According to the IRS, an offer in compromise allows eligible taxpayers to settle their tax debt for less than the full amount of money you owe to the Agency. In this way, you will save some cash in order to get back on track. For your information, this is possible, but of course, you will have to meet the strict requirements the Internal Revenue Service has established.
If you think you can’t pay your full tax liability, it is certainly a legitimate option. This option is really helpful when you believe paying all your tax liability is going to create financial hardship. Therefore, it is essential to check if you are eligible or not to get an offer in compromise, or if you need to look for alternatives.
IRS’s set of facts and circumstances:
Here are the things that the IRS will take into account to check your eligibility for an offer in compromise:
- asset equity
- income
- expenses
- ability to pay
In general, the IRS may accept an offer in compromise when it thinks the amount you are offering is the most the Agency can expect to collect within a fair timeframe. Anyway, an offer in compromise should only be taken into account as a last resort. Thus, make sure you check all the other payment options before you get to this one. Not everyone qualifies for an offer in compromise.
Who is eligible for an IRS offer in compromise?
The best way to check your eligibility for an offer in compromise is to use the IRS tool: Offer In Compromise Pre-Qualifier. All you have to do is visit the official website at: https://www.irs.gov/payments/offer-in-compromise.
Before you do that, check the following list of requirements:
- You made all required estimated payments
- You filed all required tax returns
- You are not in an open bankruptcy proceeding
- You have a valid extension for a current-year return (if you are applying for the current year)
- You are an employer and have made tax deposits for the current and past two quarters before you apply
What happens when you apply but you are not eligible? It could be the case that you apply and you do not qualify. Then, the IRS will have to return your application and offer application fee.
Besides, the IRS will apply any offer payment that you included to your balance due. So, it is essential that you ensure that you qualify for an offer in compromise before you apply in order to avoid a fee. On the contrary, if you think you qualify, you can submit your application. For more details: https://www.irs.gov/payments/offer-in-compromise