The IRS has a debt settlement program called an Offer-In-Compromise. It can be used by individuals and by businesses, such as restaurants, Airbnb owners, and professional service firms who owe the Internal Revenue Service more money than they can afford to pay can use this tax resolution tool to lower their debt.
The IRS accepts offers-in-compromise to taxpayers to give them a “fresh start” without their tax debt. If you offer is approved, the IRS accepts a lesser amount (sometimes a fraction of what’s owed) to settle your debt. But the IRS uses strict criteria and requires an extensive application before it will grant approval. When you have experience negotiating with the IRS your odds for acceptance increase significantly.
The IRS considers your income, assets, expenses, ability to pay, and whether paying the full amount would cause financial hardship.
Information Needed to Apply for an Offer-in-Compromise
The IRS does want to give people a “fresh start,” but it also wants its money. The IRS’ reason for accepting an offer is that it wouldn’t receive any money otherwise. So, with this program, if you give them an amount that equals the value of everything you own, they will forgive the rest of your tax debt. To apply, you must be current with all filing and payment requirements and you cannot be in the midst of a bankruptcy.
More information about the IRS Offer-in-Compromise program can be found on the IRS website here or by getting your free copy of our IRS Settlements Guide. If you would like to see if we can help you or your business with its back-tax problem, contact us today for a consultation at: Schedule Consultation.
If your business or former business has past-due employment taxes, the IRS may also have assessed or be about to assess the Trust Fund Recovery Penalty against you personally. Since this is a personal tax liability, you may need to submit a separate offer-in-compromise for your personal taxes to resolve it. To apply for a personal offer-in-compromise, you must first supply the IRS with your name, address, social security number, and the amount of tax debt you would like to offer to pay to resolve all of your tax liabilities. You must also include details about your income, assets, and expenses in your application.
For your personal income, you must include any wages you received, any business profit, self-employment income, rental income, child support or alimony, and interest on investments. Your assets can include things such as stocks and bonds, resale value of your personal vehicles, the market value of your home, the balance of your retirement savings accounts, and the balance of bank accounts, including checking, savings, and investments. For the expense section, you should only include items you pay regularly. These may include rent or mortgage, child support or alimony, state and federal taxes, daycare costs, costs to maintain a vehicle, and auto, health, and life insurance premiums.
It can be challenging to compile this information and complete the application correctly even for a professional, such as a CPA or attorney, who does not have experience in dealing with the IRS. We encourage working with a professional who has experience in resolving IRS disputes. They can review with you the requirements for a successful offer-in-compromise and help you determine whether you qualify. An experienced tax professional will also increase your chances of approval of your business or personal offer-in-compromise.
Robert V. Boeshaar Attorney at Law, LL.M.,PLLC
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