The Internal Revenue Service has the authority from the federal government to collect taxes to fund government activity. Connecticut residents who owe federal tax liability may be able to negotiate with the Internal Revenue Service to settle their federal tax debt for less than the full amount owed.
The Internal Revenue Service offers a variety of debt settlement options for Connecticut taxpayers including Offer In Compromise. Offer In Compromise allows the taxpayer to make an “offer” to the Internal Revenue Service to settle tax debt. Penalties and interest continue to accrue until the offer is accepted and the IRS has sole discretion to decide if they are willing to accept the Offer in Compromise. If the Internal Revenue Service does not accept the offer, they will have detailed financial information which they can use to continue their collection efforts.
Connecticut taxpayers who are considering Offer in Compromise, may want to discuss their financial situation with a tax professional such as a tax accountant, tax attorney or enrolled agent to decide if Offer in Compromise is the best tax settlement option available.
Qualifying for Offer in Compromise in Connecticut
All Connecticut residents Offer in Compromise (OIC) applications will not be accepted. In fact, the IRS accepts approximately 20-25% of the first time offers. More are accepted on appeal. Offer in Compromise can be time consuming and expensive. Offer in Compromise offers will only be accepted if they meet one of the following criteria:
- Doubt as to Liability– Connecticut residents may qualify for Offer in Compromise if there is doubt about the amount of IRS tax debt they owe. This condition is not commonly met.
- Doubt as to Collectibility– Certain Connecticut residents will have outstanding tax debt which is not in question, but the Internal Revenue Service will decide they can not collect the debt or collection of the debt would cost more than settling with an Offer in Compromise.
- Effective Tax Administration– If the Internal Revenue Service believes collection of the tax debt will cause “an economic hardship which is inequitable and unfair” they may decide to accept the Offer in Compromise. This is most commonly used for the elderly and disabled.
Rejection of Offer in Compromise in Connecticut
It is not unusual for an Offer in Compromise to be rejected. If the Offer in Compromise is rejected the Internal Revenue Service is obligated to send the taxpayer written notification explaining the reason for the denial and suggest an offer they would consider reasonable. The Internal Revenue Service frequently denies Offer in Compromise offers because they believe the offers are too low. Connecticut taxpayers are allowed to request all OIC information and will have legal access to the information under the Freedom of Information Act.
Tax Professionals can help submit all Offer in Compromise applications and negotiate with the Internal Revenue Service if the offer is denied. All OIC appeals must be made with in thirty days from the date of the denial. New Offer in Compromise forms will only need to be completed if the Connecticut taxpayer’s financial information has drastically changed or if the deadline to appeal the Offer in Compromise has expired.
Appealing an Offer in Compromise in Connecticut
Connecticut taxpayers whose Offer in Compromise application has been denied may be able to re-negotiate the offer with the administrator who made the first decision. If negotiations fail, a more formal OIC appeal process is available. The Internal Revenue Service frequently will engage in negotiations to settle tax debt with the goal of helping the tax payer pay federal liability now and put them in a position to pay all future tax obligations.
Connecticut taxpayers who would like to appeal their Offer in Compromise denial, must make a written appeal to the Internal Revenue Service. To reduce the chance of a denial all the following tasks must be completed and the following information provided:
- The Internal Revenue Service will need detailed information about the Connecticut taxpayer’s finances.
- Connecticut taxpayers will need to file all past tax returns.
- Self-employed workers must file and make estimated tax payments each quarter.
- Connecticut taxpayers will need to pay all the tax liability they owe that is not covered under the Offer in Compromise agreement.
The Internal Revenue Service does not have to agree to the OIC appeal. They have sole discretion to accept or deny all OIC applications and Connecticut taxpayers do not have the legal ability to sue the Internal Revenue Service if the Offer in Compromise appeal is denied.
There are a variety of forms that Connecticut taxpayers will have to complete to make the Offer in Compromise:
- IRS Form 656- Offer in Compromise. Form 656 provides information about the amount of funds Connecticut taxpayers can offer to settle their Internal Revenue Service tax debt.
- IRS Form 443 A- Collection Information Statement for Wage Earners and Self-Employed Individuals. Connecticut taxpayers will provide information about their current financial statues on this form and the Internal Revenue Service can use the information to determine the taxpayer’s ability to repay their tax debt.
- IRS Form 443-B- Collection Information Statement for Businesses. Internal Revenue Service uses Form 433-B to collect information about the taxpayer’s business. Tax Form 433-B is required if a Connecticut taxpayer is including their business in their Offer in Compromise.
- IRS Form 656-A- Income Certification for Offer in Compromise Application Fee and Payment. Connecticut taxpayers can use Form 656-A if they are requesting the Internal Revenue Service to waive the OIC fee.
Connecticut Tax Professionals
The Internal Revenue Service offers a wide variety of tax settlement options for the Connecticut taxpayer. If you live in Connecticut and you are considering an Offer in Compromise, a tax professional can help. Tax professionals can provide the knowledge and expertise needed to you determine if Offer in Compromise is right for you.