Offer in Compromise

The Offer of Compromise

If for example you owned a business and used withheld employee taxes for other purposes or if you neglected to report millions in income, you tax liabilty can be staggering.

Fortunately, the IRS is more interested in reaching a quick and reasonable settlement (in its eyes) than dragging things out for years and getting little or nothing in return.

This is the very reason it started the Offer of Compromise Program.

The Offer in Compromise not a gift. Accepting a settlement is a business decision on the part of the IRS.

Instead of spending the time and money it would take to collect the tax (or for people who don't have the means to pay their debt in full), the IRS will decide if it is in its best interest to accept a settlement.

Also an Offer in Compromise is not a negotiation. The IRS has a complex series of formulas that reflect what they could legally collect from you over the next several years.

This amount is generally what you have to offer to the IRS.

Since minor changes can make a big difference to the amount of the offer, it is best to retain an tax professional to prepare the offer for you.

They can make sure you take advantage of all the options available so that your offer is for the lowest amount possible.

Finally, since the IRS wants to encourage future compliance, when you make an Offer in Compromise, you must also sign a firm contract which states that the IRS is willing to forgive your entire tax debt so long as you agree to pay them the amount of your Offer settlement and agree to file and pay your future taxes on time for at least the next five years.

Once your Offer in Compromise is signed and accepted, the IRS cannot come back and change your payments or charge you additional interest or penalties for the tax years you settled on.

It generally takes the IRS six to nine months to process, investigate and accept an Offer in Compromise. This will give you time to collect the money to pay your settlement if needed.

The IRS will also accept payment plans on offers so that you will not necessarily need to come up with all of the money agreed upon at once.

Once your Offer in Compromise is paid in full, you will be permanently released of your entire tax debt for those years and all liens against your name and property will be released.

Then all you have to do from there is stay current on your taxes and payments for the next five years and hopefully you will never have to worry about an IRS tax debt again.

For more on dealing with the IRS, read:

Dealing with the IRS

IRS Enforcement Tools

This article does not purport to offer legal advice.

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