Trouble Paying Your Taxes? Consider Making an IRS Offer In Compromise
Sometimes business owners find themselves unable to meet their business tax obligations to the Internal Revenue Service. If your business meets certain criteria, you may be able to extinguish your tax liability by paying only a portion of your actual tax bill. While a Washington DC business tax attorney can help you decide if your particular circumstances are ripe for an IRS Offer in Compromise, the following provides an overview of the IRS OIC program.
What is an IRC OIC?
The Internal Revenue Service’s offer in compromise program, authorized under the federal tax code, allows a taxpayer – whether an individual, a corporation, a partnership, or other entity -- and the IRS to enter into an agreement to settle a taxpayer's tax liabilities for less than the full amount owed.
The IRS OIC program is designed to be a win-win for both the government and the taxpayer.
From the taxpayer’s perspective, the OIC process allows them to extinguish a past debt and move forward as long as they meet the terms of the OIC, including meeting all IRS tax-related obligations in the future.
From the government’s perspective, the OIC process allows the IRS to a capture some of the revenue owed without having to resort to lengthy legal proceedings while gaining a promise from the taxpayer that they will be compliant in the future.
IRS Offer in Compromise: Is Your Business Eligible?
In the majority of cases, the IRS will only accept a taxpayer’s offer in compromise if the amount offered is equal to or greater than what the IRS believes the taxpayer is able to pay. This amount, called the reasonable collection potential (RCP), is determined by looking at the taxpayer’s assets and future income.
If the taxpayer passes the threshold RCP test, the IRS will then look to see if they fulfill one of the allowable reasons behind eligibility for an acceptable OIC:
Doubt as to liability
To be eligible for an OIC under a doubt as to liability theory, there must be a genuine legal dispute regarding either the existence of the tax debt or the amount of the correct tax debt.
Doubt as to collectability
To proceed with an OIC under because there is doubt as to collectability, there must be a doubt as to whether the amount owed can be collected in full. The IRS will look to whether the taxpayer’s assets and income are less than the full amount of the tax liability.
Effective tax administration
If there is no doubt that the tax is owed and that the full amount is collectible, the IRS can still accept an OIC if the taxpayer would be left in a place of economic hardship or if exceptional circumstances would make collecting the entire tax debt unfair and inequitable.
There are additional factors regarding your potential eligibility that a business tax lawyer can review with you.
How a Washington DC Business Tax Attorney Can Help
Deciding whether or not to make an IRS Offer in Compromise is a matter to discuss with experienced tax counsel. A Thorn Law Group Washington DC business tax attorney like Kevin E. Thorn can help you make the right decision and, if necessary, guide you through the process. To learn more about your options, contact us online or call us at 202-349-4033.