Tuesday, September 15, 2015

When Should You Consider an Offer in Compromise?

An offer in compromise (OIC) is one of the many ways to get out of a tax debt problem with the IRS. This allows you to settle your debt for less than the full amount you owe. An IRS tax lawyer will tell you that not all people can qualify for this, but the option could be worth considering if you are in one of these situations:

You’ll be broke if you pay off the full amount.

The IRS can be forgiving when it comes to debt provided that you provide them with a valid reason. Being broke is as good a reason as any. With the help of an experienced tax lawyer, you can argue that due to exceptional circumstances, you will indeed become broke if you pay the full amount. This could be referred to as “economic hardship”.

There is doubt as to collectability of your debt.

“Doubt as to collectability” is a status that describes uncertainty of whether the IRS can collect the tax bill from you in the immediate future. Such cases are usually approved by the IRS, but this option is more difficult to pursue (hence the need for a lawyer).

Filing for Bankruptcy is not a valid option.

Filing for bankruptcy is another effective way to eliminate taxes and stop the collection processes. It also does not require negotiation with the IRS. If filing for bankruptcy is not a valid option because the collection timeframe is ticking, OIC is the next best solution.

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