subject: Settling Your IRS Tax Debt – Look Before You Leap [print this page] Settling Your IRS Tax Debt Look Before You Leap
I can't pay my debt If I had a dime for every time I've heard that my income would be so high I would owe the IRS. But what can you do when you owe the IRS money and you actually can't afford the full balance? What can you do when the financial security of your family is threatened? You can settle your debt with the IRS for a lesser amount, but it isn't easy.
What is this miracle solution? The official term is Offer in Compromise or a short OIC. Before breathing a sigh of relief and think that is something to solve your problems, I must say: We used to laugh in the OIC applications. There is a reason why I said, are hard to come by and tell you some of the obstacles you must overcome:
You must show the IRS that you are never able to repay the entire tax liability or prove that you should pay your debts "unduehardship". When you deal with the IRS you are guilty until proven innocent.
Only 2% of all offers in compromise are successful.
If the Offer in Compromise is accepted you have to enter into a five year contract with the IRS. You have to file all returns on time and pay any tax debt you may incur during the five year period. Failure to live up to the terms of the contract will result in the entire debt being reinstated and you'll have to owe the original amount plus any additional interest and penalties.
You can't always believe the "experts". Sometimes I stay up late and watch these commercials where so called tax experts tell you they can settle your debt for pennies on the dollar. They're trying to sell you on an Offer in Compromise. And they will file the OIC for you, but if you don't meet the criteria they have your money and you still owe the debt. Always research these tax professionals with the Better Business Bureau before you give them your money when you're already in a tight spot.
