If you have tax debt, you probably feel like you have a heavy chain around you, but there’s a beacon of hope, called the Offer in Compromise program. This is a little-known gem within the tax code.
Let’s see what this program does, what are some of the requirements and what forms you need to submit.
About The Offer In Compromise Program
First of all, this program will not erase your tax debt, but it will allow you to settle your debt for less than the full amount owed. It is a legitimate option if full payment would cause you financial hardship or if you can’t pay your full tax liability.
The OFFER IN COMPROMISE program is not a one-size-fits-all solution, but rather a carefully structured agreement tailored to your unique financial situation. The IRS will take into account your ability to pay, your income, expenses, and your asset equity. The IRS generally approves an offer when it represents the most they can expect to collect from you within a reasonable period of time.
Eligibility
To be eligible for an OFFER IN COMPROMISE, there are several boxes you’ll need to tick: filing all required tax returns, including an extension for the current year, if the current return was not filed yet; making all your required estimated tax payment; and, you cannot be in an open bankruptcy proceeding.
If you have a business, it’s also crucial to have made federal tax deposits for the current and past two quarters before applying.
The application process involves submitting a detailed package, including Forms 433 and 656. There’s also a non-refundable $205 application fee and an initial payment that varies depending on the payment option you choose: lump sum cash or periodic payment.
Keep in mind that the OFFER IN COMPROMISE is a complex process and is not a quick fix. The application can take a long time to be reviewed. Also, it’s essential you explore all other payment options before submitting your offer. To see if you could qualify, click here.
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This material is for informational purposes only. It does not constitute tax, legal or accounting advice.