If you’re like most people then you have had less than pleasant interactions with the Internal Revenue Service. This is even more true when finding yourself in a situation where you need to settle with the IRS. The IRS has the power to garnish wages, seize assets and place liens on your properties when you owe them money. These facts alone are intimidating enough for many.
While taxpayers can opt to represent themselves when dealing with the IRS, many often partner with a trusted accountant to represent them. We have been helping our clients manage their debt and settle with the IRS for years. While there are a few different options when it comes to getting the IRS off your back, one of the most successful has been an Offer in Compromise.
Below are 3 ways you can reach an offer in compromise and potentially settle with the IRS:
Type 1 is called “Doubt as to Collectability”
This type of settlement applies when you are financially unable to pay the full amount of back taxes owed. Typically, this process would entail reaching an agreement in which you pay it back in smaller deposits, or a lower amount altogether. In this process, you would have to produce proof of financial difficulty, something an accountant can assist you with.
Type 2 is called “Doubt as to Liability”
In this case, you believe that the amount the IRS says you owe is incorrect. There are a variety of scenarios in which this would apply. It could be due to an error made by IRS’, the accountant who filed your taxes, or a self-error. The desired result, in this case, would be a correction of the amount owed. In most circumstances, this would result in an overall reduction of your debt. Once again, however, appropriate documentation will have to be organized and presented.
Type 3 is called “Effective Tax Administration”
Effective Tax Administration applies in extraordinary circumstances when you do not qualify for Doubt as to Liability or Doubt as to Collectibility. This less than often utilized program allows the IRS to accept an offer less than the amount expected in circumstances in which doing so would be viewed as ‘fair and equitable.
The ETA Offer in Compromise allows the weighing of long-term benefits entailed when allowing an otherwise viable business to operate by paying less than the amount initially owed. Contact us to learn more about ‘Offer in Compromise’.
Bonus Tip:
Watch the expiration date of the statute of limitations
This option is more of a technicality than anything else. It is a law that the IRS has ten years from the date of your assessment to collect all taxes and penalties from you. In some cases, depending on the timing of your problem, you may be advised to wait it out. This has been the case for some of our clients looking to settle with the IRS.
What should you do?
If you owe the IRS $10,000 or more in back taxes, contact us today to see if you qualify for an offer in compromise. We’ve helped dozens of clients over the last few years reduce, or in some cases completely eliminate their debt!
