With the tax season well underway, many Colorado residents may still be feeling the pressure of trying to get their documents in order to file. While the process itself can certainly seem overwhelming, some individuals may have even more concerns because they are already behind on their tax obligations. Having tax debt is not easy to handle, but it may be possible for qualifying parties to use an offer in compromise to help mitigate their tax burden.
An OIC is an option that essentially allows taxpayers to come to a settlement with the IRS. The exact amount the IRS will accept differs from case to case, but on average in 2020, the settlement amount was approximately $16,180 dollars, and nearly 18,000 OIC applications were approved by the IRS. However, the approval rate for this option was only 33% in 2019. Still, if individuals are struggling to pay their tax balances, looking into this option may be worthwhile.
As mentioned, the amount a specific person will pay if the IRS accepts an OIC will depend on the details of the case. The calculation for determining how much a person will pay involves the following elements:
- The household monthly income
- The household monthly expenses
- The value of the taxpayer’s assets
- Any loans associated with the assets, such as a mortgage on a house
The IRS will use this information to calculate a possible settlement amount. First, however, Colorado taxpayers must submit their offer in compromise application and have it approved by the agency. Often, handling these types of matters can seem confusing and intimidating, especially if someone is already overwhelmed by their ordeal. Fortunately, interested parties could work with experienced tax law attorneys who could help them decide whether this option or another tax relief method could help their predicament.