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The IRS Offer-In-Compromise Program
You may have heard claims that your tax debts can be reduced to “pennies on the dollar.” These claims were undoubtedly referring to the IRS Offer-In-Compromise program. If a person is unable to pay the taxes they owe to the Internal Revenue Service, or if doing so would create an undue hardship, an offer-in-compromise may allow that person to settle his or her tax debt for less than the full amount owed.
Offers-in-compromise cover all outstanding tax liabilities, and certain kinds of offers-in-compromise may even allow the taxpayer to dispute the amount of taxes owed.
To be eligible to make an offer-in-compromise, one must be current with all tax filings and payments and must not currently be in bankruptcy. When making an offer to the IRS to settle your tax debt, you must offer a specific amount to settle all of your outstanding tax liabilities, and the IRS will determine whether or not to accept your offer-in-compromise. You will be required to pay an amount at least equal to your equity in assets plus net income over the next 12 or 24 months to satisfy the tax debt.
There is no legal right to make an offer-in-compromise, and a denial by the IRS may not be appealed in court. However, a denial may be appealed to the IRS Appeals Office.
In determining the amount they will accept in an offer-in-compromise, the IRS considers the following:
- one’s ability to pay
- current and future income
- equity in assets.
While an offer-in-compromise is pending, collection activities are suspended. If your offer-in-compromise is accepted, your tax liabilities will be reduced to the amount offered and any federal tax liens will be released when the offer terms are satisfied.
An offer-in-compromise can substantially reduce your tax debt and provide a fresh start, and a skilled tax attorney can help ensure that you make an offer that has the best possible chance of being accepted by the IRS. Give us a call today to learn more.