Want to settle your tax debts with the IRS? Try new Pre-Qualifier Tool

Posted on Jan 07, 2014

If you have a lot of I.R.S. tax debt, and think that you may qualify to settle your tax debts with them, there is a new "Pre-Qualifier" tool available for free on their website that may be able to give you a pretty good idea of what they will take, in usual cases. 

An "offer in compromise" or OIC is what the IRS calls a settlement of your taxes, for less than the amount due. It is based on what assets that you own, and what your income and living expenses are. Of course, they have their own idea of what your living expenses should be. Getting the IRS to accept an OIC that you make, may or may not be affordable for you. But it is a lot more affordable then it used to be. Recently, they changed their rules to make it much more affordable to people to settle their tax debts.

You have to be careful with an offer. If you submit one, you must pay 20% of the amount offered, with the offer (unless you are very low income). And you don't get that back, even if they reject your offer. If you make an OIC and propose to pay the offered amoiunt in installments, you must start paying the 24 monthly installments, which again, you don't get back even if they don't approve the offer.

And filing an OIC "tolls" or stops the running of the "Collection Statute Expiration Date" or CSED, so the IRS has longer to collect the taxes from you, if the OIC is either rejected, or if you later default on it. Filing an OIC can also affect when income taxes can become dischargeable in bankruptcy, if you are considering doing that in the future, or if you are considering filing bankruptcy because of other debts.

Regarding default, part of an OIC agreement is that you must be a perfect taxpayer for 5 years after the acceptance of the OIC. If you fail to timely file tax returns or fail to timely pay all that you owe, your OIC can be "defaulted" and the OIC is cancelled, and they keep all the money that you paid (you get credit for it, but they add in all the penalties and interest that would otherwise have accrued). Some of my clients are just not good OIC candidates for this reason; they just can't seem to stay current with their tax responsibilities, try as they might.

It is possible to file an OIC yourself, without help, but as you see above, there is a lot more to it than just filling ouit the forms. If you want help, hire an attorney, C.P.A., or an "enrolled agent" that is experienced in these matters. If you owe income taxes that are more than 3 years old, they may be dischargeable in bankruptcy, so if you want to know more about that, a bankruptcy attorney would be your best choice.

But if you want to get an idea of whether or not you would qualify for an Offer in Compromise, and how much the IRS may want from you to settle, go the the IRS Pre-Qualifier tool and try it out. For help with IRS problems, call our office at 713-772-8037.

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