Offer in Compromise

Offers in Compromise

An offer in compromise can be a feasible solution for taxpayers that disagree with the assessed amount of a tax bill or are unable to pay a tax debt due to financial hardship. There are three possible conditions that can qualify a taxpayer for an offer in compromise. To establish whether or not your particular set of circumstances falls into one of the categories below requires the expertise of tax accountants like Tom Rex, CPA.

Work with a Trusted Tax Professional

Beware of deceptive claims to settle your tax debt for "pennies on the dollar". The government has shut down many of the tax resolution shops that used to claim that in the past. At Tom Rex, CPA I am a trusted tax professional experienced in filing legitimate offers with the IRS. I understand what kind of evidence needs to be presented in order to furnish an offer that the IRS will accept so you can reduce your tax debt.

Do You Qualify for an Offer in Compromise?

Doubt as to Liability

To qualify for this condition a taxpayer needs to provide evidence that the assessed tax liability is incorrect and therefore they should not be required to pay the full amount. If the IRS had issued notices of assessment and the taxpayer failed to take action to dispute the tax liability at that time, or if the matter has already been contested during an audit, you will not qualify for this type of tax relief.

If you think your tax liability is incorrect because you did not file a return, and the IRS has completed a return for you, there is an IRS audit reconsideration process available to you.

When the IRS files a substitute return for you, they send you a Notice of Deficiency (90-day letter) proposing a tax assessment. You then have 90 days (150 days if addressed to you outside the United States) to file your past due tax return or file a petition in Tax Court. If you don't do either, IRS will proceed with their proposed assessment, which leads to a tax bill, which triggers the collection process. An audit reconsideration request can be made any time after an assessment has been made on your account and the tax remains unpaid.

Doubt as to Ability to Pay

You'll qualify for this option if you can provide evidence that you don't have the ability to pay the tax debt and can show the IRS that it's likely they will never be able to collect the full amount. The IRS uses a series of guidelines to establish what expenses can and cannot be considered in calculating how much the taxpayer is reasonably able to pay.

Effective Tax Administration

This is a relatively new provision that allows taxpayers to claim that special circumstances would make paying the debt a financial hardship. This option is usually applied to people who are in very poor health or elderly and are not able to work to pay off their tax debt.

Is an offer in compromise the right tax relief solution for you? Contact me at 520-433-9291 or request a consultation today to discuss settlement options with an experienced tax relief specialist.