When faced with an overwhelming amount of tax debt, many Americans tend to panic and feel trapped. Fortunately, there are ways to settle your IRS tax debts and lessen the financial burden. One of the options made available to taxpayers dealing with unmanageable tax debts is a specialized program offered by the IRS, called Offer in Compromise. The IRS Offer in Compromise is one of the most common tax settlement programs used by debtors, as it allows them to settle their taxes for less than what is owed.
Offer in Compromise Explained
An Offer in Compromise is basically an agreement between you, the tax payer and the IRS to settle your tax debts for less than the amount you owe to the government. Specifically how much less, depends on your individual financial situation. The Offer in Compromise program was originally established by the U.S. Congress to help qualified taxpayers that experienced considerable financial hardships get a fresh start. This is achieved through the IRS, which under certain circumstances, actually has the power to settle or compromise federal tax liabilities by accepting less than full payment.
A big part of the IRS Offer in Compromise agreement is negotiation. Taxpayers can negotiate settlements on various types of taxes, including different kinds of payroll taxes, penalties and interest. However, the process can be complex, as the IRS has certain rules and regulations that must be adhered to by those opting for an offer in compromise. This is why it’s important to consult with tax professionals that are familiar with IRS guidelines and protocols. They can help you fill out the Offer in Compromise form and offer you sound advice when it comes to the art of negotiating your debt settlement.
Eligibility Criterion & Payment
There are specific requirements you must meet in order to qualify for the IRS Offer in Compromise program. First of all, to be eligible, you have to file all tax returns that are due. Additionally, you must be able to prove your inability to pay the taxes. Basically, you have to show the IRS that you have exhausted all other financial resources available to you. It’s also important to be aware that the offer in compromise process is very complicated and time consuming. In some cases, it can even take up to a year or longer to reach an agreement.
The Offer in Compromise settlement option is not designed for everyone, and therefore should not be considered a loophole to avoid paying taxes. Rather, the Tax Offer in Compromise program provides taxpayers with the opportunity to pay a smaller amount as a full and final payment when they owe the IRS more than they can afford to pay. When submitting the offer amount, you have to remember that it needs to be an amount equal to, or greater than the total value of all your assets and future income.
There is an application fee for submitting an Offer in Compromise form. It generally costs under $200, along with a certain percentage for deposit. These payments are retained until the IRS is able to determine whether your Offer in Compromise application can be accepted for processing. Qualifying for the Offer in Compromise program can potentially save you thousands of dollars in taxes, penalties and interest. So if your tax debts are out of control, and you feel that you may qualify for this program, consider the IRS Offer in Compromise as a possible solution to end your financial troubles.