debt. If paying your tax liability will create financial hardship for you, filling out an offer in compromise pre-qualifier may help.
WHAT IS AN OFFER IN COMPROMISE (OIC)?
An offer in compromise is a provision from the IRS that allows taxpayers to settle tax debt for less than the full amount that they owe. It’s a compromise between the taxpayer and the IRS that puts the taxpayer on a path toward paying off their debt at a lesser amount. It’s provided to individuals and businesses who are unable to pay their tax debt in full or who may find themselves in economic hardship after paying their debt.
The IRS generally grants an OIC when the amount offered by the taxpayer represents the most that they can expect to collect within a given time period. If you choose to submit an OIC application, you should use a qualified tax preparation service such as Geaux Tax Resolutions LLC.
OICs are not for everyone, and those who file for one often need assistance from qualified professionals. Before submitting an OIC, it’s important to fill out an offer in compromise pre-qualifier (OIC pre-qualifier) to check eligibility.
WHAT IS AN OFFER IN COMPROMISE PRE-QUALIFIER (OIC PRE-QUALIFIER)?
An offer in compromise pre-qualifier is a preliminary form that can help you determine if you may be eligible for an OIC from the IRS. This form is found electronically on the IRS website.
Since the OIC pre-qualifier form is not an OIC application in itself, completing it does not approve OIC benefits. Completing the form simply serves as a guide and helps to confirm your eligibility for an OIC. After filling out the pre-qualifier, you can begin to prepare your OIC application to the IRS.
HOW DO I FILL OUT AN OIC PRE-QUALIFIER?
Our certified tax preparers can assist you with filling out the OIC pre-qualifier. Though the form is accessible to everyone online on the official IRS website, knowing how to properly fill it out is important. This is why most people use qualified tax preparers to help them.
While filling out the pre-qualifier, you will be asked to enter some financial information and your tax filing status. You will have to answer questions with regards to whether you’re in an open bankruptcy proceeding, if you have made all estimated tax payments and if you have filed all required tax returns.
You will also be asked to put in information about your assets, income, and expenses. Accurately completing the form is essential to determining whether you may be eligible for an OIC. It’s important to get professional assistance so you can get accurate results from the form.
WHEN WILL I DISCOVER MY ELIGIBILITY STATUS?
After properly filling out the OIC pre-qualifier, you will know if you’re eligible for an OIC by receiving a calculated preliminary offer amount from the IRS. This is the amount the IRS will expect to collect within a certain amount of time.
This offer should be used as a guide when filling out the actual OIC application. It essentially helps you determine how much the IRS will expect you to pay. This offer, however, is not the final decision from the IRS. If you are not eligible at all for an OIC, you will not receive this preliminary offer amount.
I’M ELIGIBLE: WHAT NEXT?
After filling out the OIC pre-qualifier and receiving a preliminary offer amount, you can begin the OIC application process. You will be required to fill out the OIC form (form 656) and a completed and signed form 433-A OIC for individuals or a completed and signed form 433-B for businesses. In most cases, you will also be required to submit a $205 application fee and your initial offer payment.
It’s very important that you complete and sign all required forms as well as submit all required additional documents. If something is missing during your application process, the IRS will not consider the application. Our team can help you make sure you have everything in order so that your OIC application process goes smoothly.
WHAT SHOULD I DO WHILE WAITING FOR APPROVAL?
The IRS takes some time to review OIC applications, and approval is not guaranteed nor instantaneous. If you select the “Periodic Payment” option on your application form, you are required to continue making payments while waiting for approval. If you fail to continue making these payments while waiting, the IRS will reject your application without giving you the chance to appeal.
WHAT HAPPENS IF MY APPLICATION IS APPROVED?
If your application is approved and your compromise offer is accepted, you will be required to continue filing all required tax returns on time. You will also need to pay all estimated state and federal tax payments that become due in the future. If you fail to do this, the IRS may hold you liable for your original tax debt, the missed payments, and all accrued interest penalties.
WHAT HAPPENS IF MY APPLICATION IS REJECTED?
Despite filling out the OIC pre-qualifier and receiving a preliminary offer amount, your actual OIC application may be returned to you without approval. If your application is rejected, you have the right to appeal. You can submit the “Request for Appeal of Offer in Compromise Form” (Form 13711) within 30 days of the decision.
There is also additional assistance that you can receive if you choose to appeal the decision. Our team can help you look into the additional assistance offered by the IRS, helping you navigate the appeal process.
WHAT PAYMENTS ARE INVOLVED WITH THE APPLICATION PROCESS?
The IRS requires two payments with the OIC application process. Applicants are required to submit a non-refundable application fee of $205. Applicants are also required to submit an initial payment as a lump sum or in installments.
If you choose to pay the initial payment in the form of a lump sum, you will be required to submit 20% of the total offer amount indicated on your application. You may also choose to pay the initial payment periodically. With this option, you will submit an initial payment with your application and you will continue to pay the rest of the initial payment in installments while your application is being considered.
I CAN’T AFFORD TO PAY THE INITIAL PAYMENT, WHAT SHOULD I DO?
If you can’t afford to pay the initial payment in a lump sum or in installments, we can help you determine whether you meet the IRS’ Low-Income Certification Guidelines. These are certain requirements that are usually met by taxpayers who are seeking a compromise for personal tax liability.
Businesses do not meet these Low-Income Certification Guidelines since the tax debt incurred isn’t personal. If you as an individual meet these requirements, you will not be required to pay the initial payment nor the $205 application fee.
GET HELP WITH YOUR OIC PRE-QUALIFIER
The OIC process can be complicated and stressful. Determining whether you’re even eligible for an OIC is also quite daunting, so reach out to our qualified tax professionals at Geaux Tax Resolution LLC in Lafayette and Mandeville, Louisiana for help. You don’t have to navigate the process alone. With more than 35 years of experience dealing with the IRS, we can help you work toward freedom from your tax debt.
