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Using Offer in Compromise in Texas to Settle IRS Tax Debt

Texas residents who have unpaid federal tax debt may be able to settle their debt for much less than they currently owe. Tax professionals such as enrolled tax agents, tax accountants and Tax Attorneys can identify which federal tax settlement options may be best for you.

The Internal Revenue Service (IRS) aggressively collects federal taxes, but they may be willing to settle for pennies on the dollar to collect taxes as soon as possible. There are a variety of tax settlement options available and one of the most popular is called Offer in Compromise or OIC.

Tax professionals are an excellent resource to help with the Offer in Compromise process to ensure the process is done correctly and as quickly as possible. Texas tax professionals can complete the following tasks for you:

  • Help complete the OIC FORM 656, the Collection Information Statement and Form 433A.

  • Answer all tax questions and Offer in Compromise questions.

  • File all Offer in Compromise forms and send them to the Internal Revenue Service

  • Ensure the Internal Revenue Service has all the appropriate financial information needed to complete the OIC including: paychecks, copies of bank records, vehicle information

The Internal Revenue Service has sole discretion to decide if they will accept the OIC application. Most OIC applications are not accepted with out an appeal. Interest on the IRS tax debt will accrue until the OIC application is approved. If the Internal Revenue Service decides they will not accept your Offer in Compromise application they will have all of your financial information and may use the information to continue their debt collection efforts. Texas tax professionals can help ensure your Offer in Compromise application is completed correctly and can help give you the greatest chance that your offer will be accepted the first time it is submitted.

Qualifying for an Offer In Compromise in Texas

Texas taxpayers have complained the OIC process is expensive and can require a substantial amount of time and completion of paperwork. The Internal Revenue Service does not accept every OIC application. In fact, most OIC applications will be denied the first time and will have to be appealed. Your OIC must meet one of the following conditions to be considered:

  • Doubt as to Liability- If you can prove the federal tax debt assessed against you is incorrect, you may be able to file an Offer in Compromise and the IRS will agree to review the amount. Doubt as to Liability is uncommon.

  • Doubt as to Collectibility- You may receive an OIC if the Internal Revenue Service believes the amount of federal tax debt owed is not collectible. Doubt as to Collectibility does not mean that the liability amount is in question only the ability to collect.

  • Effective Tax Administration- In certain cases individuals may be able to prove that collection of federal tax debt will cause “economic hardship which is inequitable and unfair”. These individuals may be granted an Effective Tax Administration and receive an Offer in Compromise. Effective Tax Administration is unusual and is most frequently allowed for the disabled and the elderly.

Rejection of Offer in Compromise in Texas

If the Offer in Compromise application is rejected, the Internal Revenue Service is required to send a written explanation describing the reasons it has been denied. One common reason is the offer was too low. If this is the case, the Internal Revenue Service must state the amount of tax payment they consider reasonable. You are allowed to legally access all of the Offer on Compromise information under the Freedom of Information Act.

A Texas Tax professional can help appeal the Offer in Compromise decision. A new Form 656 will only need to be submitted if your financial situation has drastically changed. New offers must be made with in one month to use the same form.  Tax accountants and tax attorneys all will have the experience necessary to help complete the Form 656.

Appealing an Offer in Compromise in Texas

Many times the administrator who made the first Offer in Compromise decision is the best person to talk to for negotiations. If this does not work, you can make a more formal appeal of the OIC decision, many times the Internal Revenue Service will be willing to continue negotiations for payment. To formally appeal the Offer in Compromise decision, you can send a letter to the Internal Revenue Service. This must be done with in 30 days of receiving the Offer in Compromise denial letter.

If your OIC is rejected, a tax professional can help with further appeals or negotiations. Offer in Compromise offers will be considered only if the following criteria have been met:

  • All information provided to the Internal Revenue Service must be accurate and received when requested

  • All federal tax returns have to be filed

  • Self-employed individuals must make quarterly tax estimated payments

  • Tax debt for the previous years must be paid

Offer in Compromise applications are frequently denied and the Internal Revenue Service has the legal right to refuse your appeal. The Internal Revenue Service can not be sued for not accepting the Offer in Compromise from Texas taxpayers.

Texas Tax Professionals

If you live in Texas and are considering an Offer in Compromise, it may be a good idea to contact a Texas tax professional. Tax accountants, enrolled tax agents and Texas Tax attorneys all have experience working with the IRS and understand new tax code regulations. Tax professionals can help you make informed decisions about all of the tax settlement options currently available in Texas.
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