Many individuals have significant tax liabilities that they cannot afford to repay. Tax liability can arise from not having enough tax withheld from your paycheck, withdrawing monies from retirements, bad investments, filing a return incorrectly and later having it audited, or failing to pay quarterly estimated business taxes. This list is not exhaustive and there are numerous other instances that can result in owing money to a taxing authority, including the Internal Revenue Service (“IRS”) and State of New Jersey Division of Taxation.
Tax liability is defined as the total amount the taxpayer owes, including taxes, penalties, interest, additions to tax, and additional amounts required by law. This article will deal with reducing tax liability with the IRS through a process called “offer in compromise” (“OIC”).