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Settling IRS Debt through the Offer in Compromise Program

April 7th, 2016   •   no comments   

If you have amassed an IRS tax debt, you may be a candidate for the IRS offer in compromise program. This program is the only option available to possibly receive tax relief that provides a significant reduction in not only the principal balance due but the penalties and interest that have accumulated as well.

In order to be considered for tax relief through the offer in compromise, you must be compliant. Compliance requires 2 things:

 

  1. All past tax returns must be filed; and,
  2. You must have corrected the issue that caused you to have balances due in the past.

 

 

 

Most often delinquent taxpayers are not having the proper withholding on their paychecks or they are self-employed and not paying taxes on this income. If you are an employee and not paying enough tax then you must correct your W4 with your employer so that sufficient taxes are being deducted. If you are self-employed then most likely you must be paying estimated tax payments. These are quarterly payments you send to the IRS throughout the year. Normally the amount of your estimated tax payment is determined from your prior year tax return balance due. Your tax preparer should provide 4 voucher slips indicating the amount you should be sending quarterly and where to mail these payments.

Once you have become compliant, you may be a candidate for tax relief through the Offer program. Most often, the best candidates are those who have little equity in real estate, bank accounts, and investment accounts. Additionally, you must be able to show the IRS that your monthly expenses are in line or exceed your monthly income. The key to determining this is to know which expenses will be allowed by the IRS. Many expenses are not considered necessary and as such will not be subtracted from your monthly income.

Roughly 35% to 40% of annual offers in compromise submitted are accepted. Most accepted offers are submitted by tax practitioners since they are versed in packaging offers.  If you believe that you meet the criteria above or simply want a free consultation to determine your tax relief eligibility, give Resolve Tax a call at 800-721-3890.

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