Getting the right tax advice and tips is vital in the complex tax world we live in. The Kiplinger Tax Letter helps you stay right on the money with the latest news and forecasts, with insight from our highly experienced team (Get a free issue of The Kiplinger Tax Letter or subscribe). You can only get the full array of advice by subscribing to the Tax Letter, but we will regularly feature snippets from it online, and here is one of those samples…
Making an offer with the IRS to settle your tax debt at less than what you owe? There are two payment options.
- Lump-sum cash requires 20% of the total offer amount to be paid up-front. The remaining balance is paid in five or fewer installments within five months of the date your offer is accepted.
- Periodic payment requires that your first payment be made with the offer, with the remainder remitted in monthly installments over a period of six to 24 months.
For more information, check out the IRS’s newly updated Form 656-B booklet for rules and forms. Also, the IRS has an online tool for individuals to check preliminary eligibility for filing a compromise offer. Go to irs.treasury.gov/oic_pre_qualifier for details.
Be sure you’ve filed all required tax returns before submitting your offer. Otherwise, the IRS will return your application and the filing fee, and apply any initial payment included with your submission to your tax debt. Also, individuals or businesses in bankruptcy cannot apply for an offer in compromise.
Watch out for fake promises to settle your IRS tax debts
Also, beware of “offer in compromise mills,” the IRS’s term for firms and promoters that hawk tax-debt-relief plans with promises to settle your debts at steep discounts, even pennies on the dollar. Many of these are advertised on radio and TV, charge big upfront fees, and churn out applications for relief that some of their clients can’t even qualify for.
This first appeared in The Kiplinger Tax Letter. It helps you navigate the complex world of tax by keeping you up-to-date on new and pending changes in tax laws, providing tips to lower your business and personal taxes, and forecasting what the White House and Congress might do with taxes. Get a free issue of The Kiplinger Tax Letter or subscribe.
