No one wants to spend years making payments toward a steep tax debt. This is why those "pennies on the dollar" commercials are so tempting. Who wouldn't like to dramatically lower how much they owe the IRS? However, is the incredible risk worth the very unlikely reward? This page takes an honest look at the IRS Offer in Compromise, and instructs you on how to file for a settlement.
Qualifying for an IRS Offer in CompromiseVery few IRS Offer in Compromise applications are accepted. Many people that file for an offer simply do not qualify. One of the following conditions must be proven before the IRS will even consider your offer.
- Doubt as to Liability - Prove that you do not actually owe the debt assessed.
- Doubt as to Collectibility - Prove your debt could never possibly be fully paid.
- Effective Tax Administration - Prove paying the debt causes considerable hardship.
To file for an IRS Offer in Compromise, you must fully disclose your finances. If there is any way possible to pay your tax debt in full before the statute of limitations runs out on it, your offer will not be accepted.
IRS Offer in Compromise RisksIt can take up to two years for your IRS Offer in Compromise application to be accepted or rejected. During that time, the clock on your tax debt's expiration is paused. If it takes two years for the IRS to decide on your offer, that is two extra years they will be able to collect on you. An IRS Offer in Compromise also fully discloses your finances. If you are saving up for your child's college education or your retirement, this is money the IRS may resort to levying to collect on your tax debt.
Even if your IRS Offer in Compromise is accepted, it will probably not be for "pennies on the dollar." You will have a very limited amount of time to pay the entire settlement in full. You will also have to file and pay your taxes, in full and on time, for the next five years. Otherwise, the agreement will be null and void.
How to File for an IRS Offer in CompromiseIn order to file for an IRS Offer in Compromise, you must obtain, fill out, and submit a Form 656-B booklet. You must fill out everything in this booklet, including the following forms:
- Form 433-A: Discloses your personal income, assets, expenses, and earning potential.
- Form 433-B: Discloses finances for a business, if you have a business.
- Form 656: Identifies the years and tax types you want to settle, and your offer amount.
If you plan to submit an IRS Offer in Compromise by proving Doubt as to Liability, you will also need to obtain a Form 656-L, which is not included in the booklet. With your completed IRS Offer in Compromise booklet, you will need to send the non-refundable $150 application fee and the non-refundable 20% initial payment of your offer amount.
If you want to see if you qualify for an IRS Offer in Compromise or find out if there are better options for your situation, consult a professional. Call now or fill out the form below for a free tax debt consultation on the IRS Offer in Compromise and other tax resolutions! We'll only connect you with a tax debt relief company holding at least a B rating with the Better Business Bureau.