What Is An Offer in Compromise?
An offer in compromise is a type of federal tax lien resolution that is an agreement with the IRS that settles your liabilities for less than the full amount owed. Note that this option is usually only available to those who cannot repay their debts through another method, such as installments.
Flexible Offers in Compromise are a key part of the IRS Fresh Start Program, started in 2011 to help struggling individual and small business taxpayers clear up their tax issues.
Who Qualifies for Offers in Compromise?
There are two hurdles in the offer in compromise process: qualifying to apply and getting the IRS to accept your offer. The IRS has an online tool to help you determine if you might be eligible.
The eligibility requirements for “offers in compromise” are specific. To be considered for the program, you must meet the following requirements:
- All tax filings must be current.
- You can’t be in an open bankruptcy proceeding.
- You must have received a bill from the IRS for your tax debt.
- If you’re self-employed or have income from other sources not subject to withholding, you must have made estimated tax payments for the current tax year.
- You must have exhausted all other options for paying your tax debt, such as setting up a payment plan or using other forms of tax relief.
Meeting the above requirements doesn’t guarantee your acceptance into the program. The IRS will evaluate your financial situation to determine whether you qualify.
The Application Process for Offers in Compromise
To apply for the “offers in compromise” program, you’ll need to complete and submit IRS Form 656. You’ll also need to provide documentation of your financial situation, such as:
- Proof of income: This includes pay stubs, W-2s, and other documentation of your income.
- Proof of expenses: This includes documentation of your monthly living expenses, such as rent or mortgage payments, utilities, food, and transportation.
- Asset documentation: This includes documentation of any assets you own, such as real estate, vehicles, and retirement accounts.
After submitting your application and supporting documentation, the IRS will review your financial situation to determine whether you qualify for the program. If your offer is accepted, you’ll need to make a lump sum payment or set up a payment plan to pay the agreed-upon amount.
Contact Ira J. Metrick Today To Discuss Federal Tax Lien Resolution
In conclusion, the “offers in compromise” program is a valuable tool for taxpayers who are struggling to pay their tax debt. If you meet the eligibility requirements, this program can provide significant relief by allowing you to settle your tax debt for less than the full amount owed. If you’re considering applying for the “offers in compromise” program, it’s essential to consult with a tax professional who can guide you through the process and help you navigate the complex tax code.
If you are in need of assistance with an Offer in Compromise or other federal tax lien resolution, please contact our office today.