Tax Debt – What To Do If You Owe Back Taxes Part 2

Offer in Compromise – if you owe much more than $25,000 and the likely hood is that you wouldn’t be able to pay if off in any reasonable period of time then you might want to consider a IRS process called “Offer in Compromise (OIC)”. An Offer in Compromise is an agreement between a taxpayer and the IRS that resolves the taxpayer’s tax liability.

Tax Settlement Firms – You see the advertisements in newspaper, on TV, and on the Internet. You might even get fliers in the mail. These firm’s charges start at $2,000 or much more and there are no guarantees that your offer would be accepted by the IRS. If you get rejected by the IRS, you will have virtually no recourse with these firms. Be advised that over 80 % of OIC’s are rejected due to improper planning and taxpayer’s frequent misconception.

  Collection activities during the process

Generally, unless you have an agreement with the IRS regarding your tax liability, the IRS may attempt to collect the balance at any time.

However, the IRS will withhold collection activities while they consider the offer. The IRS will not act to collect the tax liability.

• While the IRS investigates and evaluates the offer     ( average time is 10 months)
• For 30 days after the IRS rejects the offer
• While the offer rejection is being appealed.

The IRS will not withhold collection if the IRS finds any indication that the offer was submitted to delay collection or jeopardize their ability to collect the tax. In other words the action of submitting the the OIC had no merits.

Dan