Do you owe a large amount of back income taxes to the IRS? If you do, you might have heard about the "offer in compromise" arrangement, which may allow you settle your tax debt for far less than the amount you currently owe. The sticking point, though, is the difficulty of meeting the stringent requirements that will qualify you for an offer in compromise. When you learn more about this option works, you'll be able to find out if you can settle your taxes with an offer in compromise.
About the Offer in Compromise Arrangement
Basically, an offer in compromise is actually what it sounds like. You make an offer to the IRS in an effort to get the agency to compromise on the amount of taxes you owe. Taxpayers who receive an offer in compromise typically have their debt drastically reduced, sometimes settling their accounts for pennies on the dollar. However, applying for an offer in compromise is a lengthy process that includes several qualifications.
Do You Qualify for an Offer in Compromise?
How can you tell if you have a good case for an offer in compromise? The IRS usually examines three factors when considering whether to approve an application: the likelihood that they can collect the full debt, the likelihood that the total tax owed has been accurately calculated, and the potential financial effect that imposing the total would have on the taxpayer. If there is even a possibility that the IRS will be able to get the full amount of taxes owed from you without causing a financial hardship on you or your family, then the agency will probably not approve your request.
How to Request an Offer in Compromise from the IRS
What should you do if you want to apply for an offer in compromise? The IRS does allow taxpayers to submit their own paperwork to request consideration for this option. Generally, this includes IRS Form 656, which is the formal application, as well as other tax forms that explain more about your current financial standing. While it's possible to apply for an offer in compromise on your own, it may be best to hire the services of an experienced tax professional that can help you sort through the forms and complete them accurately. A good tax expert can also look at your situation and advise you if your case is likely to be approved.
Can you settle your taxes with an offer in compromise? The answer depends on your specific circumstances and your financial situation. When you learn about this tax resolution option, you can decide if it's a good idea to submit an application.