What Is IRS One-Time Forgiveness? How And When To Apply

Navigating through the complex maze of taxes can often be daunting. When you find yourself grappling with tax debt, it might seem like there’s no end in sight. Fortunately, the Internal Revenue Service (IRS) provides an array of programs to help taxpayers manage their debt. One such avenue is the IRS One-Time Forgiveness program.

This article will explore this IRS initiative, its benefits, eligibility criteria, and the correct application procedures.

IRS Forgiveness Of Debt Program: A Road To Repaying Debt

The IRS forgiveness of debt program to repay debt, also known as the Offer in Compromise (OIC), is a part of the IRS forgiveness of debt program aimed at helping taxpayers repay their debt. It offers taxpayers an opportunity to settle their tax debt for less than the full amount they owe.

It’s an agreement between the taxpayer and the IRS that provides debt relief to those experiencing significant financial hardship. However, it’s important to note that the IRS only approves OICs when they believe the offered amount is the most they can expect to collect within a reasonable period.

Eligibility For The Program

Understanding whether you’re eligible for the One-Time Forgiveness program is crucial. The IRS considers several factors while determining eligibility. These include your ability to pay, income, expenses, and asset equity.

Additionally, to be eligible, you must be up-to-date with all filing and payment requirements. You aren’t eligible if you’re in an open bankruptcy proceeding.

When To Apply

Deciding when to apply for this program can be tricky. A good time would be when you’re unable to pay off your tax debt using an installment agreement or other means without causing financial distress. However, it’s recommended to seek advice from a tax professional before making this decision. They can provide a clear understanding of your situation and guide you on the best course of action.

How To Apply

Application for the OIC involves several steps. First, use the Offer in Compromise Pre-Qualifier tool provided on the IRS website to confirm your eligibility. If you qualify, you can then fill out the IRS Form 656-B, Offer in Compromise Booklet. This document will guide you through the process of preparing an offer.

Along with Form 656, you’ll also need to complete Form 433-A (OIC) (individuals) or 433-B (OIC) (businesses) and provide the necessary documentation.

The Application Fee And Initial Payment

There’s a $205 application fee when you submit an OIC, but low-income taxpayers may be exempted. Additionally, you’ll need to submit an initial payment, which varies based on your offer and chosen payment option.

What Happens After You Apply?

After submitting your application, the IRS will conduct a detailed review of your offer. They may accept it, reject it, or provide a counteroffer.

If accepted, ensure you meet all terms of the agreement. If rejected, you can either pay in full or negotiate a payment plan. Remember, the IRS may levy or lien your property if you don’t comply with the terms of the agreement.

Consequences Of An Accepted Offer

Once your offer is accepted by the IRS, you must adhere to certain terms for the next five years. This includes filing all required tax returns on time and paying all taxes due in full. Failing to comply with these terms can lead to the cancellation of your agreement and reinstatement of the original amount of tax debt, plus penalties and interest.

Moreover, any refunds due to you in the calendar year that your offer is accepted will be applied to your tax debt.

Professional Help For The Application Process

Given the complexity of the One-Time Forgiveness Program, it’s often beneficial to seek professional help. A certified tax professional, like a Certified Public Accountant (CPA) or Enrolled Agent (EA), can guide you through the process. They can help determine your eligibility, develop a compelling offer, and communicate with the IRS on your behalf.

Working with a tax professional can increase the likelihood of having your offer accepted and alleviate much of the stress associated with dealing with tax issues.

In Conclusion

The IRS One-Time Forgiveness program can be a lifeline for those burdened by significant tax debt. While it offers an avenue to reduce debt, it is crucial to understand that it’s not a fit for every taxpayer. Moreover, the application process is complex and demands attention to detail. Professional guidance can be invaluable during this process. Above all, remember that maintaining compliance with tax laws is the best way to avoid tax debt and enjoy peace of mind.


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