Many factors will affect whether you should considering requesting innocent spouse relief or submitting an Offer in Compromise (OIC). Your eligibility and the benefits you will receive from each program depend on the following factors:
- Your financial situation.
- How long the IRS has been trying to collect the tax debt.
- Whether you have unpaid or understated taxes.
- Other eligibility requirements.
Your Finances
Most OICs are made due to doubt as to collectibility. Your financial situation is one of the most important factors the IRS will look at when considering these offers.
Your reasonable collection potential (RCP) will be calculated based on your available equity in assets and disposable income. Your offer must be equal to or greater than your RCP, and must not be able to pay your taxes in full.
Your financial situation is not nearly as important to an innocent spouse relief request. It won’t be considered for a traditional or separation of liability relief request, and it is only one of many factors the IRS will look at if you request equitable relief.
How the IRS Has Been Seeking Collection
For traditional and innocent spouse relief, you must request relief within two years from the time you become aware of the tax debt. This period can begin when the IRS sends you a notice, seizes your tax refund, or takes certain other collection actions.
Fortunately, this limitations period does not apply to either equitable relief or OICs. You can use these tax relief programs to get relief from older tax debt and many years of tax debt at once.
Unpaid vs. Understated Taxes
Once again, traditional and separation of liability have the most restrictive conditions when it comes to the cause of your tax debt. These types of relief can only be used for tax debt that was understated on your tax return.
Equitable relief and OICs can be used for tax debts that were properly reported, but not paid.
Other Eligibility Requirements
Other factors can also affect your eligibility for innocent spouse relief or OICs. Your marital status, knowledge of erroneous items on your return, or history of tax compliance can all have an impact on whether your requests are accepted or not.
A tax attorney can help you decide whether to use one or both of these tax resolution options and help you get the best possible outcome for your case.
The Gartzman Law Firm offers tax resolution assistance, taxpayer representation, and tax preparation services. Use our contact form to request a consultation with an Atlanta tax resolution attorney.