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If you have an outstanding tax debt that will create financial hardship at the attempt to repay the debt; you could consider utilizing the “Offer-in-Compromise” program. Taxpayers who are eligible for the offer-in-compromise program must meet specific prerequisites. Most importantly, there needs to be evidence that the taxpayer suffers from financial hardship to the point that it makes paying the total amount of tax debt owed impossible. Thus, the taxpayer could make an offer-in-compromise to the IRS by asserting it is the only realistic path for eliminating the tax debt and the IRS receiving some of the amount owed.

One of the primary reason’s taxpayers opt not to take advantage of this program is the requirement that they agree to forfeit a tax refund. This forfeiture poses a significant hurdle for many low-income Americans who typically depend on receiving a sizable tax refund each year.

However, On November 1, 2021, the IRS announced that it eliminated the tax refund forfeiture requirement. This means, going forward, taxpayers who make an offer-in-compromise to the IRS will still be able to receive their full tax refund for the year the government accepts their offer (though exceptions may apply to tax fraud cases). In addition, taxpayers can also apply for an “offset bypass refund” while their offer-in-compromise application is pending review by the IRS. An offset bypass refund enables a taxpayer to receive a refund while an offer in compromise is pending, but only up to the amount of the hardship. Though, it is important to note that this option is limited to individuals who have a case of extreme hardship.

The Importance of this Modification

Because of the economic hardship created by the COVID-19 pandemic, the IRS’ decision to modify the offer-in-compromise program could very well save a plethora of taxpayers from having to make the awful choice of delaying payment of tax debt or facing significant penalties.

Another important aspect of this modification is that it incentivizes delinquent taxpayers to pursue an offer-in-compromise, which could potentially make the government’s tax collection efforts more successful. Though no action is needed to receive your refund after receiving approval of your offer-in-compromise, it is crucial to apply for an offset bypass refund immediately after submitting the application for an offer-in-compromise. Why? Because this provides the IRS sufficient time to approve it ahead of tax refund issuance.

In Need of Tax Debt Relief? Contact Anderson Bradshaw Today

If you are struggling with tax debt, the tax professional experts at Anderson Bradshaw can help you through your unique tax situation. With over 30 years of experience in the industry, we have seen many different tax issues and have learned the best ways to handle each one accordingly. You can feel confident knowing your struggles and difficulties with the IRS can be resolved and corrected quickly and efficiently at Anderson Bradshaw. For further information or to schedule a consultation please contact Anderson Bradshaw Tax Consulting at 877.550.3911 or visit to learn more.

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