Hello, I'm Sara from TurboTax with important news for taxpayers who owe back taxes to the IRS.
If you are like most taxpayers, you probably go to work every day and earn a wage or salary. Because you receive your income throughout the year rather than in a lump sum, it may be hard for you to pay off your taxes with a single payment.
One way you can ease this burden is by making an Offer in Compromise (OIC) to the IRS. This is essentially asking the IRS to lower the amount of tax you owe. However, you should be mindful of the fact that this offer does not automatically reduce any penalties or interest you are responsible for paying.
Generally the IRS will only accept a reasonable offer if:
- The IRS realizes it is unlikely to collect the full amount from you.
- There is still some doubt as to whether the amount of tax you owe is 100% accurate or
- If paying the full amount will cause you a severe hardship.
Knowing how the IRS is going to evaluate your offer, make sure you reasonably believe you have a chance to qualify. Otherwise, it may end up costing you money.
- When you submit your offer, you must pay a $150 application fee and make a 20 percent tax payment.
- Once you send this off a refund is unavailable, even if the IRS rejects your offer.
For more tax tips and guidance, visit TurboTax.com.