How Do You Settle Your IRS Tax Liability with an Offer in Compromise?

If you are behind on your federal income taxes, you may be interested in negotiating a tax settlement. If you can get rid of your tax debt while also paying less than the full amount you owe, pursuing this option could give you a fresh start while relieving you of the burden of owing money to the federal government.

The primary means of achieving this outcome is to submit what is known as an “offer in compromise” to the Internal Revenue Service (IRS). While this option is not available to everyone, if it is available to you, submitting an offer in compromise with the help of a Maryland tax attorney could result in a significant reduction of your outstanding tax liability.

Are You Eligible to Submit an Offer in Compromise?

If you are interested in submitting an offer in compromise to the IRS, the first step is to determine whether you are eligible. In order to submit an offer in compromise, you must be able to demonstrate that either: (i) you cannot afford to pay the full amount you owe; or, (ii) paying the full amount you owe would result in severe financial hardship. The IRS has made clear that the offer in compromise program is not intended for taxpayers who simply prefer to pay less than they owe. You must meet certain other basic eligibility criteria as well.

How Do You Submit an Offer in Compromise?

If you are eligible, then you will need to prepare all of the necessary forms and documentation in order to submit your offer in compromise to the IRS. This means that you must:

• Prepare and submit either IRS Form 433-A (OIC) or IRS Form 433-B (OIC);
• Prepare and submit either IRS Form 656B or IRS Form 656-L; and,
• Compile and submit all necessary documentation to justify your offer.

In addition, you must pay a non-refundable $205 application fee, and you must also submit a non-refundable initial payment that is either 20 percent of your offer or the first of a series of installment payments that you propose to make over a six to 24-month period.

What Happens After You Submit an Offer in Compromise?

Once you submit your offer in compromise, the IRS will review your offer and either accept it, reject it or return it. If the IRS accepts your offer, you must make the rest of your proposed payments on time in order to avoid collection. If the IRS rejects your offer, you can file an appeal; and, if your offer is returned, you will need to address the issues identified in the return letter and then resubmit your offer.

Discuss Your Options with US International Tax Advisors

Are you interested in submitting an offer in compromise to the IRS? If so, we encourage you to contact us to discuss your options in detail. To request an appointment with US International Tax Advisors, call us at 844-796-8565 or contact us online today.