If you’re here, it’s likely because you’re familiar with what an offer-in-compromise is and what it can do for taxpayers who are facing a mountain of federal tax debt they don’t believe they can pay off. That’s essentially what the goal of this form of settlement is: take care of that extensive debt without having to pay the full amount.
This can sound enticing, especially for those who are sick of the IRS meddling with their finances. However, there are several things to consider before you negotiate or agree to an offer with the IRS.
What will an offer look like?
The first offer must come from the taxpayer. You should work closely with your attorney and give them a thorough overview of your finances and assets in order to formulate an offer that makes the most sense for you. The IRS will then make a counteroffer and will allow for some negotiation. Then the IRS will make a final counteroffer. If you do not agree with this counteroffer you can take your case to IRS Appeals.
The IRS is going to want you to offer as much as they think you reasonably can before they will agree to accept an offer-in-compromise. This means it’s likely they’re going to take whatever savings you may have as well as the assets you have outside of those you need to safely live and operate in your daily life. Assets like your home, cars and bank accounts are all assets the IRS will want you to refinance or liquidate before accepting your offer.
The IRS will review your income and expenses as if they were putting you on a tight budget where you are permitted to spend money almost exclusively on necessities with the rest of your budget going directly to the IRS. Then they will determine what they think you should be able to pay. Further, they will require you to stay current with your taxes for the next five years or the offer will default and your tax liability will be reinstated.
For more information about how much you will need to offer as well as a detailed overview of the IRS offer-in-compromise process, see our IRS Settlements Guide.
Is the settlement necessary for you?
This should be the first and most important question. These settlements can difficult in the short-term as you will have to pay a substantial amount. But there are good reasons to consider an offer. If you’ve been dealing with a mountain of federal tax debt and have no reasonable means of paying it off, it might be helpful to do what you can now to get out from under it. Also, getting out from under a federal tax lien could improve your credit and open up some financial doors you didn’t previously have available to you.
What are the long-term implications?
Once you file an offer-in-compromise, the IRS will watch you closely and expect you to file your taxes accurately and on time for the next five years. If you fail to do so, your offer could be rescinded and the original debt could return to you.
Other than this, the long-term implications are mostly positive for you as long as you fulfill your obligations of the offer. Your credit is likely to go up which may allow you to receive loans and other benefits you previously couldn’t have obtained. At the end of the day, an offer-in-compromise can be a risk but there are benefits for those who truly see no other way out of their debt.
You should never try to put together an offer-in-compromise without first working with an experienced tax professional. Robert V. Boeshaar, Attorney At Law, LL.M, PLLC has the experience to handle your offer and make sure the compromise doesn’t put your financial future at risk. Contact our offices today for an attorney who knows how to help individuals and small businesses resolve their disputes with the IRS.
Robert V. Boeshaar Attorney at Law, LL.M.,PLLC
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