When To File An Offer with the IRS

There are times when it is best for a business to file an offer and times when it is better to pursue being deemed uncollectible. In this blog post, we will explore both of these options and help you decide which path is the best for your company.

What's An Offer In Compromise?

An offer in compromise (OIC) is an agreement between a taxpayer and the IRS that settles the taxpayer's tax liability for less than the full amount owed.

The IRS considers many factors when evaluating an OIC, including:

The IRS will also consider your compliance history. To be eligible for an OIC, you must have filed all required tax returns.

In case you are currently not compliant, you can become eligible by filing all missing tax returns and making all required estimated tax payments for the current year. You must also be current on all federal tax deposits if you are required to make them.

When you are not current, you can become eligible by bringing your federal tax deposits up to date. You must also be current on all federal tax payments. When you are not current, you can become eligible by making all required federal tax payments.

What's The Process For Submitting An Offer In Compromise?

The first step is to submit a completed Form 433-A (OIC) or Form 433-B (OIC) along with a non-refundable application fee of $186.

Once your OIC is accepted, you will be required to make an initial payment called the "offer amount." The offer amount is based on your ability to pay and the IRS's evaluation of your case. If you are unable to make the initial payment, you may be able to set up a payment plan.

What Happens If My Offer In Compromise Is Accepted?

When your OIC is accepted, you will be required to make payments according to the terms of your agreement. You will also be responsible for paying any tax liability that arises during the duration of your agreement.

If you default on your payments or violate the terms of your agreement, your OIC will be void and you will be responsible for the full amount of your tax liability, plus interest and penalties.

What Happens If My Offer In Compromise Is Rejected?

Your OIC may be rejected. If your OIC is rejected, you will be responsible for paying the full amount of your tax liability, plus interest and penalties.

You may also be required to submit a new OIC with an updated offer amount or pursue other collection options, such as a payment plan or currently not collectible status.

What Is Currently Not Collectible Status?

Currently not collectible status is when the IRS agrees to temporarily delay collection action because you are unable to pay your tax liability in full.

To qualify for currently not collectible status, you must prove that paying your tax liability would create a financial hardship.

So, if your offer in compromise is rejected or you are unable to pay your tax liability in full, you may be eligible for currently not collectible status.

To request currently not collectible status, you must submit a completed Form 433-F (OIC) along with supporting documentation.

When you apply and your request for currently not collectible status is granted, the IRS will delay collection action for a period of time. However, interest and penalties will continue to accrue on your unpaid tax liability.

If your financial situation improves, you may be removed from currently not collectible status and required to resume payments on your tax liability.

When To File An Offer And When Should You Pursue Being Deemed Uncollectible

When you owe the IRS money, you may be wondering if you should file an offer in compromise or pursue being deemed uncollectible. The answer depends on your individual circumstances.

You should consider submitting an offer in compromise if:

• You are unable to pay your tax liability in full
• You believe that the amount you owe is incorrect
• You are unable to pay your tax liability in full and you believe that the amount you owe is correct
• You should consider pursuing being deemed uncollectible if:
• You are unable to pay your tax liability in full and you believe that the amount you owe is incorrect
• Your financial situation has changed and you are unable to pay your tax liability in full
• You believe that the IRS will never be able to collect the full amount of your tax liability
• You are facing financial hardship and you are unable to pay your tax liability in full. 
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When you are unsure whether you should file an offer in compromise or pursue being deemed uncollectible, you should speak with a tax professional. They can help you evaluate your options and make the best decision for your individual circumstances.

FAQs

I Can't Pay My Taxes, What Should I Do?

Whenever you can't pay your taxes, you should contact the IRS to discuss your payment options. You may be able to set up a payment plan or request currently not collectible status.

What Happens If My Offer In Compromise Is Rejected?

In case your offer in compromise is rejected, you will be responsible for paying the full amount of your tax liability, plus interest and penalties.

You may also be required to submit a new OIC with an updated offer amount or pursue other collection options, such as a payment plan or currently not collectible status.

How do you declare noncollectible financial hardship status?

You can request currently not collectible status by submitting a completed Form 433-F (OIC) along with supporting documentation. If your financial situation improves, you may be removed from currently not collectible status and required to resume payments on your tax liability.

Is there a one-time tax forgiveness?

There is no one-time tax forgiveness program. However, you may be able to set up a payment plan or request currently not collectible status if you are facing financial hardship.

Conclusion

You should speak with a tax professional if you are unsure whether you should file an offer in compromise or pursue being deemed uncollectible. They can help you evaluate your options and make the best decision for your individual circumstances.

Morris and Associates are experts when it comes to finding tax relief. We specialize in helping individuals and companies find tax relief in Georgia, but can help no matter where you live. If you need help with back taxes or simply communicating with the IRS and finding the answers you need, contact us for help!

We can also save your time and money to help prepare your annual tax return. We can personally help save you money when dealing with the IRS for any tax related matter.  Contact us today or call: (678) 641-3193