Florida taxpayers who file an Offer in Compromise are offering to pay the Internal Revenue service less than the full amount of tax debt they owe. The Internal Revenue Service has sole discretion to accept less than the full payment for the tax debt and will do so if they believe it is unlikely the debt will ever be collected or if there is doubt as to the taxpayer’s liability for the debt.
An Offer in Compromise is a legal alternative for the Internal Revenue service to avoid declaring tax debt as currently not collectible or accepting a protracted installment agreement. The Internal Revenue Service will often accept an Offer in Compromise to help the taxpayer pay as much debt as possible, for the least cost to the government in the shortest time frame possible.
The Internal Revenue Service currently accepts approximately 25% of the initial OIC offers. The IRS has the sole authority from the federal government to accept or refuse an OIC offer and Florida residents who have been denied will not have legal recourse against the IRS. Penalties and interest will continue to accumulate until the Offer in Compromise is accepted. An Offer in Compromise can be time consuming and expensive and if the IRS refuses an offer, they will have detailed information from the Florida taxpayer to continue their aggressive tax collection actions.
Florida residents who are considering an Offer in Compromise should contact a tax professional. The Internal Revenue Service offers a variety of tax settlement options for taxpayers and Offer in Compromise is not always the best solution to use to eliminate tax debt.
Qualifying for Offer in Compromise in Florida
A Florida taxpayer’s desire to have their tax bill reduced will not be enough to qualify for an Offer in Compromise. One of the following conditions must be met:
Doubt as to Collectibility – There must be some doubt as to the ability of the Internal Revenue Service to collect the IRS tax debt either now or in the immediate future.
Doubt as to Liability– This condition is unusual, but under certain conditions there may be a doubt as to whether a Florida taxpayer actually owes the IRS the taxes which they have been assessed.
Effective Tax Administration– Under certain exceptional circumstances Florida residents may face an economic hardship which would be inequitable or unfair if they paid their federal tax debt. If the IRS agrees, it may grant an Offer in Compromise. This condition is most frequently accepted for the elderly and handicapped.
Rejection of Offer in Compromise in Florida
Most Offer in Compromise offers are initially rejected. The Internal Revenue Service is required to send written notification to the taxpayer outlining the reason for the denial and if they considered the offer too low, they should identify what amount they would consider reasonable. Florida taxpayers should be able to review their Offer in Compromise information and if the IRS refuses, the information can be legally obtained under the Freedom of Information Act.
Offer in Compromise appeals have to be made with in 30 days from the date of the OIC denial letter. Offer in Compromise forms will not need to be resubmitted if the Florida’s taxpayer information has not drastically changed unless the date to appeal the OIC denial has passed. Tax professionals can provide legal advice for any Florida resident who is considering filing an Offer in Compromise application or if they need help with an OIC appeal.
Appealing an Offer in Compromise in Florida
Many Florida residents can begin the Offer in Compromise appeal’s process informally by discussing their offer with the IRS administrator who first denied their offer. The Internal Revenue Service may be willing to negotiate until an offer is reached which is suitable for the taxpayer and the government. Florida residents who are not successful utilizing the informal negotiation process can file a more formal written appeal to the Internal Revenue Service with in thirty-days of the Offer in Compromise denial letter.
Completing an Offer in Compromise
To file an Offer in Compromise the Florida taxpayer will have to complete the following tasks:
- Submit a series of forms and financial documents to the IRS. Documentation can include: pay stubs, bank records, and vehicle information.
- Florida taxpayers will have to file all IRS tax returns on or before the federal tax deadline for the next five years
- All self-employed Florida workers will have to make estimated tax payments and file all federal tax returns each quarter
- Florida taxpayers must pay all IRS tax payments (excluding the amount outlined in the Offer in Compromise offer) for the next five years
- Agree to pay the amount outlined in the Offer in Compromise
- Agree to let the IRS keep all IRS tax refunds and apply them to your tax debt prior to submitting your OIC
- Agree that the IRS will apply any tax refund to your IRS back taxes for the calendar year that your OIC is approved
***Failure to fulfill the terms outlined in the Offer in Compromise Contract can give the IRS the ability to revoke the OIC and charge the taxpayer with the full amount of IRS debt.****
Offer in Compromise Forms
- IRS Form 656- Offer in Compromise. IRS Form 656 provides financial information about the Florida taxpayer’s financial status and their ability to repay their IRS federal tax debt.
- IRS Form 443 A- Collection Information Statement for Wage Earners and Self-Employed Individuals. Form 443-A provides additional financial information about the Florida taxpayer’s ability to pay their IRS tax debt to the Internal Revenue Service.
- IRS Form 443-B- Collection Information Statement for Businesses. Form 433-B outlines financial information about the Florida taxpayer’s business. Florida residents are required to submit tax Form 433-B if they are including their business tax debt in their Offer in Compromise offer.
- IRS Form 656-A- Income Certification for Offer in Compromise Application Fee and Payment. This form is required for any Florida taxpayer who is requesting the Offer in Compromise fee waiver.
Florida Tax Professionals
There are a variety of tax settlement options available for Florida taxpayers. A tax professional has the expertise to review a taxpayer’s financial situation and determine which plan will help the taxpayer eliminate tax debt as soon as possible for the least amount of money.