How Do I Write An Offer In Compromise Letter To The IRS?

How Do I Write An Offer In Compromise Letter To The IRS?

Are you struggling with unpaid taxes, penalties, and interest? Have you considered making a deal with the IRS to settle your tax debt faster and for less than what you owe? An Offer in Compromise (OIC) may be an ideal solution. An OIC is a legally binding agreement between yourself and the IRS that permits taxpayers who find themselves in dire financial straits the ability to resolve their outstanding tax obligations for an amount often far lower than what was actually owed. In this blog post, we will provide you with everything you need to know about how to write an offer in a compromise letter—from getting all required documents together to understanding exactly what language needs to be included—so that your offer can successfully obtain approval from the Internal Revenue Service.

How Do I Know If I'm Eligible For An Offer In Compromise?

You may be eligible for an offer in compromise if your adjusted gross income (AGI) is less than or equal to the amount indicated on Form 656, Section 1. This amount is based on your family size and location. To determine if you are eligible, simply compare your AGI from your most recently filed tax return (Form 1040 or 1040-SR) to the appropriate value in the chart on Form 656, Section 1. If you are unsure about this process, please take advantage of available resources such as IRS.gov or a tax preparation specialist.

How Do I Write An Offer In Compromise Letter To The IRS?
What Are The Requirements Needed?

What Are The Requirements Needed?

In order to submit an offer in compromise, you must have all of the necessary documents ready and available. These include:

• Form 656-L - Offer in Compromise (OIC) submission

• Form 433-A – Collection Information Statement for Wage Earners and Self-Employed Individuals

• Form 433-B – Collection Information Statement for Businesses

• Any necessary proof of payment documentation, such as pay stubs, bank statements, etc.

• Proof of your current financial situation

• A written statement that includes the reasons why you are unable to pay your tax debt in full

Additionally, you must submit the nonrefundable application fee of $205 (as of 2019) along with your offer in compromise letter.

How Do I Write An Offer In Compromise Letter?

Writing an effective offer in compromise letter is an important step toward resolving any tax debt or disputed portion of the tax debt. In your letter, you must provide a clear statement as to why the debts are incorrectly supported by relevant documentation and evidence. It is equally important to use a professional and courteous tone in the letter. You should also include proof of financial hardship that may prevent you from being able to pay back the full amount of the taxes, including relevant documents and statements. Follow these steps carefully so that IRS officials can understand your case and properly assess it for an offer in compromise settlement.

How Do I Write An Offer In Compromise Letter?

How Hard Is It To Get An IRS Offer In Compromise?

Calculating whether or not you qualify for an Offer in Compromise can be a difficult process without professional help. The IRS review process can also take several weeks - once your offer is submitted, they will review and analyze your financial assets and circumstances to determine eligibility. Ultimately, the odds of getting an IRS Offer in Compromise are slim; in 2021, only 15,154 offers out of 49,285 were accepted. Therefore, if you’re considering taking this route to lower tax debt, it’s best to have an experienced accountant or tax lawyer provide guidance through the entire negotiation period.

What Happens If IRS Rejects My Offer?

If your Offer in Compromise (OIC) has been rejected by the Internal Revenue Service (IRS), you have a limited window of opportunity to appeal the decision. Within 30 days of receiving the rejection letter, you must make a formal request for an appeal hearing to present your case again and potentially be approved. After this 30-day period, the IRS will not accept an appeal, so it is important that you are timely in submitting your fresh materials such as updated financial information and further explanations for why your OIC should be accepted. Taking these swift steps for an appeal could make a significant difference in your tax liability.

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Do I Need Help For Submitting An Offer In Compromise?

Submitting an offer in compromise is a complex and time-consuming process, especially if you are unfamiliar with the IRS’s requirements. It can be helpful to consult with a professional tax preparer or accountant to make sure your documents are accurate and complete. Your advisor may also provide advice on how to negotiate with the IRS for the best possible terms. Additionally, hiring a tax attorney who specializes in offer-in-compromise cases can be beneficial, as they understand the nuances of these proceedings and can advocate on your behalf. Ultimately, it is in your best interest to seek help so that you have a clear understanding of all relevant regulations, processes, and potential outcomes.