An offer in compromise is tax relief designed to settle tax debt for less than the amount owed when a taxpayer cannot pay full liability. The IRS may accept an offer in compromise in situations where the amount offered is the most it can expect to collect from the taxpayer before the statute of limitations is exceeded. Ability to pay, income, expenses and asset equity are all examined when an offer in compromise is being considered. The IRS will investigate all other forms of liability fulfillment, such as an installment agreement, before agreeing to an offer in compromise.
Who is Eligible for the Offer in Compromise Program?
To be eligible for an offer in compromise you must file all required returns and pay all estimated taxes assessed in the current year. If you are in an open bankruptcy proceeding, you are not eligible for an offer in compromise.
Submitting an Offer in Compromise
Before you are ready to submit an offer, you must use the IRS guidelines to calculate an offer it will consider appropriate given your particular financial situation. You also need to choose one of two payment options. The first option requires 20 percent of the total amount offered to be paid at the time of application. Once you receive written acceptance of the offer, you have to render the remaining amount in five or less payments. Option two requires a payment to be made at the time of offer and payments to be made monthly, including during the offer evaluation time, until the amount of the offer is paid. Typically, a smaller amount is accepted for offers paid under option one. An application fee of $150 is required for all offers in compromise. This fee and the initial payment are nonrefundable even if your offer is not accepted; however, the payment will be allotted toward your tax liability.
Key Points Regarding the Offer in Compromise Program
There are several things to keep in mind regarding an offer in compromise. Penalties and interest continue to accrue while your offer is being considered. A Notice of Federal Tax Lien may still be filed and won’t be released until you have satisfied the terms of your offer. The statute of limitations on your tax liability is extended when you apply for an offer in compromise. If your offer is accepted you must continue to file and pay all current tax obligations while your offer is being paid or for five years after your offer is accepted, whichever is longer, or your offer may be defaulted. An offer that is defaulted results in a reinstatement of the original tax debt. Any refunds due during the calendar year when you submit your offer will be applied to your tax debt. An approved offer in compromise supersedes any existing installment agreement. Any tax debt that you do not agree with may be addressed in your offer as Doubt to Liability (Form 656-L).
Don’t Wait, Contact us Today
The number of offers in compromise is not high because the IRS does not want to collect less than it is owed. All other avenues of collection will be thoroughly sought over an offer in compromise. Seventy percent of the offers in compromise Tidy Tax submits are accepted while the national average is 20%. We will not attempt an offer in compromise on your behalf uselessly. We know what it takes to get the tax relief you need, and we’re ready to help. Contact us today. 866.749.7717