Offer In Compromise

What is an Offer in Compromise?

The IRS has an Offer in Compromise tax settlement program to help taxpayers who can demonstrate that they cannot all pay their back taxes and tax penalties and that further collection efforts by the IRS would not be cost effective or futile.

While you may hear and see much advertising about how you can pay “pennies on the dollar” to the IRS, the “Offer in Compromise” is not for everyone.

The IRS will need to scrutinize your financial records to be assured that you met their strict guidelines by reviewing all of your income and total equity according to their “secret” formula before considering your tax settlement offer. For this reason you should speak with a tax attorney or other tax professional to assess your assets and liabilities to determine your complete current financial status.

Only after a complete review of your current financial position is completed by your tax professional should you consider proceeding with an “offer in compromise” tax settlement. If you meet the requirements you will need to submit 20% of the settlement offer with your initial request. If the offer is rejected the IRS will keep the 20% and apply it to your tax bill so it is important be certain that you qualify—AND even more important to properly demonstrate that you qualify to the satisfaction of the IRS.

Finally, it is important to recognize that while not everyone who owes back taxes and has fallen on hard times will qualify for an offer in compromise tax settlement, there are many other strategies to he will help provide tax relief such as IRS installment agreements, being declared uncollectable, tax collection statute of limitations,  tax abatements and more.

In summary the offer in compromise is a tax settlement that may offer tax relief for taxpayers who can demonstrate an extreme hardship and weak financial position such that collection efforts by the IRS would not be cost effective or futile.