First a couple of things to note
- There are no guarantees
The IRS is known to be extremely strict when it comes to assessing the financial circumstances of an applicant before deciding on whether or not to grant the offer. In fact, the Internal Review Service rejects more than 80% of the OIC applications. This makes it imperative that you gain a clear understanding of what to do before filing for the Offer and ensure that you increase the chances of your success.
- Bankruptcy is a road block to acceptance
First and foremost, before filing your OIC, ensure that you meet the eligibility criteria. These make it mandatory that you have filed for all federal tax returns and are up-to-date on the estimated tax payments or the income tax withholdings that are due to you, among other requisites. Then check with the Centralized Insolvency Operation to ensure that there is no bankruptcy case pending against you or your business.
Gather the required documents & supporting documents
An integral task before filing your OIC is to prepare the documents required to be submitted along with forms 656, 433A, or 433B. These include, apart from your tax filing and tax payment records, your paystubs, bank and credit card statements dating back to the past three months, details about your loans, mortgages, and retirement accounts, and a summary of your personal expenses like those incurred for health and child care, housing, and transportation. You will of course, need to consult an experienced and competent tax professional to help you prepare the documents and also, if needed, reorganize the details about your financial status to present it in a favorable light to the IRS.
Do your best to make sure everything is in order, and then seek experienced counsel. The easier you can make it on the tax professional that will help guide you the rest of the way, the less the tax professional will have to spend and the less money you’ll have to spend.
Enlist the help of a season tax professional
Spend time seeking out the best tax pro to guide you through the offer in compromise. There is more about selecting the right person to guide you through the process elsewhere in the guide, so for now we’ll just say, do not take this decision lightly.