If you are an Arizona resident and you have unpaid back taxes or you have been contacted by the Internal Revenue Service for repayment of your federal tax debt obligations, it is important to contact an Arizona Tax Attorney to discuss debt settlement options.
The Internal Revenue Service knows the chances of collecting the full amount of federal tax debt owed to them declines the more time lapses, it is therefore in their best interest to collect tax payments as soon as possible. With this in mind, the Internal Revenue Service has created a variety of programs to allow Arizona taxpayers to pay only a portion of their overdue taxes. One of these programs is called Offer in Compromise or “OIC”.
If you owe back taxes, penalties and interest, it is important to contact an Arizona Tax Attorney before the IRS contacts you. The Offer in Compromise is a formal process and should be done accurately. Your Arizona Tax Lawyer can:
- Help you complete the IRS Form 656, submit the Collection Information Statement and Form 433A.
- Review your tax debt situation
- Answer all questions related to the Offer in Compromise program
- Send all appropriate Offer in Compromise documents to the IRS.
- Work with the IRS to comply with their request in a timely manner and providing the appropriate documentation such as pay check stubs, bank records and vehicle information.
After you make your Offer in Compromise, the Internal Revenue Service has sole discretion as to whether or not they will choose to reduce your tax debt. Currently, less than half of the OIC applications are accepted. Interest on the outstanding federal tax debt continues to accrue while your Offer in Compromise is under review and if the Internal Revenue Service does not accept your offer, unfortunately, they will have all the information they need about your finances to continue aggressive collection efforts against you. For this reason, it is a good idea to talk to an Arizona Tax Lawyer. Hiring an Arizona tax Attorney can help protect you and increase the odds that the Offer in Compromise application will be accepted.
Qualifying for an Offer In Compromise in Arizona
Not everyone who submits an Offer in Compromise application will be accepted. Complaints have been made that the Offer in Compromise process can be expensive and require an extensive amount of paperwork. In addition, most offers are denied the first time and must be appealed. You must be able to show certain conditions exist to receive a favorable Offer in Compromise:
- Doubt as to Liability- If you disagree with the amount of tax debt the IRS states you owe, you may be eligible to file an Offer in Compromise to require the IRS to review the dispute. This condition is uncommon and is generally used after the taxpayer has failed to win an appeal, litigation or the time to appeal the assessment has expired.
- Doubt as to Collectibility- Given your current financial situation, if the IRS believes your tax bill is not collectable in the near future, they may accept your Offer in Compromise application.
- Effective Tax Administration- If you can prove paying your federal tax debt would create an “economic hardship which is unfair and inequitable” the IRS may accept your Offer in Compromise. This offer is rarely allowed and is used not when the collectibility or liability is in question, but only if there is an extenuating circumstance. Effective Tax Administration is most often used for the disabled and the elderly.
Rejection of Offer in Compromise Offers
The Internal Revenue Service will reject your Offer in Compromise if the offer is too low. They are required to send an written explanation to you outlining the reasons your offer was denied. In the IRS letter, they should state what amount they consider reasonable. If they refuse to send you a copy of the report for your Offer in Compromise, you are legally able to access that information under the Freedom of Information Act.
If your offer is rejected, you can work with an Arizona Tax Attorney to resubmit your offer. Your tax attorney may have insight about your application and how to complete the information to make it better. You will not be required to submit a new Form 656 if your financial circumstances have not changed and you complete the new offer with in one month. If you offer is very different or your financial situation has changed, your tax lawyer can work with you to complete a new Form 656.
Appealing an Offer in Compromise
An Offer in Compromise can be formally appealed or you can contact the administrator who was responsible for the decision and talk to them. The Internal Revenue may be willing to negotiate further with you. Formal appeals can also be made by sending a letter to the IRS with in thirty days of receiving the denial letter.
Arizona Tax Attorneys can help you appeal your Offer in Compromise. If your Offer in Compromise is rejected it is important to contact a Tax Attorney prior to further negotiation. To ensure your Offer and Compromise appeal is reviewed you must:
- Provide accurate financial information in a timely manner to the Internal Revenue Service for review.
- All past tax returns must have been filed.
- You must have paid your required tax debt obligations for the current year. If you are self-employed the IRS will require all estimated tax payments to be made each quarter.
Unfortunately, the Internal Revenue Service has the legal right to deny you an appeal of your Offer in Compromise. The Internal Revenue Service can not be sued for not accepting your Offer in Compromise.
Arizona Tax Attorneys
An Arizona Tax Lawyer can help you complete your Offer in Compromise by helping file the forms and create an offer which is as low as possible. Tax Attorneys also can help make sure the Internal Revenue Service follows their outlined tax code regulations. Arizona Tax Lawyers can also provide you with clear honest answers about all the tax settlement options available for your financial situation.