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Installment Agreements and Offers in Compromise (Pics)

Installment Agreements and Offers in Compromise (OICs): What You Need to Know

If you owe back taxes to the Internal Revenue Service (IRS), installment agreements and offers in compromise (OICs) may provide some relief. But before you decide on a payment plan, it`s important to understand these options and how they work.

Installment agreements allow taxpayers to pay their tax debt in monthly installments instead of all at once. The IRS offers two types of installment agreements: guaranteed and streamlined. Guaranteed installment agreements are available to taxpayers who owe less than $10,000 and have no outstanding tax liabilities. Streamlined installment agreements are available to taxpayers who owe less than $50,000 and can pay off the debt within six years or the remaining statute of limitations, whichever is shorter.

To qualify for an OIC, taxpayers must prove that they are unable to pay their tax debt in full, either through a lump sum payment or over time through an installment agreement. An OIC is an agreement between the taxpayer and the IRS that settles the tax debt for less than the full amount owed. The IRS will consider factors such as the taxpayer`s income, expenses, and assets when determining if an OIC is appropriate.

While installment agreements and OICs can provide relief, they do come with some risks. For example, if a taxpayer defaults on an installment agreement, the IRS may take enforcement action such as levying bank accounts or wages. Additionally, OICs can take months to be reviewed and approved, and there is no guarantee that an OIC will be accepted.

To ensure the best outcome, it`s important to consult with a tax professional who is experienced in handling installment agreements and OICs. A qualified tax professional can help negotiate with the IRS and determine the best course of action for your specific situation.

In summary, installment agreements and OICs can provide relief for taxpayers who owe back taxes. However, it`s important to understand the risks and seek professional guidance before making any decisions. With the help of a qualified tax professional, you can navigate the complex tax system and find a solution that works for you.

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