While an Offer in Compromise (OIC) can be a powerful tool for taxpayers struggling with significant tax debt, it’s not the only solution available. If your OIC is rejected or you don’t qualify, consider these alternative options:
1. Bankruptcy
Bankruptcy can provide relief from certain tax debts. Chapter 7 and Chapter 13 bankruptcy can discharge tax liabilities under specific conditions:
- Timely Filing: Your tax returns must be filed on time, or within the extended filing deadline.
- Non-Fraudulent Returns: Your tax returns must be accurate and truthful.
- Assessment Period: The IRS must have assessed the tax liability within a certain timeframe.
- No Intentional Tax Evasion: You must not have intentionally avoided paying taxes.
Note: Bankruptcy can have significant long-term financial consequences, such as damage to your credit score. It’s essential to consult with a bankruptcy attorney to weigh the pros and cons.
2. Currently Not Collectible (CNC) Status
If you can’t afford to pay your taxes, you may qualify for CNC status. The IRS will halt collection activity while you’re in CNC status. However, this is not a permanent solution. The IRS can resume collection efforts once your financial situation improves.
To qualify for CNC status, you must demonstrate that you cannot afford to pay your taxes. This typically involves providing documentation of your income, expenses, and assets.
Remember: While these options can provide relief, they should be considered carefully. It’s advisable to consult with a tax professional to determine the best course of action for your specific situation.
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