If you find that you have an overwhelming amount of tax debt, then you must apply for an IRS offer in compromise forms, a procedure that enables you to resolve your debt for less than what you owe.
These offers, however difficult to obtain, might be of great assistance to people who are having a hard time making their debt payments. The IRS may take some time to accept your application because the eligibility conditions are stringent.
There are several distinct types of offers in compromise, which are agreements with the authorities to clear your tax burden with a lesser amount than you owe. An offer to settle a tax debt must specify the legal justifications for the compromise and provide sufficient details to allow the Service to assess whether the offer is acceptable under its acceptance guidelines.
Types of Offer in Compromise Relief:
There are three types of offer in compromise relief:
· Doubt as to Liability:
When there is a sincere disagreement over whether or how much the appropriate tax liability under the law exists, there is doubt as to liability. If the presence of the liability has been confirmed by a final court ruling, there is no room for doubt as to liability.
· Doubt as to collectability:
Any situation where the taxpayer’s income and assets are insufficient to cover the total balance of the liability raises questions about its capacity to be collected.
· Promotion of effective tax administration:
If the Service determines that, despite the possibility of complete collection, collection of the whole liability would put the taxpayer in a difficult financial situation; a settlement may be reached to enhance successful tax administration. Financial difficulty is described as being unable to cover minimally necessary living expenses. No agreement may be reached on this basis if doing so would jeopardize taxpayers’ capacity to comply with tax rules.
Doubt As to Collectability is the most prevalent among all. You give a specific sum that corresponds to the amount you can afford to pay to convince the government that you are unable to afford to pay the full amount you owe. You argue to the authorities that you do not truly owe the tax they believe you do, or at least not entirely, by filing a Doubt As to Liability.