Offer in Compromise

Taxpayers who have a tax debt and they cannot afford the full tax bill, either immediately or through a payment plan. Taxpayers may have heard that they can settle their tax debt for less than the full amount owed, this is called an Offer in Compromise. You may qualify for IRS debt forgiveness in the form of an offer in compromise if your meet certain criteria.

         ***There is three situations that the IRS will consider for an offer in compromise***

1. Doubt as to liability: There’s a genuine dispute about the amount you owe, or whether you owe anything at all.
2. Doubt as to collectability: Your assets and income are less than the full amount of the tax liability, and the IRS believes your tax debt may not be fully collectible.
3. Effective tax administration: There’s no doubt that you owe the full amount and that the IRS could collect it, but paying in full would create a financial hardship — or there are exceptional circumstances that would make it unfair and inequitable for the IRS to collect the full amount.

         ***There are also other requirements you’ll need to meet to qualify***

1. You’ve filed all tax returns that you’re legally required to file.
2. You’ve received a bill for at least one tax debt that you include in your offer.
3. You’ve made all required estimated tax payments for the current tax year, if applicable.
4. If you’re a business owner with employees, you’ve made all required federal tax deposits for the current quarter.
5. You or your business aren’t currently in an open bankruptcy proceeding.
6. You don’t have an open audit or outstanding innocent-spouse claim with the IRS.
7. The IRS hasn’t referred your case to the Department of Justice.

Keep in mind not everyone qualifies for an offer in compromise from the IRS. In fact, your chances might be slim, in 2017 the IRS received 62,000 offers in compromise and accepted only 25,000 of them. That is roughly 40% acceptance rate.