There are a variety of IRS tax settlement options available for Delaware taxpayers who have outstanding tax debt. The Internal Revenue Service (IRS) has been given the task of collecting taxes for the United States federal government. With this goal in mind, the IRS has created programs which will allow taxpayers to repay tax debt often for a fraction of the total amount of money owed.
Offer in Compromise is one of the most popular tax settlement options. Offer in Compromise allows a taxpayer to make an offer to the IRS to settle back tax debt. If the IRS takes the offer it is considered a compromise and all past federal tax liability identified in the Offer in Compromise agreement is settled. The Internal Revenue Service has the sole authority to accept or deny Offer in Compromise offers. Delaware taxpayers who have an OIC offer denied will not have any legal recourse against the IRS.
The IRS currently denies approximately 25% of the OIC offers but more may be accepted on appeal. If the IRS declines the Offer in Compromise offer they will be able to continue their aggressive debt collection efforts against the taxpayer.
Offer in Compromise will not be the best solution for all Delaware taxpayers with back taxes to settle their debt. Offer in Compromise can be expensive and time consuming. Delaware taxpayers who are considering OIC should contact a tax professional to determine if Offer in Compromise is right for them.
Qualifying for Offer in Compromise in Delaware
Delaware taxpayers who are considering Offer in Compromise will have to meet one of the following conditions:
- Doubt as to Liability- Delaware taxpayers who believe they have been assessed the incorrect tax amount may qualify for Offer in Compromise. This condition is not frequently met.
- Doubt as to Collectibility– Under this condition, the amount of tax debt is not in question, only the ability of the Delaware taxpayer to pay their tax debt. The IRS may also accept an OIC offer if the cost to collect the debt is too high.
- Effective Tax Administration- Delaware taxpayer’s who would suffer “an economic hardship which is inequitable and unfair” may qualify for an Offer in Compromise. The IRS most frequently grants an OIC for this condition for the handicapped and the elderly.
Rejection of Offer in Compromise in Delaware
The Internal Revenue Service will reject approximately 80% of the initial Offer in Compromise offers. More may eventually be accepted on appeal. Delaware taxpayers who are denied an OIC should receive written notification from the Internal Revenue Service outlining why their OIC offer was denied. If the OIC offer was considered too low, the OIC denial letter should identify what offer the IRS would consider acceptable.
If the Internal Revenue Service refuses to share information about an Offer in Compromise with a Delaware taxpayer, the taxpayer can legally request the information using the Freedom of Information Act. All appeals for an Offer in Compromise must be requested with in 30 days from the date of the OIC denial letter. New Offer in Compromise forms will need to be completed if the expiration date for the appeal has past or if the Delaware’s taxpayer situation has substantially changed.
Appealing an Offer in Compromise in Delaware
To appeal an Offer in Compromise denial a Delaware taxpayer can first contact the Internal Revenue Service administrator who denied the OIC offer. This informal OIC appeals process is not always successful. If the IRS administrator is unwilling to negotiate an OIC offer, a more formal appeal can be made by sending a letter to the Internal Revenue Service with in 30 days of the date of the denial letter. The Internal Revenue Service often is willing to engage in OIC negotiations so the Delaware taxpayer will gain the financial ability to meet future tax liabilities.
Requirements for an Offer in Compromise
- All requested financial information must be provided to the Internal Revenue Service
- All Offer in Compromise forms will need to completed and sent to the Internal Revenue Service
- Delaware taxpayers must file all of their federal tax returns
- All self-employed workers must file quarterly tax returns and make estimated tax payments
- All federal taxes must be paid (except for the payments which can not be paid and are outlined in the Offer in Compromise)
Delaware taxpayers must also submit the following Offer in Compromise forms:
- IRS Form 656- Offer in Compromise. IRS Form 656 will provide financial information about a Delaware taxpayer’s ability to repay their tax debt.
- IRS Form 443 A- Collection Information Statement for Wage Earners and Self-Employed Individuals. This IRS tax form provides additional financial information about the Delaware taxpayer to the Internal Revenue Service.
- IRS Form 443-B- Collection Information Statement for Businesses. Form 433-B provides financial information to the Internal Revenue Service about a Delaware taxpayer’s business. Tax Form 433-B is only required if the Delaware taxpayer is including their business tax liability in the Offer in Compromise offer.
- IRS Form 656-A- Income Certification for Offer in Compromise Application Fee and Payment. The IRS Form 656-A will be required if the Delaware taxpayer is requesting that the Offer in Compromise fee be waived.
Delaware Tax Professionals
All Delaware taxpayers who have federal tax liability should contact a tax professional such as an enrolled agent, certified tax accountant or tax attorney to discuss their outstanding tax debt. The tax settlement options can vary and a taxpayer’s financial situation will determine which program is best for them.