Offer in Compromise Review: A Tax Blog can never review "Offer in Compromise" enough! Most know that you can either pay your Tax Debt in full or pay on monthly payments. But there IS another option, settling your Tax Debt for less. This is not always the best or even the easiest option for resolving your Tax Debt. But if you qualify, it's definitely worth looking into.
Do you Qualify for an Offer in Compromise?
It's notoriously hard to have your IRS Offer in Compromise approved. But there is a secret way to crack the IRS's code. The IRS has three ways of determining if you Qualify for an Offer in Compromise.
The Three Factors: The IRS may accept the offer based on any of the following:
• Doubt as to Collectibility: If you know you cannot pay your IRS Tax Debt in full, you may qualify. Remember, if you have assets that could be sold to satisfy your debt then you will not qualify for an Offer in Compromise.
• Doubt as to Liability: If you think the debt liability does not fall to you, you're a good candidate for an offer in compromise. But your reasons must be legitimate. Here are three legitimate reasons listed on the official IRS website:
(1) the examiner made a mistake interpreting the law
(2) the examiner failed to consider the taxpayer’s evidence or
(3) the taxpayer has new evidence.
• Effective Tax Administration: If you know you owe the taxes and can also afford to pay them, there's still hope. There may be “Exceptional” circumstances. This means that if the IRS was to collect the debt in full it would cause the taxpayer a financial hardship or an unfair circumstance. This usually applies to people who are disabled, seriously ill, or single mothers.
Don't forget: Getting your Offer approved is only the beginning. When your Offer is approved you are entering a 5 year contract with the IRS. This means you have to file your taxes on time for five consecutive years. If you default on a payment or fail to file, the IRS can charge you the original debt amount plus penalties and interest.
Labels: Offer in Compromise