What Is an Offer in Compromise?
An Offer in Compromise is a program for taxpayers who could not possibly pay their IRS or State debt in full, to settle for a lower amount than they could pay. There are three types of Offers in Compromise.
- Doubt as to Liability. This is when there is doubt as to whether the tax total that was assessed is correct. If there is any doubt that an error was made, you may be able to reach a compromise.
- Doubt as to Collectability. This is when there is doubt as to whether the full amount of the debt could ever effectively be collected. The IRS or State will take into account extreme financial hardship and may agree to settle for an amount that is much less than the full debt.
- Effective Administration. You may qualify if you have the ability to pay all the back taxes, but due to exceptional circumstances, paying the full amount of taxes would result in economic hardship. Most of the time, this involves some type of life changing medical tragedy than requires you to retain all savings and assets just to stay alive.
An Offer in Compromise is based upon a complex IRS formula to determine which taxpayers are eligible. It is impossible to make a blanket statement about what makes taxpayers eligible.
If you think you may be able to reach this compromise with the IRS, you must start by making sure you get into and remain in compliance with all tax returns and estimated payments.
The best way to determine if you are eligible for this compromise is to make an appointment with an expert from Legacy Tax & Resolution Services to over your tax information personally.
Should you get help?
I have seen many people try to prepare their own OIC and fail because they do not fully understand the art of dealing with the IRS. Yes, you can submit an Offer in Compromise yourself but if you are trying to considerably reduce your debt, I recommend you rethink your position.
An “accepted” OIC is not the same as a “successful” OIC.
There is more to it. Sure, the average taxpayer can fill out the forms and after spending hours reading and rereading the instructions provide the substantiation needed for an application to be accepted. How do you measure success? To me, success is measured with an approval on the LOWEST DOLLAR AMOUNT the IRS will accept.
If you feel that you may be in over your head, or just want to get a second opinion, let’s set up a short call. To avoid the back and forth emails and phone tag, I have included a link to my Calendar https://calendly.com/taxman/tax-problem-resolution-initial-consultation. Let’s set up a 30 min. phone conference to get to know each other. The phone number to call is 855-829-5877 and my extension is 203.