This case started in late October 2021. The taxpayer owed over $30,000 in back tax debt that she couldn’t afford to pay. The taxpayer had previously entered into an installment agreement with payments of $475 per month. As a result of the COVID-19 pandemic, the taxpayer’s business was affected, and her financial situation went into decline. Consequently, the monthly payments were no longer affordable. Not knowing what to do, the taxpayer contacted TaxAudit for help.
TaxAudit quickly went to work doing a comprehensive assessment of the taxpayer’s overall tax and financial situation to determine her tax debt relief options. During the comprehensive assessment, TaxAudit determined the following:
- The taxpayer owed over $30,000 to the IRS in back taxes, penalties, and interest for multiple tax years.
- After taking into account the taxpayer’s monthly income and allowable living expenses, the taxpayer did not have any disposable income to afford to make monthly payments to satisfy the tax debt.
- The taxpayer did not have equity in assets (such as home equity or other property, money in the bank, investment, or retirement accounts) that could be liquidated to satisfy the tax debt.
- Paying the back taxes, either in full or on a monthly installment agreement, would create a financial hardship for the taxpayer.
Based on these factors, TaxAudit determined that the taxpayer would be a good candidate for the IRS
Offer in Compromise (OIC) program to potentially settle the tax debt for less than the total amount owed.
Next, TaxAudit worked with the taxpayer to gather the necessary financial documentation to support her current financial situation and lack of ability to re-pay the back tax debt. After gathering the necessary documentation, TaxAudit prepared the Offer in Compromise package including Form 433-A (OIC),
Collection Information Statement for Wage Earners and Self-Employed Individuals and Form 656,
Offer in Compromise, on behalf of the taxpayer. TaxAudit then submitted the taxpayer’s Offer in Compromise application to the IRS in early December 2021, but a final resolution would not come quickly.
In late December of 2021, the IRS sent a letter acknowledging the receipt of the taxpayer’s Offer in Compromise. The letter also stated that the taxpayer may not be current with their estimated tax payments and asked for confirmation that the deficient estimated tax payments had been made or verification that the taxpayer’s year-to-date withholding and estimated payments would be sufficient for the current tax year as this is one requirement to be eligible for an Offer in Compromise. TaxAudit helped the taxpayer prepare a projection of the current year’s tax liability and determined that the taxpayer’s year-to-date withholding and estimated tax payments would be sufficient to satisfy the current year tax liability. TaxAudit then prepared a response to the IRS’ request and provided the projections as verification that the taxpayer was current with their estimated tax payments. The IRS was satisfied with this response and the case would continue to move forward.
Over the next several months, the IRS would send multiple “stall letters” to the taxpayer, each indicating that they would need another 90 days to complete their review. Finally, in mid-September of 2022, the taxpayer would receive IRS Letter 5483, the Offer in Compromise acceptance letter confirming that the IRS had accepted the taxpayer’s offer as submitted. This officially settled the taxpayer’s over $30,000 back tax debt for a total of $406, provided that the taxpayer maintains compliance by filing and paying all taxes timely for the next 5 years from the date of the acceptance letter.
The Tax Professionals in the Tax Debt Relief division may be able to assist you as well if you have a sizeable outstanding tax debt that you can’t seem to get under control. It starts with a free consultation to review your circumstances and determine if further assistance can be provided. If you need assistance, reach out to TaxAudit
Tax Debt Relief now.