An offer in compromise is an agreement between the IRS and a taxpayer that settles a tax liability for payment of less than the actual amount owed. In general, the IRS will agree to an offer in compromise when it believes that the taxpayer cannot pay their amount in full and the compromised amount equals at least the amount the IRS believes it can collect from the taxpayer.
Submitting an offer in compromise can be a complicated process, and it may be difficult to present your case in such a way that the IRS would be willing to accept your offer. To have a successful offer in compromise, a taxpayer should consult with a tax attorney who has a firm grasp on IRS rules, procedures and guidelines. Having an experienced tax lawyer on your side during the process of submitting an offer in compromise may increase your chances of having your offer approved. To speak with a tax attorney in your area with no obligation, fill out the free case review form on the right.
By approving an offer in compromise, the IRS hopes to collect the amount it believes it can obtain from the taxpayer in an efficient manner. Furthermore, the IRS expects that by agreeing to an offer in compromise, the taxpayer will comply with future filing and payment requirements. When an offer in compromise is accepted, the taxpayer must fulfill all filing and payment requirements for the next five years.
There are several different types of offers in compromise which are explained below:
Doubt as to Collectability: The IRS will approve an offer in compromise when it doubts that the taxpayer could ever pay the entire amount of taxes due. A number of supporting documents must be submitted to the IRS before it can consider this type of offer in compromise.
Doubt as to Liability: The IRS will approve an offer in compromise when it doubts whether the assessed tax is accurate. This form of offer in compromise is only applicable if the taxpayer can prove that it does not rightfully owe the assessed tax. If the taxpayer is simply unable to pay the tax liability, this type of offer in compromise is not appropriate.
Effective Tax Administration: This type of offer in compromise is made when the taxpayer agrees to the taxes due and would be able to pay this amount in full, but certain circumstances exist that would make an IRS acceptance of an offer in compromise appropriate. Taxpayers looking to submit this type of offer in compromise must prove that the collection of the amount owed would create an economic burden or would be unfair.
If you are interested in submitting an offer in compromise to settle your tax liability, contact a tax attorney today. He or she can determine which form of offer in compromise is appropriate for your situation and choose a payment period which would work best for you. To speak with a tax lawyer in your area about a possible offer in compromise, fill out our free case evaluation form today.