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Offer in Compromise?
An Offer in Compromise is an agreement between the taxpayer and the IRS. It's an agreement that centers around the taxpayer paying less than the tax liability the IRS claims is owed.
Offers are most likely to be accepted by the IRS in circumstances where it's unlikely the entire tax liability can be collected. The Offer in Compromise will represent an amount and a time period for payment that is realistic. The ultimate goal for the IRS is to collect as much of the tax debt as possible, as quickly as possible, and with the least cost to the IRS.
It's important that the taxpayer is aware that she may have several options of tax reduction available.
Collectability Doubts - Within this category, there is little to no possibility of the taxes owed ever being paid. If a taxpayer wants to use this strategy as a basis for an offer, she must be able to show that under no circumstances will she be able to pay the taxes owed. She must also be able to provide supporting documents, such as financials including bank statements, which indicate she is unable to pay the tax amount due.
Doubt as to Liability - The taxpayer or her representative must establish verifiable reasons why she thinks that the tax owed is not actually hers to pay. If she wants to argue that the tax owed is incorrect, she will need strong documentation to prove this. She will have to show there is more to her claim than the inability to pay due to lack of funds because this is not an acceptable reason on which to base this claim.
Effective Administration of the Tax - This is a case when the taxpayer knows the tax is hers to pay and she owns assets or has the money to pay the full tax amount. Even though the taxpayer could pay the tax amount owed in full, she feels that she shouldn't have to as it may affect her overall circumstances and possibly make her insolvent. There are a few areas she will need to cover in order to claim an Offer in Compromise for this reason;
- the taxpayer is unable to work to earn a living due to long term illness, injury, medical conditions, and disability. Although she has the money to pay back the tax that is owed; she will not be able to earn more money as a result of the previously stated reasons
- the taxpayer may have dependents that require her financial support. If paying the full tax amount in question jeopardizes the health or care of her dependents, this may be used as a valid reason for tax reduction
- if the taxpayer has assets and equity but is unable to borrow against them or she is unable to liquidate any assets she may have; this may also give her grounds for a tax reduction, as she would then struggle to pay for her basic living expenses
The taxpayer has three options to pay if the Offer in Compromise is duly accepted.
- the taxpayer can pay by cash; but, she will have to pay within 90 days of the offer being accepted
- the taxpayer can request a short term payment plan that must be paid within 24 months
- the taxpayer can request a long term payment plan that gives her until the collections statute time runs out
If the taxpayer's Offer in Compromise is accepted, she must make all agreed payments in a timely fashion. She should not incur any additional tax debts within her set payment period or within a five year period, whichever is the longer time period. If the taxpayer does not keep to her terms and conditions within the offer, she faces the risk of the original tax liability being re-instated.
If the taxpayer feels she needs more information or needs help concerning this matter, we can provide her with a free and confidential consultation to help her with the tax problem. Our expert team includes tax lawyers, CPA's and enrolled agents who will help get the tax issue settled once and for all. If the taxpayer wants us to help her negotiate a settlement with either the IRS or a state tax agency, we will do everything legally possible to get rid of the tax problem.
The Offer in Compromise program is in the best interest of the taxpayer and the IRS. Our goal is get the lowest settlement possible for our clients. We can help most taxpayers settle their tax debts so that they can get back on track with their lives.