Here at Defense Tax, we can help you negotiate a settlement with the IRS to pay significantly less than the amount they say you owe them. The ‘offer in compromise’ or OIC is a scheme where if you have no means of paying your tax bill within 10 years of it being levied the IRS will agree to a reduced amount in settlement of the tax bill.
There are three types of OIC – the Offer In Compromise – Doubt as to Collectability, the OIC – Doubt as to Liability, and the OIC – Effective Tax Administration. Let’s now look at the top 5 reasons you could have an offer in compromise of these three types.
1. The economy tanks
No matter the whys of the matter, the US economy has hit the wall with the COVID-19 pandemic. Between January and April this year, 20 million Americans lost their jobs in all sectors – even in tax auditing! We just don’t know what will happen next.
With regard to the OIC – Doubt as to Collectability, you could have been infirm, steady employment, and was paying a decent amount of tax every year but with the economy going over the cliff you may struggle to recover to the point you can pay 2019’s tax bill. In this instance, the IRS may well look at your accounts and agree there is some doubt as to your ability to pay your tax bill.
2. Living in a one factory town and the factory leaves
This happens a lot in America as businesses go under thanks to Chinese factories undercutting their costs so much that the American company goes out of business. Once again you could be happy in your job one day and planning a future in your small town when you get the news that the owners are closing their business and contracting a Chinese company to do the work instead.
The IRS also considers the value of your assets and where the housing market collapses in your factorials, one factory town your assets may not reach the threshold of you being able to repay your tax bill. Here again, you can apply for an OIC – Doubt as to Collectability.
3. You become disabled
What if you develop cancer or have a major mental health breakdown? These aren’t controllable or even preventable in many cases. You may be a homeowner (and have the assets to pay) but have been driven over the edge by the pandemic situation and need expensive long-term mental health treatment.
Here the IRS would consider your extenuating circumstances and judge that by realizing the assets in your home to repay your taxes you will be put into undue hardship so even though you could in theory repay your tax bill it would put you in an even worse situation. Here the OIC – Effective Tax Administration (OIC-ETA) could be put into action.
4. Do you or your family have drug or alcohol problems?
You don’t have to look on the internet for long to know about the epidemic of opioid abuse in the United States. Again, forgetting why this has happened it may well have impacted you or a close family member. The IRS has been known to consider this as an extenuating circumstance that would force you into undue hardship and would then agree to an OIC-ETA
5. Doubt as to Liability
No US government agency gets their calculations or judgments right every time. You could be in dispute as to your liability to pay the tax bill in the first place. Where the IRS can see an expensive legal battle that might cost it more than the tax bill, you’re disputing then it can in some circumstances agree to an OIC-Doubt as to Liability.
This is one of the rarest forms of OIC the IRS agrees to but with the support of Defense Tax, you could fight your corner on the issue and prove to them that their position has sufficient weakness to warrant an OIC of this type.
Do you fit into any of these categories?
If you believe that you fit into any of these five examples of where you could get an Offer in Compromise then you should contact us at Defense Tax today to discuss slashing your tax bill.