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Offer in compromise can be a great tool for taxpayer in hardship

Few things are as financially unnerving to Georgia taxpayers as having a delinquent tax bill to the IRS. Even worse, perhaps, is knowing one does not have the ability to pay it, even with a payment plan.

An offer in compromise is a contract between a taxpayer and the IRS where both parties agree to settle an alleged tax liability for less than the IRS says the person owes. Those who cannot pay the liability in full via a payment plan may be able to secure an OIC.

As noted by the IRS, generally, a pre-condition to securing an OIC is that the taxpayer must be up-to-date on tax filings of the past and be paid up on the current year’s estimated tax payments, if any.

Reasons the IRS can use to accept an OIC

There are also regulated factors upon which the IRS may engage in an OIC. They include the following:

  • Doubt as to collectability
  • Doubt as to liability
  • Exceptional circumstances

By exceptional circumstances, the IRS is referring to a collectible tax debt that would nonetheless create a great financial hardship to the taxpayer. It may also include those situations where collection would be unfair due to the extraordinary facts of that person’s situation.

Acceptable offer amount for an OIC

An OIC must generally be at least the amount that would be collectible by the IRS if such collection efforts ensued. That is the typical measure of the taxpayer’s repayment abilities. This means a look at the person’s real estate, motor vehicles, bank accounts and other assets, as well as his or her expected future income. When evaluating expected future income, the IRS disregards the amount necessary for basic living expenses. Basic living expenses may not equal a person’s actual living expenses, however, because people enjoy differing levels of living to which they have become accustomed.

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The Peck Group, LC

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Located in Atlanta, The Peck Group, LC, represents clients nationwide. Regionally, we are committed to serving clients in Fulton County and throughout the state of Georgia.