Sometimes, conditions can arise which are beyond the control of anyone,
and a person can have a tax debt to the IRS. Other conditions can
produce the same situation but the problem is the same. If this has
ever happened to you, you know the mental anguish it can produce.
All may not be lost, however. The IRS will normally accept a payment
agreement to eliminate the debt. A payment agreement is not always
a viable option. If the debt is too large for a reasonable payment
agreement, an Offer in Compromise (OIC) may be the option for you.
Two types of OIC exist. The first is based on “Doubt of Collectability”
which simply stated is you can’t pay the debt due to insufficient
In this case the IRS will settle the debt for less than is owed, based
on your assets and income less allowable expenses.
This requires an IRS form about your financial information.
Be prepared to present proof of income and expenses or the OIC
will be rejected. The Second OIC is based on “Doubt of Liability”.
In this case, your income tax must be redetermined and you must be
able to pay the balance due. If you can’t pay the balance, then
the Doubt of Collectability must be used. If the OIC is filed
based on Doubt of Liability, an exceptional chance of an audit exists.
Perhaps the most frequent response is the most dangerous response. Failure or refusal to respond can result in Levies or Seizures, which then produces other problems. The best option is to meet the problem head on and take an aggressive position to handle the issue before the IRS takes an aggressive position to collect the taxes.
Penalties and Interest can be abated for reasonable cause. If you did not file your return or pay the taxes timely and the delay was caused by conditions beyond your control, you may be able to have the penalties and interest related to those penalties removed (abated). This is determined on a case by case basis and consequently, the way the request for abatement is worded is of the utmost importance.
If you have a debt to the IRS contact us and we will determine the best method to alleviate the problems caused by that debt.