You can settle your tax liability for less than the whole amount you owe by making an offer in a compromise. If you are unable to pay your entire tax debt or doing so would put you in a difficult financial situation, this may be a viable option. When dealing with the IRS for an offer in compromise, there are various factors to be taken into account, particularly the facts and circumstances such as the following:
- Paying capacity
- Equity in assets
The offer in compromise is most likely accepted if the IRS sees your offer and circumstances fitting such as the anticipation to recover tax debt in a reasonable amount of time. Before making a compromise offer, consider all available payment possibilities. Not everyone is a good fit for the Offer in Compromise program. Check the credentials of any tax expert you employ to assist you in filing an offer.
Who are eligible for an offer in compromise?
You may submit an offer in a compromise application if you:
- Made all the necessary projected payments and filed all necessary tax reports.
- If you are not engaged in an active bankruptcy case.
- Have possession of a current-year return extension that is valid (if applying for the current year) prior to applying, you are an employer who has settled tax deposits for the previous two quarters.
If You Apply But Aren’t Qualified
If you happen to submit an offer in compromise but are unable to accept it, the IRS will do the following:
- Send your application back and include the application fee.
- Add any offered payment you made to the outstanding balance.
To find out more information about offers in compromise, how to increase the chances of accepting your offer, and how you will get the most out of it, feel free to download this.