International Revenue Service is responsible for the collection of taxes and administering the IRC (Internal Revenue Code) in the United States. If a person has remaining debt in International Revenue Service, an Offer in Compromise or OIC could be used to settle the federal tax debts.
However, an Offer in Compromise can only be used as a tool to settle the remaining debt, only if a person’s tax debt is comparatively larger compared to their total annual income. Suppose you have remaining tax debt to the Internal Revenue Service, and you think that you are qualified for application in Offer in Compromise. In that case, the Coast one Tax group is ready to help in resolving your tax problems.
Colorado Offer in Compromise—Process
Each state in the USA has different programs in terms of settling the taxpayer’s debts. In Colorado, an offer in compromise is made available in state by the Colorado Department of Revenue.
In order to settle your tax debts through OIC, the requirements are needed to be met first. Specifically, to qualify for OIC, a taxpayer should have to lack equity in assets and should present data that they lack the ability to pay the back taxes on a monthly basis.
Consequently, the taxpayer should first submit a federal offer in compromise to the Internal Revenue Service. As the taxpayer waits for the response from IRS, a tax lawyer should work with the Colorado Department of Revenues to make a minimal installment agreement.
When the taxpayer with back taxes finally receives acceptance of OIC from IRS, they can move their submission to the Colorado Department of Revenue.
Requirements:
Upon submission to the Colorado Department of Revenue, this list of requirements should be prepared and completely filled up in order for a successful OIC approval.
A. 433A submitted to the IRS
This tax form collects information regarding a taxpayer’s financial status, including their assets and debts. This form is used by Internal Revenue Services in order to determine a payer’s ability to settle its outstanding tax liability. Form 433A (OIC) is six pages long and is formally called Collection Information Settlement for Wage Earners and Self-Employed Individuals. Inside, this form necessitates personal and employment information, and accounting of personal and business assets, as well as a household budget per month.
Sections of form 433A
Section 1 of this form necessitates personal information. This includes household information, marriage status, ownership of the house the taxpayer lives in (rent or owned), number of individuals living with the taxpayer’s house, and other basic information such as an address, birth date, contact information, as well as Social Security number. Section 2 is the Employment Information. Section 3 is the Personal Asset Information—this is where bank accounts, assets, and investments are summarized. Section 4 of the form is the Self-employed information. Section 5 is Business Asset information; in this section, a taxpayer should have listed any assets that are in the name of their business—including real estate, tools, equipment, and even computers. Section 6 is Business Income and Expense Information which details the business’ gross revenue and expenses. Section 7 is the Monthly Household Income and Expense Information. Section 8 is the calculation of the minimum offer amount to be paid. The last section is other information needed by the CDOR in order to process the application for OIC. In the last section, it is important to include information such as whether the taxpayer is a beneficiary in someone’s will, trust, or insurance policy or if they have filed bankruptcy in the last 10 years.
B. Form 656 submitted to the IRS
Form 656 allows the IRS to have an overview of the taxpayer’s financial situation. From this form, the IRS can review their ability to pay their back taxes. Form 656 is needed to be filled for OIC when; a. There is a doubt about the collectability of tax debt, b. Doubt for the liability for the debt, c. It is an effective tax administration.
C. Letter from the IRS that verifies the acceptance of federal Offer in Compromise.
This letter basically sends the taxpayer a note that their application for federal OIC is accepted under a specific section of the Internal Revenue Code.
D. Verification for the payment of federal offer.
Verification for the payment of the federal offer will be sent to the taxpayer. This should be included in the requirements.
Other requirements include:
E. Checklist of Colorado Offer in Compromise.
F. Colorado Department of Revenue Financial Statement.
G. Proposed amount to settle the Colorado tax debt.
Taxpayers have the right to propose a justified amount in order to settle their tax debt. IRS will apply up to 20% payment for settling.
H. IRS account transcripts
This shows the basic data of taxpayers, including marital status, adjusted gross income, return type, taxable income, and all payment types.
I. Power of attorney
If represented by Tax Attorney:
After all the compilation of the documents, they should be directly submitted to the Colorado Department of Revenue. CDOR will respond to the taxpayer’s application for OIC around 30-60 days after submission.
Where to submit Offer in Compromise for Colorado Department of Revenue?
The address for the Colorado Department of Revenue should be at:
1375 Sherman Street, Denver, Colorado.
Terms and Conditions for Offers in Compromise of Tax Liability
OIC has terms and conditions that are needed to be agreed on by the taxpayers in order to be approved of their application. Here is a summary of Colorado Offer in Compromise Terms and Conditions:
The taxpayers should have filed all tax returns through the current period; they should agree the offer covers the liability for tax, penalty, and interest for the entire account.
Offers in compromise are a one-time opportunity order to pay all unsettled tax liabilities. Similarly, taxpayers should not have received a previous relief from taxes such as tax liability discharged during a bankruptcy.
Colorado Department of Revenue will apply for any payment according to the best interests of the state. Consequently, the State has the right to verify the financial information of the taxpayer independently.
It is still considered that the collection actions will still continue until the approval of Offers in Compromise. Also, if the taxpayer’s financial information is inaccurate, or if the Department has discovered undisclosed assets, the request for OIC will be denied.
Anyone with no payment plan is permitted for anything less than the computed full taxes, any penalty, as well as the interest due. Offers in Compromise will be rescinded if the subsequent filing and payment requirements are not met. Lastly, if tax liabilities and payments are not met for three years, the statute of limitations, as well as the full tax liability, will be waived. The interest will also be reinstated, including its penalty.
For more detailed Terms and Conditions, visit the Website of CDOR.
What to expect upon application for Offer in Compromise?
There are required tax compliance because if failed, OIC will be denied. Also, 15% of the tax payer’s liability may be required as a down payment.
Coast One Tax Group
Coast One Tax Group assists individual taxpayers and small businesses resolve back tax problems. This top-rated Tax Relief Company may help you in assisting your tax-related difficulties such as Offer in Compromise.