Georgia taxpayers who owe federal back taxes have several IRS tax settlement options available to settle the debt. One of the most common programs is Offer in Compromise or OIC. Offer in Compromise allows the taxpayer to make an “offer” for less than the full amount of tax debt owed and the Internal Revenue Service (IRS) will either choose to accept or reject the offer. If the IRS decides to accept the offer, it is considered a “compromise” and will completely settle the IRS tax debt. The IRS has an incentive to accept OIC offers because it allows them to avoid declaring a tax debt as not collectible or extend the payment period with a protracted installment agreement.
The federal government has given the Internal Revenue Service the authority to collect tax debt from United States taxpayers. With this authority, the IRS also has sole discretion to accept or decline Offer in Compromise offers. The IRS frequently will settle IRS tax debt if they believe the debt is unlikely to be collected, there is question to the amount of tax debt owed or if paying the taxes will cause a Georgia taxpayer extreme financial difficulty. Currently the Internal Revenue Service accepts approximately 25% of the initial Offer in Compromise offers. Unfortunately, if the IRS declines the OIC offer, the Georgia taxpayer will have no legal recourse against the IRS and the IRS can continue their aggressive debt collection efforts with the detailed information the Georgia taxpayer has provided.
All Georgia residents who are considering an Offer in Compromise should contact a tax professional for assistance. Offer in Compromise can be a complicated, time consuming and expensive tax settlement option. Penalties and interest will continue to accrue until the offer is accepted. There are several IRS tax settlement options available to eliminate tax debt and Offer in Compromise may not be the best option for all Georgia taxpayers.
Qualifying for Offer in Compromise in Georgia
For a Georgia taxpayer to qualify for Offer in Compromise, they must meet one of the following conditions:
Doubt as to Liability – The Internal Revenue Service must agree that there is some doubt as to the amount of IRS tax debt which has been assessed to the Georgia taxpayer. This condition is not often met.
Doubt as to Collectibility – The Internal Revenue Service must agree that it is unlikely that the assessed taxed liability will be collected now or in the future or the IRS considers the cost to collect the tax debt too high.
Effective Tax Administration– Under certain conditions, collection of the IRS tax debt will cause a Georgia taxpayer an economic hardship which would be inequitable or unfair. If the IRS agrees, they will accept an Offer in Compromise. This condition is most frequently accepted for the elderly and handicapped.
Rejection of Offer in Compromise in Georgia
Up to 80% of Offer in Compromise offers will be declined. More will be accepted after a series of negotiations or a formal appeal. If the IRS rejects a Georgia taxpayer’s offer they are required to send written notification outlining the reason for the denial and what amount they would consider reasonable to settle the debt. New OIC forms will only have to be resubmitted if the OIC deadline has passed or if the taxpayer’s financial information has significantly changed. All Offer in Compromise information is available to Georgia taxpayers under the Freedom of Information Act.
Appealing an Offer in Compromise in Georgia
Informal negotiations to request an OIC reconsideration can be made by contacting the IRS administrator who made the first OIC denial decision. The IRS frequently negotiates with the taxpayer to find an offer which is acceptable to the Georgia taxpayer and the IRS. If informal negotiations fail, Georgia taxpayers can make a more formal written appeal to the Internal Revenue Service with in thirty days from the date of the OIC denial letter.
Completing an Offer in Compromise
To file an Offer in Compromise the Georgia taxpayer will have to complete the following tasks:
- Submit a series of Offer in Compromise forms and financial documents to the Internal Revenue Service. OIC required documentation can include: Georgia taxpayer’s pay stubs, bank records, and vehicle information.
- Georgia taxpayers will have to file all Internal Revenue Service federal tax returns on or before the federal tax deadline for the next 5 years
- All self-employed Georgia workers will have to make estimated federal tax payments and file all federal tax returns each quarter
- Georgia taxpayers must pay all Internal Revenue Service federal tax payments (excluding the amount outlined in the OIC offer) for the next 5 years
- Georgia taxpayers must agree to pay the amount outlined in the Offer in Compromise agreement
- Georgia taxpayers must agree to let the Internal Revenue service keep all IRS tax refunds and apply them to the tax debt prior to submitting the Offer in Compromise
- The IRS will apply any tax refund to the Georgia taxpayers back taxes for the calendar year that the OIC is approved
Failure to fulfill the terms outlined in the OIC agreement can give the Internal Revenue Service the legal right to revoke the Offer in Compromise and charge the Georgia taxpayer with the full amount of IRS tax debt.
Offer in Compromise Forms
- IRS Form 656- Offer in Compromise. IRS Form 656 provides financial information to the Internal Revenue Service about the Georgia taxpayer’s financial status and their ability to repay their IRS tax debt.
- IRS Form 443 A- Collection Information Statement for Wage Earners and Self-Employed Individuals. Form 443-A provides additional financial information to the Internal Revenue Service about the Georgia taxpayer’s ability to pay their tax debt.
- IRS Form 443-B- Collection Information Statement for Businesses. Form 433-B provides information to the IRS about the Georgia taxpayer’s business. Georgia taxpayers are required to submit tax Form 433-B if their business tax debt is included in the Offer in Compromise.
- IRS Form 656-A- Income Certification for Offer in Compromise Application Fee and Payment. Georgia taxpayers must complete this form if they are requesting the Offer in Compromise fee waiver.