You may have seen or heard the commercials that advise you to call a number to try and make a deal with the Internal Revenue Service (IRS) to pay less than you owe on your taxes, but can you trust those commercials? Is there really an option to “get out of tax debt” like the commercials suggest?
In fact, there are ways to settle your tax debt, and you have several options for settling that debt, as well as working with different professionals to accomplish the process. One of the most talked about options is the Offer in Compromise.
The Offer in Compromise
One option the IRS provides is called an Offer in Compromise, and it’s a somewhat lengthy and involved process where you share a substantial amount of information with the IRS, and the department makes a determination on whether they will accept your offer to pay them less money than what is owed.
According to the official IRS website, the agency takes four things into account when determining whether to accept your Offer in Compromise:
- Ability to pay;
- Expenses; and
- Asset equity.
The IRS publishes a document known as Form 656 Booklet, which is important to download and read to ensure your Offer in Compromise is complete and likely to be accepted when you submit it. The book is about 30 pages, but it will provide the information you need to determine whether you even qualify to submit an Offer.
You Cannot Make an Offer in Compromise During Bankruptcy
If you have issues paying your income tax bill, you may also have financial problems elsewhere, and you may be thinking about filing for bankruptcy. The process of filing for bankruptcy and completing a payment plan required by the court or a liquidation of assets can take some time, and the IRS does not allow taxpayers to apply for Offers in Compromise if they are still undergoing the bankruptcy process.
If you wish to make an offer to the IRS and also apply for bankruptcy, you may wish to investigate the likely timelines associated with each option. An Offer in Compromise can take some time to complete, but if you submit all your paperwork correctly and provide the IRS with all the documentation they require, you can receive a decision in a matter of months.
On the other hand, submitting documents for bankruptcy and undergoing the process can take much more than a few months.
Also, there are very specific conditions that you must meet to wipe out tax debt through bankruptcy, and bankruptcy can also only eliminate federal income taxes. Speaking with a tax lawyer is the best way to figure out whether you may qualify to eliminate your tax debt through bankruptcy and whether you may wish to undertake an Offer in Compromise before you begin the bankruptcy process.
Legal advice website Nolo reveals:
“Most tax debts can’t be wiped out in bankruptcy — you’ll continue to owe them at the end of a Chapter 7 bankruptcy case, or you’ll have to repay them in full in a Chapter 13 bankruptcy repayment plan.”
Speaking with a lawyer is an important step in taking the road to bankruptcy, and during your consultation with your legal counsel, you’ll discuss all your debts, which may include tax debt, and your lawyer will help you decide when and if bankruptcy is the right route for you and your family.
Are You Thinking About Filing for Bankruptcy?
Are debts making you think about filing for bankruptcy? Are you worried about tax debt or whether bankruptcy will wipe out the debts you can’t pay? Contact Suburban Legal Group to determine whether bankruptcy is your best option. We offer a free legal consultation.
DISCLAIMER: All information on this website are provided for informational purposes only and are not intended to be construed as legal advice. Suburban Legal Group PC shall not be liable for any errors or inaccuracies contained herein, or any actions taken in reliance thereon.