I just recently got audited and turns out I owe taxes along with penalties totaling $13,900. Can I use a Offer to Compromise in my case? I know IRS lets you make payments but can I bargain down the interest rate or do something about my penalties?
2007-03-04 19:51:05 · 5 answers · asked by densheng 1 in Business & Finance ➔ Taxes ➔ United States
You can probably come to a settlement with the IRS regarding tax and penalties. However, there is nothing you can do about the interest. As far as they are concerned, you owe them money and interest on that amount will keep accruing until the debt is paid.
2007-03-04 20:12:40 · answer #1 · answered by tma 6 · 0⤊ 0⤋
An offer in compromise is used either when you don't have the ability to pay the taxes, or you question the legitimacy of the amount. If neither are these the case, then the only other way an offer would be accepted would be for "Effective Tax Administration," which the IRS states is for the following reason:
"There is no doubt the tax is correct, and no doubt that the amount owed could be collected, but an exceptional circumstance exists that allows the IRS to consider a taxpayer's OIC. To be eligible for a compromise on this basis, the taxpayer must demonstrate that collection of the tax would create an economic hardship or would be unfair and inequitable."
If none of those three apply, then you wouldn't be able to get an offer accepted.
I suggest talking with a tax professional and seeing what other options might be available to you.
2007-03-06 21:12:26 · answer #2 · answered by Neil 2 · 1⤊ 0⤋
An Offer in Compromise is possible if you're in a situation where it's unrealistic for you to pay your debt and fraud or tax evasion are not involved. With an Offer in Compromise, you make an offer of some lesser amount than your entire debt as settlement in full of the amount owed.
It would be a wise idea to enlist some professional assistance from a CPA or tax attorney or an enrolled agent who has had some direct experience in this area, however. The rules were changed last year and you now need to include a deposit of 25% or your offer amount with the Offer in Compromise. If your offer isn't accepted, the deposit will NOT be returned although it will be applied to your total debt.
2007-03-05 06:08:46 · answer #3 · answered by Bostonian In MO 7 · 1⤊ 0⤋
You can try. They're only likely to agree if it's clear from your finances that you'd never be able to pay the amount you owe.
2007-03-05 09:46:33 · answer #4 · answered by Judy 7 · 0⤊ 0⤋
yes
2007-03-05 07:16:08 · answer #5 · answered by Anonymous · 0⤊ 0⤋