The Hidden Details of an Offer in Compromise

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An Offer in Compromise is a tax debt payment settlement between a taxpayer and the IRS that reduces the tax debt amount of the taxpayer so that the tax debt can be paid. An Offer in Compromise is unlike other IRS debt payment programs where taxpayers are required to pay the full tax debt amount.

An Offer in Compromise provides taxpayers the benefit of getting their tax debt reduced to an amount that they can manage to pay in full. IRS Tax Attorney Network warns that most taxpayers do not match the eligibility criteria of an Offer in Compromise. It is only when paying taxes in full can create a financial hardship that the IRS considers reducing the debt amount.

Who Qualifies for an Offer in Compromise?

Taxpayers are lured by tax companies to file for an Offer in Compromise and get their tax debt reduced, but IRS Tax Attorney Network reveals that very few taxpayers can hope to qualify for this tax reduction payment program. The IRS considers a unique set of facts and circumstances before agreeing to reduce a tax debt. These include:

  • The taxpayer’s ability to pay
  • Income of the taxpayer
  • Expenses
  • Asset equity

Only those taxpayers who cannot pay off the entire tax debt amount due to extreme financial difficulties which leaves them only with enough to meet basic requirements of food, shelter, and transportation, can hope to qualify for an Offer in Compromise.

IRS Tax Attorney Network advises taxpayers to check the qualifications of the tax professionals they hire, as this IRS program is used to tempt taxpayers into paying a high fee for a tax debt resolution with the facade of a tax settlement deal.

Resolution of Tax Debt through an Offer in Compromise

For those taxpayers who cannot afford to pay off their entire tax debt, an Offer in Compromise affords much tax relief. The IRS usually approves a request for an Offer in Compromise when the amount offered by taxpayers is the most they can expect to collect within a reasonable period of time. IRS Tax Attorney Network adds that the IRS explores all other payment options before agreeing to reduce the tax debt.

The amount of the initial payment under an Offer in Compromise may vary from taxpayer to taxpayer. It is largely based on the payment option taxpayers choose and the amount they have offered to pay.

Taxpayers who are being evaluated for an Offer in Compromise must submit an initial payment of 20 percent of the total offer amount with their application. IRS Tax Attorney Network suggests taxpayers wait for written acceptance by the IRS before continuing to pay the remaining amount, which is usually paid in five or less payments. Taxpayers can also choose to pay the remaining balance in monthly installments, but will need to pay the initial payment with their application.

Taxpayers who meet the Low Income Certification do not have to send an initial payment or the application fee with their application. Also, they do not need to pay through monthly installments.

An Offer in Compromise is the most abused IRS debt payment program by tax debt companies. Popularly known as a settlement for ‘pennies on the dollar’, it has been advertised as a tax reduction program for all. IRS Tax Attorney Network suggests taxpayers find a reputable tax relief company through this site as a means of avoiding such IRS resolution scams.

For more information on finding a trusted tax professional visit IRS Tax Attorney Network