As a Former IRS agent and teaching instructor with the Internal Revenue Service I was one of the revenue officers who taught the offer in compromise program.
I am a national expert in the subject.
Many people believe there is only one type of offer in compromise and that is the one where you can settle your debt for pennies on the dollar.
Few people know there were two other programs you could be eligible for and qualify for.
The Internal Revenue Service received 78,000 offers in compromise last year and accepted approx, 38,000 offers.
Here are the three programs that IRS has to settle or remove your tax debt.
The IRS may accept an OIC based on one of the following reasons:
• First, the IRS can accept a compromise if there is doubt as to liability. A compromise meets this criterion only when there’s a genuine dispute as to the existence or amount of the correct tax debt under the law.
These offers come about because there is an issue with the tax return or an audit and the taxpayer believes the amount of tax debt is not correct and they have proof to show that the debt is incorrect.
To make sure your offer in compromise goes through you need to show all the verification to prove that you have the correct tax liability and that the IRS is in error.
The key to this case is pure documentation. It will be like going through a tax audit to justify everything on your tax return.
• Second, the IRS can accept a compromise if there is doubt that the amount owed is fully collectible. Doubt as to collectibility exists in any case where the taxpayer’s assets and income are less than the full amount of the tax liability.
Please note there is a pre-qualifier tool.
Everyone thinks they can just settle their debt for pennies on the dollar but there are many qualifications before IRS will accept that offer in compromise.
If you are going to hire a tax professional you need to make sure that person is truly qualified to settle your debt for pennies on the dollar.
There is much advertising in the space so much so that everyone believes they can settle their tax debt, but that is certainly not so.
The base rule for the offer in compromise to settle your debt for pennies on the dollar is you must make sure you are giving IRS all of the liquidity you have in your assets before IRS is going to accept the offer.
As a former IRS agent I worked and administered this program with new agents.
• Third, the IRS can accept a compromise based on effective tax administration.
An offer may be accepted based on effective tax administration when there is no doubt that the tax is legally owed and that the full amount owed can be collected, but requiring payment in full would either create an economic hardship or would be unfair and inequitable because of exceptional circumstances.
Last year I believe there was one offer in compromise accepted under effective tax administration. With that said, few people know this offer in compromise exists in many more people should try to challenge or file their offers based on this.
Usually, these cases are filed because there are certain circumstances that exist such as cancer, imminent death or some unusual circumstance that IRS will look at the case and say this is in the best interest of the government.
Have questions call or ask a former IRS agent.
