Arkansas residents who have unpaid Internal Revenue or IRS tax debt may be able to settle their federal tax debt for much less than they currently owe. There are a variety of tax settlement options available for the Arkansas taxpayer. If the Internal Revenue Service is harassing you, it may be a good idea to talk to a tax professional such as an enrolled tax agent, tax attorney or tax accountant for help.
The Offer in Compromise is one the most popular tax settlement options offered by the Internal Revenue Service. The Internal Revenue Service does not accept all Offer in Compromise applications and acceptance is under their sole discretion. If the IRS does not accept your Offer in Compromise they will have information about your financial situation which they can use to aggressive continue collecting back taxes. In addition, penalties and interest will continue to accrue during the OIC approval process. All tax settlement options should be discussed with a tax professional prior to negotiating with the Internal Revenue Service.
Qualifying for Offer in Compromise in Arkansas
The Offer in Compromise process can be time consuming and expensive. You will be required to provide a substantial amount of information. The IRS will not accept every Offer in Compromise and many OIC applications will only be accepted on appeal. Offer in Compromise applications will only be considered if they meet one of the following:
- Doubt as to Liability– The Internal Revenue Service agrees there may be some doubt as to the correct amount of tax liability assessed. This condition is not frequently met.
- Doubt as to Collectibility– Under this condition, there is not a question of the amount owed, but rather, the IRS does not think they will be able to collect the tax debt.
- Effective Tax Administration– This condition may be met if an individual can prove collection of the federal tax debt will cause “an economic hardship which is inequitable and unfair”. This is most commonly used for the elderly and disabled.
Rejection of Offer in Compromise in Arkansas
Most Offer in Compromise offers will be rejected by the Internal Revenue Service. If your OIC is rejected the Internal Revenue Service is required to send you a letter explaining the denial, and the amount of the offer the IRS would consider reasonable. Most OIC offers are denied because the Internal Revenue Service believes the amount offered was too low. If the IRS fails to provide OIC information to you, under the Freedom of Information Act you have the legal right to access the information.
If your Offer in Compromise has been rejected, it may be beneficial to discuss the appeal process with a tax professional. A new form 656 will only need to be filled out if your financial situation has changed substantially or you fail to make the new OIC offer with in the specified time frame, which is 30 days from the date of the denial.
Appealing an Offer in Compromise in Arkansas
Many Offer in Compromises applications will be denied. Most negotiations for a reconsideration can began with the administration that made the initial decision. A more formal appeals process is available if the administrator is not willing to reconsider your offer. The Internal Revenue Service in an effort to collect federal tax liability will often consider additional negotiations for payment.
All formal appeals may be made by written letter with in 30 days of receiving the Offer in Compromise denial letter. Tax professionals can help with the OIC process and ensure you meet the following criteria:
- The Internal Revenue Service will need accurate and expedient information
- All federal tax returns must be filed
- Tax estimates must be made and paid quarterly for self-employed individuals.
- Tax debt for previous years not covered under the OIC must be paid
The Internal Revenue Service does not have to agree to an appeal. The Internal Revenue Service has the sole discretion to approve or deny the Offer in Compromise application and Arkansas taxpayers do not have the legal authority to sue the Internal Revenue Service for failing to accept their Offer in Compromise offers.
Filing for an Offer in Compromise in Arkansas
There are a variety of forms which must be completed for the OIC.
- IRS Form 656- Offer in Compromise. Form 656 will provide information to the Internal Revenue Service about the amount of money you can offer to settle outstanding federal tax debt.
- IRS Form 443 A- Collection Information Statement for Wage Earners and Self-Employed Individuals. The IRS will use this form to assess a taxpayer’s ability to pay federal tax liability. This form will outline your current financial status.
- IRS Form 443-B- Collection Information Statement for Businesses. This is the same as the Internal Revenue Service Form 433-A but it is for businesses. This form will be required if business taxes are included in the Offer in Compromise.
- IRS Form 656-A- Income Certification for Offer in Compromise Application Fee and Payment. This form is only used if you can not afford to submit the Offer in Compromise.
Arkansas Tax Professionals
Offer in Compromise tax settlement options are just one of many tax settlement methods offered by the Internal Revenue Service to provide federal tax relief. Tax professionals have the expertise and experience with the tax code regulations to provide the information you need to make an informed decision concerning your federal tax debt.