If you have a tax liability with the Internal Revenue Service (IRS)—that is, you owe money to them—you may be considering a settlement proposal, especially if you have been as hard hit by the economy, job loss, or other factors as many other Americans have been. A settlement proposal is when you offer to address your tax liability in a manner other than paying the total amount due when it is due.
When you are submitting a settlement proposal to the IRS—whether your proposal is an installment plan, an offer in compromise, or a different payment option—there are several important steps you can take to improve the chances the IRS will accept your proposal:
File all tax returns due. If you have not filed your federal income tax return for one or more years, including the current tax year if the filing date has passed and you have not filed for an extension, then the IRS will automatically reject most settlement proposals.
Submit completed forms including fees. For each of the IRS’ available formal processes for submitting different types of settlement proposals, the IRS has specific forms that it expects you to fill out completely and turn in. Even within a given settlement option, there may be one or more different forms to submit depending on your circumstances. And along with these forms, you generally need to include the appropriate supporting documenting and filing fees. If any of the forms, supporting documentation, or filing fees are not in order, the IRS may automatically reject your settlement proposal.
Submit your best offer. When you submit a settlement proposal, the IRS expects that while it may not be for the full amount of the tax liability you owe, they expect that it will be the maximum amount you can afford to give them. When the IRS reviews your income, expenses, and overall situation as a part of your settlement proposal, if it is obvious you can afford to pay more than your offer, the IRS will reject your proposal.
Provide support. As noted above, the IRS generally requires supporting documentation as proof that, rather than you paying your full tax liability, you need to use a settlement proposal. The IRS has specific reasons for when it will accept a settlement proposal. If your reason and the supporting documentation do not establish that it is for a legitimate reason, the IRS will not accept your proposal.
Follow your settlement agreement as though it has been accepted. While the IRS is considering whether it will accept your settlement agreement, they expect you to begin making payments to them according to your submitted plan as though the settlement agreement has already been accepted. Failure to make these payments will results in the IRS declining you proposal.
How can I get help in making sure my settlement proposal will be accepted by the IRS?
While there is no guarantee that a settlement proposal to the IRS will be accepted, you can increase the likelihood of your proposal being accepted by leveraging the knowledge and experience of a tax attorney. A tax attorney will understand the settlement proposal options available to taxpayers, the specific situations that allow a taxpayer to qualify for each of the settlement options, and how to submit a settlement proposal that meets the criteria to qualify for the chosen options.
If you complete the short form below, a tax lawyer will review your situation free of charge and provide guidance you can use to make the decision best for you. This review is 100% confidential and free of charge, so please get help today in determining what settlement proposal options is best of your tax situation.
Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.