Offer in Compromise – An Overview

2007-03-08 10:33:40

( Legal )



An Offer in Compromise is an ideal tax legal option for taxpayers who cannot pay their tax liability in full or through installment agreement. The Internal Revenue Service is offering this program to debtors as a last resort to settle unpaid tax liabilities. The IRS Offer in Compromise program allows delinquent taxpayers to pay a lesser amount, usually under one percent, to settle their total outstanding tax debt.

Types of Taxes covered by the IRS Offer in Compromise

The types of taxes the can be settled through the Offer in Compromise include: Unemployment tax; Personal income tax; Employment/Payroll tax; Civil Estate and Gift tax; Capital gains tax; Corporate tax; Inheritance tax; Civil Penalty assessments; Partnership tax; Interest assessments; Civil Penalty assessments; and Trust Fund Recovery assessments. You do not need to file a separate Offer in Compromise for each type of tax. In fact, you have the legal right to enumerate and settle all your tax obligations on your Offer in Compromise. It is important to note that not only individuals could avail themselves of the program. Any organization or group that has a federal tax liability can apply for an IRS Offer in Compromise.

How to qualify for an Offer in Compromise?

To qualify for an IRS Offer in Compromise, you must prove two things to the tax agency. First, you have to establish that the value of your asset is low or nominal. It is imperative for you to know your total asset value before filing for an Offer in Compromise. The IRS will not consider an Offer in Compromise for a sum less than your total equity value. You also need to prove that your monthly allowable costs exceed or equal your income per month. Not all your monthly expenses will be considered by the IRS, so it would be wise to seek help from an expert tax lawyer to help you ascertain if your monthly income is indeed lower or equal to your allowable monthly expenses. If you meet these two conditions, you are qualified to seek an IRS Offer in Compromise.


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