IRS Offer-in-Compromise

For whatever the reason, you can’t pay your IRS taxes. The IRS offers the Offer-in-Compromise as an option to review the taxpayer’s ability to pay the taxes owed.

Offer-in-Compromises are available for 1040’s, 1120’s, 941’s, 940’s and Trust Fund Recovery Penalties. While this scope seems broad, the IRS is very specific as to whom or what can be considered for Offers.

Plain and simple: an IRS Offer-in-Compromise is a request to pay less than the total taxes owed. For instance, you owe $67,000 1040 taxes and offer $6,500; the IRS accepts it, a $60,500 reduction in taxes. To reach this conclusion, you established your inability to pay.
The IRS looks at:

  • Your income.
  • Your expenses.
  • Your assets.
  • Your liabilities.

And finally – your ability to pay based on this information. They look to see how much in disposable income you have and if you can pay taxes owed. To see if you may qualify for an Offer-in-Compromise, go to the IRS Pre-Qualifier. However, the Pre-Qualifier is very specific in its data for correct calculations. Input of wrong data may result in your belief you do or do not qualify.

The filing of the Offer-in-Compromise requires:

  • All tax returns are filed.
  • Form(s) 433A and 433B are filed.
  • Form 656, the Offer Application.
  • Payment of $150.

Determination of the Offer acceptance normally takes 6-9 months. In some cases it can go out as long as 2 years.

An Offer-in-Compromise has a legitimate purpose and it is NOT the best option for many situations. An Installment Plan may be your best direction to take.

Call Christy at 586-803-8000 to discuss the Offer process in greater length. Is an Offer possible for you or your business?

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