If you owe the Internal Revenue Service, an Offer in Compromise (OIC) is a legitimate way to settle the debt. The goal of the IRS is to collect debts in their entirety, so you must show you have valid reasoning to ask for an OIC. If the agency sees you are in a financial bind, they will work with you to get as much of their money as possible within a reasonable amount of time. If you owe tax debt and qualify for an OIC, don’t sabotage your opportunity by making these careless mistakes.
Hiding important information from the government
The IRS will not finalize an OIC without doing a thorough investigation of your finances. If you want to make the process painless, give the government agency any documents they have requested. The IRS maintains strict records and will know if you are withholding information from them. Your best chance at reaching a compromise on your tax debt is to be completely upfront about your situation.
Not filing your tax returns during the OIC process
If the government is going to bail you out, the agency wants to be certain you won’t end up in the same situation two or three years down the line. If you don’t file your taxes, it’s a safe assumption you will be denied your OIC request.
Failing to pay your taxes
Once you submit your OIC, you should pay any taxes you have due. If you don’t pay the bill or you fail to make payments on a prearranged agreement, your Offer in Compromise will be denied. The Internal Revenue Service looks at it this way: If they are going to work with you so you can pay down your debt, the least you can do is be responsible enough to abide by their rules.
If you are not sure how to apply for an Offer in Compromise, consider hiring a tax professional to help. IRS agents have their hands full, so failing to submit the right information or missing the tiniest detail on the forms may result in a rejection. The fee you pay to a tax pro is small compared to mounting IRS debt. In truth, hiring an experienced tax expert will improve your chances of having your OIC approved.