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Do I Qualify for an IRS Offer in Compromise?

If you have a tax liability that you cannot fully pay, you may qualify for an Offer in Compromise. Moreover, there are collection alternatives to fully paying an IRS debt. An IRS Offer in Compromise (offer) is an agreement between you (the taxpayer) and the IRS that settles a tax debt for less than the full amount owed. Moreover, the offer program provides eligible taxpayers with a path toward paying off their tax debt. Therefore, the ultimate goal is a compromise that suits the best interest of both the taxpayer and the IRS. To be considered, generally you must make an appropriate offer based on what the IRS considers your true ability to pay.

Submitting an application does not ensure that the IRS will accept your offer. It begins a process of evaluation and verification by the IRS. Furthermore, the IRS takes into consideration any special circumstances that might affect your ability to pay.

Do I qualify for an IRS offer in compromise?

Before your offer can be considered, you must (1) file all tax returns you are legally required to file, (2) have received a bill for at least one tax debt included on your offer, (3) make all required estimated tax payments for the current year, and (4) make all required federal tax deposits for the current quarter if you are a business owner with employees. Moreover, your offer will be immediately returned without further consideration if you have not filed all tax returns you are legally required to file.

Note: If the IRS determines that you have not filed all tax returns you are legally required to file, the IRS will apply any initial payment you sent with your offer to your tax debt. Moreover, the IRS will return both your offer and application fee to you. You cannot appeal this decision.

Questions you should ask yourself to determine whether you qualify for an IRS offer in compromise:

  • Are you in an open bankruptcy proceeding?
  • Have you filed all required federal tax returns?
  • Have you made all required estimated tax payments?
  • What is the total equity in all of your assets?
  • What is your monthly income from all sources?
  • What are your typical monthly household living expenses?
  • How will you pay your offer to compromise the IRS tax debt?

If you are considering whether you qualify for an IRS offer in compromise, contact a tax attorney to discuss the specifics of your case. Once you submit an offer in compromise, the IRS will not levy or request an installment agreement.