Making a deal with the IRS is possible, but without an offer in compromise, or OIC, you must pay your full tax liability. Though the Internal Revenue Service does accept smaller payments, the agency won’t contest the amount for you. Tax law in California requires you to apply for a compromise via Form 433-A or 433-B. Both individuals and businesses can apply for the compromise. The following are reasons that the IRS honors an OIC.
Doubt in liability
Should you examine your files and see an error made regarding your actual liability, then you can contest it. Tax law in California protects your right to contest a tax claim while providing evidence to support it. Without filing a real action, using the provided forms gives the IRS enough data to fix its own errors.
Doubt regarding the full amount
At times, amounts that the IRS asks you to pay are inaccurate. Doubt in the full amount is second out of three clauses that the IRS accepts. In such cases, it’s imperative to realign the data you filed to prove that your taxable amount or total tax was wrong. Some find this dispute necessary after getting an IRS notice to pay more taxes.
Financial conditions and equitability
You can make a public complaint regarding your finances, giving the IRS reason to consider you incapable of paying a tax burden. Your disability in this case must be clear, present or irrevocable. Being able to make installment payments might disqualify you from an OIC deal. To qualify for OIC overall, you need the following:
- Tax returns all filed
- Federal tax deposits updated
- Tax payments in a current year completed
- Reasonable collection potential accounted for
In the event that you receive an error from the IRS, your appeal has a 30-day window to be made. Your file then gets examined, and you’ll be asked for more data or given a verdict.