Insider Tips: It's notoriously hard to have your IRS Offer in Compromise approved. After all, this is Uncle Sam's money we're talking about. And he's doesn't want to lose one red cent of it. But there is a secret way to crack the IRS's code. You may have read this all before, but here it is in plain English:
The Three Factors: The IRS may accept the offer based on any of the following.
1. Doubt as to Collectibility: This means you can't pay in full, no matter what. But remember, if you have assets these could be sold to satisfy your debt.
2. Doubt as to Liability: This means you're not liable for the debt. Don't apply unless you can prove it, and don't apply unless your reason is legitimate. Constitutional arguments and "it's just not fair" excuses won't cut it. According to the IRS, here's what qualifies as legitimate reasons:
(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.
3. Effective Tax Administration These are exceptional hardship cases like when an individual is recently handicapped or widowed with no income. Basically, you must demonstrate that the collection of the debt would create an unfair economic hardship for you. (Ex: If the IRS does not accept your Offer in compromise, you cannot afford to pay your medical bills.)
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 years straight. If you default on a payment or fail to file, the IRS can charge you the original debt amount plus penalties and interest!
An Offer is not always the right answer for solving your Tax Debt issues. If you don't know which way to turn, consider consulting with a professional for the right answer.