If You Cannot Pay Taxes, You Can Claim a Lower Amount
We talked about what to do with our tax refunds , but many of us do owe the IRS money. For some, this amount may be much higher than expected. If you cannot afford to pay your tax bill, you can qualify for a Compromise Offer.
GOBankingRates indicates that in some cases you can actually pay a lower amount or set up a repayment plan with the IRS. This is called the “Offer of Compromise” (OIC), and Nolo’s legal website indicates that the IRS approves about 25 percent of OICs filed.
Of course, this option is for those who really cannot afford to pay the bill. You must prove economic hardship due to exceptional circumstances. According to the IRS:
A compromise offer allows you to pay off your tax debt for less than the full amount of your debt. This can be a legal option if you are unable to pay your tax liabilities in full or is creating financial hardship. We consider your unique set of facts and circumstances:
- Payment options;
- Income;
- Costs; and
- Equity.
The IRS does have a prequalification tool on its website. He will tell you if you qualify, and if so, how much you should offer to pay.
From there, you must complete Form 656 and pay a $ 186 registration fee. Expect to shell out a lot of receipts, records and documents. If accepted, your OIC will be publicly listed, but this will not affect your credit rating (if you had tax withholding, that’s another story ).
Visit the IRS page for more details. And check out the full GoBankingRates post for other repayment options if you can’t afford to pay your tax bill.
Compromise proposal | IRS via GoBankingRates