Many individuals and businesses that owe taxes to the Internal Revenue Service will contact my office and ask, “how do I settle my IRS tax debt?” While most people are aware that they can settle their tax debt with the IRS through an offer in compromise, they do not know what is needed to submit their offer in compromise to the IRS and the process with the IRS offer in compromise unit. The article and video below have been prepared by a tax attorney in Denver at The McGuire Law Firm to provide information regarding a tax settlement with the Internal Revenue Service. As always, this article and video below is for informational purposes, and it is recommended you contact your tax attorney or tax professional regarding a tax issue.
An offer in compromise is based more off of a taxpayer’s ability to pay as opposed the taxpayer’s total debt. Thus, first and foremost, a taxpayer looking to submit an offer in compromise to the IRS must complete a financial statement. An individual will complete Form 433A OIC and a business will complete Form 433B OIC. An individual with an interest in closely held businesses should likely complete both Forms 433A OIC and 433B OIC. These forms are financial statements that help calculate the taxpayer’s reasonable collection potential, which is determined by equity in assets and disposable income. Of course, if a taxpayer does have special or extenuating circumstances, these issues can be presented to the IRS as a reason for the taxpayer to not pay their full collection potential. Upon completing the necessary financial statements, the taxpayer should be able to calculate their offer amount.
Upon completing the offer amount, Form 656 should be completed, which states the taxpayer’s information, the tax debts of which the taxpayer is attempting to settle and the offer terms. The offer terms will include the offer amount and over what time period the taxpayer will make such payments. Further, the offer terms can dictate the payment that must be submitted with the offer and whether payments need to be made as the IRS is reviewing the offer.
The taxpayer will submit Form 656 and the necessary financial statements and attachments to the appropriate IRS Offer in Compromise Unit. Currently, there are 2 units whereby a taxpayer would initially submit their offer in Holtsville, NY and Memphis, TN. Upon submitting the offer, the taxpayer will receive verification of receipt. Thereafter, likely in 4-8 months, the taxpayer will receive contact from the offer unit and an offer examiner. More information or documents could be requested, or the offer could be accepted, rejected or returned. If the offer is rejected, the taxpayer does have appeal rights and can appeal such rejection. If you have questions related the settlement of an IRS tax debt, speak with a Denver tax attorney at The McGuire Law Firm through a free consultation. Please enjoy the video below, and hopefully, you have found this information useful.
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