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How to submit an Offer in Compromise that will be accepted?

Make a mistake in the filing process or offer an amount that is too low and you could have to start from scratch again. In our last post, we explained how it is necessary to be up-to-date in filing your tax returns.

In this post, we discuss the OIC filing process in more detail and what you need to do while waiting on a decision.

 

Square one: Find the right forms

When you start researching whether an OIC might be an option, you are greeted with lengthy forms that ask for exhaustive information. How do you know whether you will qualify? There is really no substitute for the guidance of an experience tax attorney. Here are few of the details about each of the forms.

Form 433-A is for individual taxpayers and 433-B is for businesses. These are detailed forms that ask for income, expenses, assets in bank accounts, the value of real estate and other property. For a company, questions about wages, inventory and material purchases and insurance costs are line items under the expense section.

If you have been through the mortgage application process, the list of documentation will look familiar. Here are a few of the things you need to provide to support your request:

  • Copies of bank statements for the last three months
  • Copies of all income including wages, investment and retirement account as well as Social Security, rental income, child support and alimony

Then there is another form - Form 656 where you make your offer. This is where you also explain the circumstances that prevent you from paying your tax bill in a reasonable time frame.

Don’t forget the application fee and initial payment

If you are struggling to pay back taxes, then an application fee might be one more hardship. But if neglected it could lead to an automatic rejection. The application fee is currently $186. You have several options to make payments; however, it is necessary to send an initial payment with the application.

Meeting the Low Income Certification guidelines can allow you to skip these two fees.

Payments while the application is pending?

You can pay the offered amount in lump sum or periodic payments. With a lump sum offer, you submit an initial payment of 20 percent and the remainder when the offer is accepted. Periodic payments start with the application and then you make monthly payments until the offer is accepted and you have paid the offer amount in full.

What is your offer is rejected? Then the money you paid goes toward your unpaid tax bill. You would then have 30 days to to appeal the rejection. If you filed an OIC on your own and your application was rejected immediately speak with an attorney, because the window to appeal is limited.

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