If you`re struggling to pay your taxes, you may have heard of an “offer in compromise” or OIC. Essentially, this is an agreement between you and the IRS to settle your tax debt for less than what you owe. However, there is another option that few people know about: the “offer in compromise with special circumstances” or OIC-SC.
An OIC-SC is a settlement agreement that considers your unique financial situation and hardship circumstances. It`s intended for individuals who are experiencing significant financial difficulties and cannot pay their tax debt in full.
To qualify for an OIC-SC, you must meet specific criteria:
1. You must have a current tax liability (meaning you owe taxes for the current year)
2. You must have filed all required tax returns
3. You must have made estimated tax payments for the current year
4. You must not be in an open bankruptcy proceeding
5. You must prove that paying your tax debt in full would cause significant economic hardship, which may include medical bills, job loss, and other unforeseen circumstances.
If you meet these criteria, you can apply for an OIC-SC by submitting form 656-L, Offer in Compromise (Doubt as to Liability or Collectability), along with supporting documentation. The IRS will review your application and determine if you qualify.
It`s essential to understand that an OIC-SC is not the same as a traditional OIC. With a traditional OIC, the IRS considers only your ability to pay, while an OIC-SC looks at both your ability to pay and your hardship circumstances.
Another critical difference between the two is that an OIC-SC requires a non-refundable application fee of $186. This fee is waived for low-income taxpayers.
If the IRS accepts your OIC-SC, you will make a one-time payment to settle your tax debt, and the IRS will release any tax liens related to the debt. You may also have the opportunity to set up a payment plan for the remaining balance if you can`t pay the full amount upfront.
In conclusion, an offer in compromise with special circumstances is an option for those struggling to pay their tax debt. It`s worth noting that the application process can be complex, so consider seeking the help of a tax professional to guide you through the process.