Scraping the money together to pay what you owe to the IRS is one of the most stressful parts of tax filing season. Taxpayers in the United States owed the IRS $120 billion in back taxes and penalties in 2022. Finding the money to pay what you owe is daunting, and waiting too long results in more severe penalties.
Knowing your debt relief options is vital to saving money and providing for yourself and your family. One of the best options for tax help is an IRS Offer in Compromise calculator. Learning to use one will help you with financial management.
Luckily, you’re in the perfect place to learn more about using the calculator and tax services to protect your wealth and well-being. Continue reading to enjoy financial efficiency today!
What Is an IRS Offer in Compromise?
An IRS offer in compromise is invaluable when you owe money to the IRS through taxes. The purpose of the offer in compromise is to allow taxpayers to pay less than what they owe. Individuals must meet the specifications of the debt relief program to apply and qualify.
You must use three steps if you plan on using an IRS offer in compromise. Complete the IRS forms 433-A and 656 to begin getting tax debt relief.
You’ll also need to pay a $205 application fee, which is nonrefundable. If you meet the IRS standards for low income, they may waive your fee. The last step involves paying toward the balance you’ve calculated with the IRS offer in compromise calculator.
Use the calculator to generate a fair remaining balance based on what you owe, your income, assets, and cash. It’s also beneficial to account for any debt you’ve accrued through student loans, mortgage payments, or monthly rent.
Consider hiring tax services to aid you with the process. It’s daunting when you’re new to handling your taxes and accounting for each aspect of your financial health. Tax experts will guide you to help you save money and move toward a brighter future.
Who Qualifies for the IRS Offer in Compromise?
The two hurdles to prepare for when applying for an IRS offer in compromise are qualifying to apply and convincing the IRS to accept it. You can use this offer in compromise tool to better understand your eligibility.
There are several criteria the IRS uses that result in an immediate disqualification for your financial optimization. It will be canceled if you forget the required information on your application. Late tax returns and a lack of estimated tax payments are other reasons the IRS will decline your offer.
As daunting as it is, continue paying your taxes while waiting to hear from the IRS. Failure to pay will result in an automatic disqualification. The worst mistake you can make is forgetting to include the money for the application fee.
If the IRS sends your application to you, you’ll have an opportunity to fix areas that disqualify you before resubmitting it. It’s a chance to get your money by making the necessary changes to your application.
How to Use an IRS Offer in Compromise Calculator
One of the vital steps of getting the IRS to accept your offer in compromise is calculating what you owe and the total amounts of your assets and debts. It’s an essential step toward getting the financial relief you and your family deserve.
Avoid sending the IRS a dollar amount that is too low, as they’ll reject your offer. You want the IRS to take your application seriously to improve your odds of financial assistance. You also don’t want to offer too much as that will nullify the benefits of the offer in compromise.
Creating a fair and appropriate offer requires skill and balance. Determining a fair offer alone is possible, though working with tax experts who will guide you is always best.
Use the calculator to calculate what you’ll need to pay by subtracting the dollar amount of your assets from the dollar amount of your debt. The next step involves calculating your annual income and multiplying it by the number of months remaining in the statute of limitations.
Multiply the sum you get from your calculations by 12. The IRS will want to receive all their debts within a calendar year or two. If the total is less than what you owe to the IRS, you qualify for an offer in compromise.
What You Pay With an Offer in Compromise
If the IRS accepts your offer in compromise, you must pay the agency the agreed-upon sum. There are two options to make payments after having your offer accepted by the IRS. If you have the cash on hand, a lump sum is a better option, or you can use a payment plan to make payments over a set number of months.
When choosing the lump sum option, you have five months to make the payments. The IRS also requires you to provide 20 percent of what you owe with the application and $205 fee. The money is nonrefundable, and you can’t get it back even if the IRS accepts your offer.
Your other option is a payment plan. You’ll have 24 months to pay your tax debt with the IRS. You’ll need to calculate and send your first payment with the application and $205 fee. The money you send is nonrefundable, though the IRS applies it to your tax bill.
Making payments while waiting on the IRS’s verdict about your application is beneficial. It’s a complex process but worth the effort.
Learn to Use an IRS Offer in Compromise Calculator Today
Facing the reality of what you owe in your tax bill is intimidating, and the best way to save your money is by using an IRS offer in a compromise calculator. You can determine what you owe and find a fair dollar amount to offer the IRS when you qualify for the program. It’s the best way to pay tax debt without breaking your financial management plan.
Making money work for you and growing is essential in finding financial efficiency. Read our Finance and Economics articles for guidance today!
