The Harsh Truth: The IRS wants the entire tax liability paid in full. After all, millions of Americans manage to do this every year, why shouldn’t you? The IRS will evaluate every single detail of your IRS case and situation before they even consider your offer. Here’s what you need to know before your submit an Offer in Compromise to the IRS.
• You don’t qualify: If you have the ability to pay the Tax Debt in full or pay it in monthly payments with an Installment Agreement, you don’t qualify for an Offer in Compromise. Even with special hardship circumstances, like unemployment, most people will not qualify for an Offer in Compromise.
• It’s not the best option: An Offer in Compromise isn’t for everyone. There’s a wide variety of ways to solve your Tax Debt issues, and you need to find the solution best suited to you. Sometimes an Installment Agreement is a better solution; it all depends on your situation.
• It'll cost ya: Depending on which Offer you submit, an application fee of $150 and 20% of the offer made must be submitted to the IRS. The money you send is nonrefundable! This means you’ll lose big if you’re not approved.
• Your Tax Lien is here to stay: Even if your Offer is approved, your Tax Lien remains until your Tax Debt is paid in full. According to the IRS, you have less incentive to finish paying your debt without the Tax Lien in place.
• Tax Levies are Finders, Keepers: The IRS will keep the proceeds from a levy served prior to submission of an Offer in Compromise. This means the money the IRS seized from your bank account prior to the OIC will not count towards the OIC, and the IRS is keeping it.
• No more refunds: No Tax Refunds will be received until the tax debt is paid in full. The IRS is letting you pay less than you owe, fair is fair, right?
• Collections statutes extended: The statutory period of your debt is suspected while the IRS investigates your Offer, and it’s further extended if you appeal an Offer in Compromise rejection. This will extend the amount of time the IRS has to collect on your tax debt. It’s a good idea to make sure you’ll be approved if you apply, the statute of limitations on your debt can be extended for years.
Ready to Apply? If you think you’re ready to take on the responsibilities of an Offer in Compromise, fill out IRS Booklet Form 655 Offer in Compromise. And remember to double check and proofread, the required $150 application fee and 20% of the offer is nonrefundable. A mistake could cost you big bucks, and lead to future levies and other IRS problems.