Every year, the IRS processes tens of thousands of offer in compromise (OIC) requests. This program is appealing for many reasons, but mainly because it provides an opportunity to settle tax debts for less than the actual amount owed. Unfortunately, most requests are rejected — and even when offers are accepted, the terms might not be all that favorable.
Thankfully, several excellent alternatives can be called on to deal with a large tax bill. The following are among the best options:
Installment Agreement
At first glance, an installment agreement might not seem as appealing as an OIC. Under this approach, you’re responsible for paying the full amount owed — plus interest. That being said, it’s far easier to get an installment agreement set up. What’s more, installments can be paid over a longer period of time, so you can slowly chip away at your tax debt without compromising your way of life.
Currently Not Collectible Status
If your financial situation keeps you from paying your tax bill or handling installments, Currently Not Collectible (CNC) may be your best bet. Under this solution, the IRS pauses collection efforts after it determines that your current economic issues will keep you from paying your tax bill for the time being.
CNC will ideally be reserved for short-term financial concerns, as interest and penalties continue to accrue while your account is deemed not collectible. Still, if you suspect you’ll struggle to get an OIC accepted — or if you doubt your ability to fund your offer — CNC could be a better solution as you get your financial situation straightened out.
Not sure if an offer in compromise is right for you? As you examine your options, don’t hesitate to get advice from the Highland Tax Group. We’re happy to discuss your tax situation and offer insight into various solutions.