When you see all the advertisements on the Internet and on TV about applying for an IRS Offer In Compromise to get a fresh start with the IRS you might get the impression that the Offer In Compromise is some sort of “secret way” to clear up your tax debt.
In reality there is no secret at all about the IRS Offer In Compromise to get a fresh start, and the IRS would actually like you to apply for an Offer In Compromise to clear up your tax debt.
Just the other day, the IRS put out a press release with the headline “Taxpayers with an outstanding tax bill should consider an Offer in Compromise.”
Yes, the IRS wants you to consider an Offer In Compromise.
The main reason that the IRS would like you to apply for an Offer In Compromise and to get a fresh start is that the IRS would rather get you back into the tax system than to have a delinquent taxpayer who hasn’t filed tax returns for many years.
A delinquent taxpayer who returns to the tax system can mean future revenue for the IRS.
That’s reality. The IRS wants compliance and it doesn’t want taxpayers failing to file. When taxpayers fail to file — many times out of fear because they can’t pay their tax bills — the IRS can’t collect anything and it has no hope of collecting taxes in the future.
By holding out the possibility of an Offer In Compromise and a fresh start, the IRS is hoping that it will boost revenue in the future, even if it has to discount or write off previous debts owed by taxpayers.
But that’s where the big heart of the IRS ends. The other reality is that being eligible for an IRS Offer In Compromise isn’t easy. To be eligible you really have to have severe money problems.
IMPORTANT DETAILS ABOUT THE OFFER IN COMPROMISE
The IRS Offer In Compromise program allows taxpayers to enter into an agreement, with the IRS that settles a tax debt for less than the full amount owed. Sometimes taxpayers are able to settle for significantly less, especially if they have low income and few assets.
You should apply for this type of agreement when you can’t pay your full tax liabilities or when paying the entire balance owed would cause financial hardship. The IRS says “the goal is a compromise that suits the best interests of both the taxpayer and the IRS.” As we said, the best interest for the IRS is that it gets a delinquent taxpayer back into the tax system.
GETTING THE IRS OFFER IN COMPROMISE IS DIFFICULT
Unfortunately, getting approved for the IRS Offer In Compromise program is difficult. The IRS has very strict requirements — meaning you really have to show you have severe money problems. This is where talking to a tax professional can help you. In fact, we suggest that you talk to a tax professional first before you attempt to apply for an Offer In Compromise on your own. A tax professional will have a good idea on what the IRS will consider for eligibility and a tax professional may find other factors that can improve your chances for being approved.
WHAT THE IRS CONSIDERS FOR AN OFFER IN COMPROMISE
When reviewing Offer In Compromise applications, the IRS considers the taxpayer’s unique set of facts and any special circumstances affecting the taxpayer’s ability to pay, as well as:
- Asset equity
The IRS publishes a booklet that the IRS says “covers everything a taxpayer needs to know about submitting an offer in compromise” but there are other factors that a tax professional might discover that the IRS doesn’t publish in its booklet.
YOU MIGHT BE BROKE BUT THERE’S AN IRS FEE
You might be broke and that’s why you can’t pay your tax debt but the IRS has an application fee for the Offer In Compromise. The current application fee is $205.
Really. The IRS is asking for $205 from people who say they haven’t got enough money to pay their taxes.
Fortunately, there is a way to have the $205 fee waived if you meet the definition of a low-income taxpayer. And here we have to ask, isn’t everyone who is applying for an Offer In Compromise a low-income taxpayer?
IF YOU DON’T QUALIFY FOR AN OFFER IN COMPROMISE
If you don’t qualify for an Offer In Compromise program there are payment plans that the IRS offers. Again, this is why talking to a tax professional first — before your talk to the IRS directly — can give you valuable information that the IRS may not volunteer.
In fact, after looking at the stringent requirements of the IRS Offer In Compromise program you might decide that you’re better off with another kind of payment plan.
WE OFFER A FREE CONSULTATION
We offer a free consultation to discuss with you the Offer In Compromise program and other ways you can settle your IRS debt. We are happy to discuss these options with you free of charge. In 15-minutes or less we can tell you if you would qualify for an IRS Offer In Compromise or if a payment plan would be a better option for you. If a payment plan is the right option and you don’t need professional help, we’ll tell you what you can do on your own without paying us or anyone else any fees. The video below explains how easy it is to have this free consultation with one of our tax resolution experts.
Remember, the IRS isn’t being 100% benevolent when it suggests that you contact them about the IRS Offer In Compromise program. It’s their way of getting you back into the tax system. Yes, we want to help you resolve your IRS tax debt, but we think talking to a tax professional first offers a lot of advantages. So call us. Our consultation is free. Make the call.