Hyden, Miron & Foster, PLLC Law Blog

Friday, April 17, 2020

What Is an Offer in Compromise?

Receiving a tax bill is dreaded. It can easily be a substantial bill and one that you might not have prepared for. Being landed with a hefty tax bill from the IRS and little to no way to pay it can cause great anxiety. Try and remain calm. Get educated about your options. You might be eligible for relief from your tax bill by pursuing an offer in compromise.

What is an Offer in Compromise?

An offer in compromise is an option for those taxpayers who owe a tax debt that they simply cannot pay. With an offer in compromise, the taxpayer offers to pay less than what is actually owed in order to settle the debt. To be clear, however, the IRS will not accept a settlement offer if the taxpayer can actually afford to pay what is owed. Before the IRS can even consider a settlement offer, the taxpayer is required to file all tax returns. Additionally, the taxpayer may still need to make an initial payment on the tax bill while submitting an offer in compromise. Any payment submitted during this time will go towards reducing the outstanding tax bill.

To begin the offer in compromise, you must submit your offer. Remember, you must have the ability to pay whatever you are offering. Be aware that there are filing fees associated with the offer in compromise application. Filing the DATC-OIC form has a fee of $186. You will also need to choose a payment option for your offer in compromise. You may choose to make a lump sum cash payment in the offer. You pay also choose to make periodic payments to fulfill the offered settlement amount.

Offers in compromise are only accepted in rare instances. The IRS tends to believe that the vast majority of tax payers can afford to pay a tax bill either with current financial resources or over a period of time, with the use of a payment plan. An offer in compromise is only meant to apply to taxpayers in rare cases. The offer in compromise is for those people who are not only currently unable to pay a tax bill, but are unlikely to be able to pay the tax bill before the IRS runs out of time to collect the amount. Usually, the IRS has 10 years to seek collection from the date the tax bill was assessed. The IRS will review your income, expenses, equity in assets, and your ability to pay when evaluating your offer in compromise application. If you are currently in open bankruptcy proceedings, you are ineligible for an offer in compromise.

While an offer in compromise can provide much needed relief, it is for only a small cross-section of taxpayers. Thus, taxpayers should also explore other available payment options for tax bills that will be difficult to pay. Sometimes, a payment plan can be put in place to accommodate taxpayers struggling with a tax bill.

Tax Attorneys

If you are facing a tax bill that you may be unable to pay, talk to the tax attorneys at Hyden, Miron & Foster. We can help you explore your options. Contact us today.

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