An Offer in Compromise (OIC) settles a tax liability for less than the total amount owed. The government must accept your offer and if accepted, your tax liability may be settled for substantially less than what is owed.
Qualifying for, and having the government accept, an OIC is a difficult process. Numerous factors are analyzed to determine whether you are a suitable candidate for an OIC. Generally, the government will determine your “reasonable collection potential” which is based upon how much the government believes it can recover from you. This amount will determine whether the OIC will be accepted or rejected. If accepted, an OIC can reduce your tax liability by hundreds, if not thousands, of dollars.
Basis for an OIC:
1) Doubt as to Liability
Doubt as to Liability is one ground upon which an OIC may be based. The taxpayer must show that there is a “legitimate doubt” as to the amount of the liability assessed. This ground is occasionally successful and depends upon whether the assessed liability is correct.
2) Effective Tax Administration (ETA)
An OIC based on the ground of Effective Tax Administration requires the existence of exceptional circumstances. The overall tax liability may be correct; however, the taxpayer has the burden of proving that paying the full amount would create an economic hardship. An economic hardship requires some type of disability, major expense, or other factor showing an inability to make tax payments.
When determining economic hardship, the taxpayers income and expenses are exhaustively analyzed. Most expenses are based on a predetermined national rate. Therefore, if you are living in the Sacramento or Roseville area, the national figures must still be utilized. The IRS will occasionally permit a more specific figure, however, it often is not in the taxpayers interest to do so.
Contact Randhawa Hundal LLP’s Tax Attorneys to Determine if You Qualify for an OIC
Contact Randhawa Hundal LLP’s Tax Attorneys to determine whether you qualify for an OIC. Having an OIC accepted can relieve you of hundreds, if not thousands, of dollars in tax debt. Even if you are not a suitable candidate, our Tax Attorneys can assist you with other programs that can reduce your overall tax burden. An installment agreement may be a potential alternative. Our Tax Attorneys service individuals in Sacramento, and greater Sacramento area, including Roseville. Call now to take control of your taxes!
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