Offers in compromise provide a valuable means of reducing your total debt owed to the IRS. Unfortunately, this approach is not nearly as straightforward as it may initially appear. Depending on your situation, you could be forced to overcome a variety of hurdles before finally achieving OIC relief. Chief among them? Proving a ‘doubt’ to indicate your eligibility. While many people are familiar with the doubt as to collectability option, relief is available when a doubt exists regarding your liability as a taxpayer, as highlighted below:
What Does Doubt as to Liability Mean?
Doubts as to liability occur when legitimate concerns exist regarding whether you owe tax debt in the first place. This doubt is not valid, however, if a final court decision has officially established your tax debt.
The Process of Applying Based on Doubt as to Liability
Given the unique nature of the doubt as to liability classification, this specific type of OIC calls for a unique application process. This begins with completing Form 656-L. You aren’t required to pay an application fee or deposit, but you will need to provide extensive evidence indicating that current IRS taxes or debt are not valid. Furthermore, you will need to submit a written explanation of the circumstances surrounding your situation.
Keep in mind that you are permitted to apply for an OIC on the basis of both a doubt as to liability and a doubt as to collectability. Essentially, this means that you believe the amount of tax debt assessed is incorrect — and that you’re also unable to pay up. In most cases, however, it’s best to first resolve disagreements with the IRS regarding the debt’s validity before considering collectability.
If you’re interested in pursuing an offer in compromise as a solution to your current IRS issues, you can benefit from the assistance of the Highland Tax Group. Contact us today to learn more about our range of tax resolution services.