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Posted on Sep 4, 2009 in Installment Agreement, Offer in Compromise, Tax Q&A | 0 comments

Do I have to provide Bank Statements to the IRS

When you are filing an offer in compromise with the IRS you have to give the IRS a lot of financial information and proof. They want to see the last three months of bank statements, pay stubs, utility bills, investment account statements, medical bills and more. You can almost picture the offer in compromise program as wanting the same type of information as if you were being audited and had to prove why you claimed certain deductions on your income tax return.

All of this financial information has to be provided at the beginning of the filing of the offer in compromise and is usually required to be updated during the offer in compromise process (perhaps even several times) because of the length of time it takes to for the offer in compromise to be examined.

Now, if you are setting up a monthly payment plan (or installment agreement as the IRS calls it) you may or may not be required to provide financial information and bank statements. If you owe the IRS less than $10,000 and you can pay it off in 36 months, the IRS will automatically set up an installment agreement for you.

The next scenario is if you owe the IRS less than $25,000. When you owe less than $25,000 you do not necessarily have to provide financial information and bank statements as long as the total tax, penalties and interest will be paid off during the statute of limitations for collection. Many times the IRS will ask you what you want to pay and then they will tell you if that will pay off the debt or not. If it will they will then set up your installment agreement. If your offer will not pay off the tax in time, the IRS will tell you what the minimum payment will have to be. If you cannot afford that payment you will have to provide financial information to the IRS.

If, however, you cannot afford the payment that the IRS must receive to pay off the debt in 36 months or less (if you owe less than $10,000) or if you cannot pay off the tax before the end of the statute of limitations (if you owe less than $25,000) then you would have to provide all of the financial information to prove that you do not have that much disposable income every month and need a lower payment amount for your installment agreement.

When you owe the IRS more than $25,000, you must provide financial information to the IRS and your monthly payment will be what the difference in your income and allowable monthly expenses is.