| Just about everyone in the U.S. tax system tries to | | | | Some frivolous cases were submitted, which now |
| voluntarily comply with the tax laws. We are required | | | | causes the IRS to scrutinize each and every case. |
| to file tax returns and pay the correct tax amount | | | | You can actually perform the OIC yourself but it is |
| owed to the government. Not complying, threatens the | | | | best to let a professional help. The IRS will take |
| stability of the tax system. Sometimes, if not most of | | | | advantage of the less than knowledgeable taxpayer. If |
| the time, non-compliance is due to the lack of | | | | the OIC is not to the requirements set forth by the IRS, |
| knowledge by the taxpayer. Usually the IRS will help | | | | it will be rejected and you will still have to pay the full |
| the taxpayer become compliant. If the taxpayer | | | | amount of the tax liability. |
| purposely decides not to pay taxes then they may be | | | | 3) Penalty Abatement - If you can't pay your tax debt |
| subject to criminal sanctions by the IRS. There are | | | | due to circumstances out of your control, the penalties |
| those times that a taxpayer has financial trouble | | | | and interest owed can be challenged and thus should |
| paying taxes or that their tax returns have been | | | | be able to negotiate down the debt. Four categories |
| incorrect for a long period of time. The amount of the | | | | fall into this relief: |
| tax liability can be staggering if you consider the | | | | A) Reasonable Cause - mistakes on taxes, death, |
| interest and penalties that the IRS will tack on due to | | | | serious illness, unavoidable absence and ignorance of |
| your mistakes. The IRS can take advantage of a | | | | the law. |
| taxpayer who does not understand the tax law or the | | | | B) Statutory Exceptions - minor to major tax code |
| IRS Audit and Collection system. The good news is | | | | changes. |
| that there are tax debt relief programs that can help | | | | C) Administrative Waivers - hardship beyond your |
| individuals or businesses like you. | | | | control: fire, flood, natural disasters, bad tax/legal |
| 1) IRS Tax Relief Settlement - The IRS developed this | | | | advice. |
| program to allow the taxpayer to settle their tax debts | | | | D) Correction of Service Error - IRS mistakes. |
| for a percentage of the taxes owed. Depending on | | | | For a successful penalty abatement, the stated |
| your age, total assets, income and expenses, you | | | | representations for relief of penalties and interest have |
| could save thousands of dollars with this program. | | | | to be very specific. This will involve a skilled |
| 2) Offer in Compromise (OIC) - This is a settlement to | | | | professional to work with the IRS protocol and bring a |
| collect unpaid taxes for less than the full amount due. | | | | resolution to the taxpayer's problem. |
| Congress developed this program to offer taxpayers | | | | 4) Payment Plan - This program allows taxpayers to |
| a one time opportunity to eliminate their debt for a | | | | make payments on their tax debt because they can |
| fraction of what is owed. IRS agrees on the amount to | | | | not settle their tax in one entire payment. This gives |
| settle the debt. The IRS follows certain guidelines or | | | | the taxpayer time to pay and reduce their tax debt |
| circumstances for a compromise. | | | | without the harassment and embarrassment of the |
| A) Doubt as to Liability: some doubt if tax is correct. | | | | IRS officers. |
| B) Doubt as to Collectibility: doubt that the full amount | | | | If there is a financial condition where you can't pay, |
| tax owed will ever be paid. | | | | your account can be placed in a "not currently |
| C) Effective Tax Administration: no doubt the tax and | | | | collectible" status. Under this program, the IRS will |
| amount owed is correct but due to circumstances the | | | | withhold collection activity until you are financially able |
| taxpayer can't pay i.e. economic hardship. | | | | to accept a payment plan or an Offer in Compromise |
| If there is a financial hardship where the amount owed | | | | is submitted. |
| exceeds the ability to pay off the tax debt in 5 years, | | | | You should try to avoid working or negotiating with the |
| the qualification for this program should be easy. The | | | | IRS yourself and hire a professional who knows and |
| problem with the program is that it is very popular. | | | | understands the IRS and the tax laws. |