Read this tip to make your life smarter, better, faster and wiser. LifeTips is the place to go when you need to know about Offer In Compromise and other Tax Relief topics.
Offer in Compromise programs offer taxpayers a way to reduce their tax debt at less than the full original amount of tax debt. Sometimes this program is affectionately known as ‘pennies on the dollar'. The agreed amount in an Offer in Compromise includes the original unpaid tax bill, interest, and penalties. In order to apply for an Offer in Compromise (OIC), you need to follow some guidelines.
Form. You will need to file IRS Form 656 as a requirement.
Online. You can also go online to request an OIC.
Financial statement. You will need to supply the IRS with financial information about your situation. This is done on IRS Form 433-A for individuals. For businesses, you will use IRS Form 433-B.
Verification. You will need to supply verification of your financial situation. Verification includes bank statements, vehicle titles, mortgage notes, financing agreements, etc.
Cover letter. Write a cover letter explaining why the IRS should accept your OIC offer.
You need to convince them it is to their best interest to enter into this Offer of Comprise agreement. Enclose this letter with your IRS Form 656.
Fee. There is a $150 application fee. This is nonrefundable. Include this with your application package.