An offer in compromise allows individuals to settle their tax debts for less than the full amount they owe. The IRS considers several factors, including a person’s ability to pay, income, expenses, and asset equity, when evaluating and approving an offer in compromise.
To be eligible for an offer in compromise, individuals must have filed all required tax returns and made all required estimated payments. They should not be actively involved in an open bankruptcy proceeding and must have a valid extension for the current year return.
Additionally, employers must have made tax deposits for the current and past two quarters before applying. In cases where the IRS cannot process the offer, they will return the application and offer application fees.
Any offer payments included will be applied to the balance due. Payment options for approved offers in compromise can include a lump sum cash payment of 20 percent of the total offer, followed by the payment of the remaining balance in five or fewer payments.
Alternatively, individuals can choose periodic payments, where they pay the balance in monthly installments. Low-income individuals who meet the certification guidelines do not need to send the application fee, initial payment, or make monthly installments while the IRS reviews their offer.
If an offer in compromise is rejected, individuals have the right to appeal within 30 days using the Request for Appeal of Offer in Compromise, Form 13711. The IRS Independent Office of Appeals provides additional assistance in the appeals process.
It is important to note that navigating the offer in compromise process can be complex, and it is often recommended to seek the guidance of a qualified tax attorney at Anderson Bradshaw who can provide expertise and assistance throughout the application and negotiation process.