If you are an individual or business taxpayer that does not have the income, assets, or means to pay your tax liability now or in the foreseeable future, you may be a candidate for an IRS compromise. The IRS Compromise program allows you to offer a lesser amount for payment of a non-disputed final tax liability. It is sometimes possible to wipe your tax slate clean at an enormous discount. Under this Offer in Compromise program, you and your tax professional can negotiate with the IRS, a final settlement amount that will retire your tax debt once and for all. Often, this settlement amounts to pennies of the dollar of your tax debt. Getting your offer in compromise approved is only the beginning of your road to recovery. When your tax debt settlement is approved you are entering a 5 year contract with the IRS. This \”contract\” means you have to file your taxes on time for five consecutive years. If you default on a payment or fail to file properly and timely, the IRS can charge you the original tax debt amount plus penalties and interest. To file an IRS compromise, you must submit appropriate IRS forms and provide comprehensive financial statements to the IRS. These forms must be completed correctly in order to increase your chance of negotiating a good settlement amount.

An offer in compromise is a lump sum payment provided to the IRS, to do away with tax debt. An Offer in Compromise refers to an agreement between the IRS and an individual taxpayer that settles the current outstanding tax debts for an amount less than currently owed. There are three primary types of Offers in Compromise- Doubt as to collectability, doubt as to liability and effective tax administration.

● Doubt as to collectability- If there is reasonable doubt that the individual taxpayer has the capacity now or in the future to pay the current tax liability, this form of an offer to compromise may be a viable option.

● Doubt as to liability- This form of offer to compromise may be an option if there is legitimate doubt that the tax liability is accurate. Examples could include mistakes interpreting the law on the part of the tax examiner, the taxpayer\’s evidence was not properly considered or new evidence is now available.

● Effective Tax Administration- In this instance, there isn\’t doubt that the taxpayer has the capacity to repay the tax debt or that that tax debt is correct, but rather an exceptional circumstance exists causing the IRS to consider an offer to compromise. Typically, financial hardship or proof that the IRS tax debt collection is either unfair or inequitable must be proven for consideration.

The IRS tax Offer in Compromise program is a very powerful program. It was established by the U.S. Congress to help taxpayers who have experienced significant financial problems, to get a fresh start. What many people do not realize is that the Offer in Compromise program is a privilege, not a right. Many people are turned down from the Offer in Compromise program because they simply do not qualify. There are alternative tax relief services to help settle back taxes and tax penalties for those who do not qualify for the OIC program. However, for those who are accepted for the Offer in Compromise, they usually have reason to celebrate because the tax savings are, often, very large! Many settlements are pennies to the dollar and the average Offer in Compromise settlement rate that we see is $0.106 on the Dollar. For instance, one person we worked with owed the IRS $52,000 in back taxes! After several months of negotiations, he was able to settle his debt for just $3900 through the IRS\’s Offer in Compromise program. What’s great about this program is that the compromised amount may be paid in one lump sum payment, in installment payments, or through a combination of a lump sum payment and installment payments.

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Category: Finances
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