There is no doubt that your back tax is correct and there is potential to collect the full amount of the tax owed, but an exceptional circumstance exists that would allow the IRS to consider an Offer in Compromise (OIC). To be eligible for Offer in Compromise on this basis, a taxpayer must demonstrate that the collection of your tax liability would create an economic hardship or would be unfair and inequitable.
Your settlement offer amount must include the realizable value of assets plus the total amount the IRS could collect over 60 months of payments or the remainder of the statutory period for collection, whichever is less.
3. Deferred Periodic Payment Offer - Payable in non-refundable installments; your Offer in Compromise amount must be paid over the remaining statutory period for collecting the tax. The first payment and the $150 application fee are due upon filing the Form 656. Regular payments must be made during the investigation.
Your settlement offer amount must include the realizable value of assets plus the total amount the IRS could collect through monthly payments during the remaining life of the statutory period for collection.
The IRS is not bound by either your offer amount or your terms. The OIC investigator may negotiate a different offer amount and terms, when appropriate. Your investigator may determine that your proposed settlement offer amount is too low or the payment terms are too protracted to recommend acceptance. In this situation, the OIC investigator may advise you, the taxpayer, as to what larger amount or different terms would likely be recommended for acceptance.
If your IRS Offer in Compromise is missing documents, forms or information, the IRS can (and the IRS will ) return your paperwork to you as un-processable, and the IRS can (and the IRS will) then proceed with an IRS Wage Garnishment or IRS Wage Levy of your wages / paycheck / Social Security / property. In other words, the IRS will try to discourage and confuse you.
You need to be sure to "dot all the i's" and "cross all of the t's." Don't forget, the IRS is not looking to help you. It is your responsibility to present a Offer in Compromise that is done correctly and accurately. If you don't, the IRS will dismiss your Offer in Compromise and you will have to start all over again.
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