Mistakes To Avoid With An Offer in Compromise
- March 15, 2018
- Posted by: [email protected]
- Category: Blog, IRS
When you’re behind on your taxes, an Offer in Compromise (OIC) is a new lease to a taxpayer’s life. This type of settlement isn’t available to everyone- it’s important to take steps to make sure that the process and payments run smoothly from start to finish. If you are hoping to qualify for an OIC, an Austin IRS tax services provider can draft your OIC application and negotiate with the IRS, which gives you a fighting chance to reduce your tax burden by having the OIC approved.
It may take some time to process your offer. During the negotiation period, it’s important to continue to demonstrate that you are doing everything in your power to be tax compliant and responsible with your money. Once your OIC is accepted, it is imperative that you make your payments according to the agreement.
Mistakes that May Ruin Your Offer in Compromise:
Hiding Financial Information
When the Internal Revenue Service considers any Offer in Compromise application, they will review your financial statements, claims on assets, property, etc., to make sure that everything adds up. If they find anything that was purposefully undeclared or not mentioned on Form 433-A then you will receive an automatic rejection.
Further, you could be faced with an additional penalty on the grounds of perjury. It’s incredibly important to provide them with all the information available. Avoid a criminal court proceeding by being upfront and honest from the start.
Indulging in Heavy Spending
When you are trying to prove financial hardship, going on a spending spree does not help your case. Avoid spending money on expensive gadgets and luxury items. The IRS will monitor your bank statements once you apply for an OIC. Indulging in eating out often, or going on wild shopping sprees will show them that you are not in need. In fact, these types of habits will lead to the IRS suspecting you of not disclosing all of your income, which could get you into some hot water. Control your spending habits for the time period recommended to you by your tax attorney in Austin.
Once the IRS approves your offer, you cannot afford to miss a payment as this may lead to a retraction of the OIC. Make sure you make a payment according the the installment schedule. Negligence will not be accepted at this stage and the IRS will likely revoke the offer.
Skipping Tax Returns
The IRS will continue tracking your tax behavior even after your OIC application has been approved. One of the terms you must meet is to regularly file your taxes for at least the five years that fall immediately after the acceptance of the OIC. Ask your tax preparer to at least file tax returns on time even if you cannot pay immediately. Again, you should be paying taxes as soon as possible in order to not fall into the trap of delinquent taxes. Pay tax installments on a regular basis to avoid retraction of the OIC.
Escobar & Associates is a well known tax services provider in Austin, Texas. We have helped many of our clients through the Offer in Compromise application process. Reach out to us online or call our team at 512-442-3055 for a free consultation.