Offers in Compromise

Do you have an IRS notice problem? Are you afraid to go to your mailbox?

If so, an IRS offer in compromise may be right for you.

What is an Offer in Compromise?

An IRS offer in compromise is where you, the taxpayer makes an offer to the IRS to settle your tax debt for less than the full amount owed. The IRS will accept your offer when it is good for both you and the IRS.

There are three reasons why you may qualify for an offer in compromise.

1. Doubt as to Liability — There is doubt that the taxpayer actually owes this debt.
2. Doubt as to Collectability — There is doubt that the IRS will be able to collect the debt because there is no money.
3. Effective Tax Administration — In sum, in the interest of justice the amount should be reduced.

Although all three reasons to request a compromise are valid, the most common reason comes from doubt as to collectability. This is where you tell the IRS that you don‘t have the money to pay your tax debt and it is unlikely that you will ever have enough money to do so. In the offer you are essentially stating that the IRS should accept less than the full amount due because there is serious doubt that the Service will ever be able to collect the entire amount.

Some high pressure tax promoters peddle offer in compromises through infomercials by misleading people into believing they can pay pennies on the dollar. While this is true in unusual and extreme circumstances, it is far from accurate for the average requester. Teogatha Law recommends that taxpayers are diligent in ensuring that the tax professional they choose to assist them with an offer in compromise is of ethical character to ensure an honest appraisal of the situation before vast sums of money are spent on an offer that has no chance of success.

Method of Request

To request an offer in compromise the taxpayer must file Form 656 with the IRS in a semi-similar fashion to the way a Form 1040 is filed. On form 656 a taxpayer must provide details of their financial affairs that demonstrate that a compromise should be granted. The taxpayer can choose to either pay the IRS in installments or make a lump sum payment. In either case, the taxpayer will typically have to make a payment, or payments, to the IRS while the offer is pending.

Appeal

If the IRS denies the offer it is possible for the taxpayer to appeal the decision. The easiest method is to try and talk to the decision maker and get them to change their mind. If this fails, a formal protest can be filed with the appeals office within 30 days of the date of the rejection.

Professional Assistance with Offers in Compromises

Teogatha Law provides professional representation for taxpayers throughout the offer in compromise process. Teogatha law goes through the facts and laws associated with each individual case to ensure maximum opportunity for an acceptable compromise to be reached.